Fertilizer (Agricultural Inputs)

Plants require Nitrogen, Phosphorus and Potassium (NPK) for their balanced growth. If soil is deficient in these nutrients or if the farmer is using High Yielding Variety seeds that require more nutrients than any natural soil can supply, different fertilizers are used to boost nutrients in the soil.

Fertilizers are provided to the farmers at subsidized rates. In 2020, Rs 71,000 crore was paid in fertilizer subsidies by the Union Government.

There are two types of subsidies on fertilizers

Nutrient Based Subsidy

• Nutrient Based Subsidy is used in the case of DAP & MOP. 
• It was framed under Fertilizer (Control) Order, 1985 and issued under Essential. Commodities Act, 1955.
• The government fixes per kilogram subsidy on DAP & MOP in this system. (Cost of Fertilizer for farmer = Market Price MINUS Fertilizer Subsidy)
• But, imports of DAP & MOP aren’t controlled.

Subsidy on Urea

The case of urea is very different. The government intervenes in the sector in five ways: 

1. It sets the Maximum Retail Price (MRP).
2. It provides a subsidy to 30 domestic producers on a cost-plus basis, meaning more inefficient producers get larger subsidies. 
3. It provides a subsidy to importers.
4. Imports are canalized—only three agencies can import Urea into India.
5. Half of the movement of fertilizer is directed—that is, government tells manufacturers where to sell their urea.

These distortions feed upon each other, leading to a series of adverse outcomes.

Problems created by the way urea is subsidized

1. Leakages

• Urea is subsidized 75% of its price. 
• Due to this, it is smuggled to
  1. Industry (Ammonia-based industry) 
  2. Across the border to Bangladesh and Nepal  
• Additionally, larger—presumably richer— farmers consume subsidized urea. Ideally, subsidized urea should be given only to poor farmers

2. Shortages

• The regulation under canalization creates shortages. Under the provisions of canalization, the government orders specific companies to when to import, what quantities to import & where to sell. But estimating the demand is a difficult task & shortages can’t be addressed instantaneously (it takes 60 days at least).

3. Inefficient Fertilizer Manufacturers

• Earlier, the main objective of the Indian government was self-sufficiency  & this led to Subsidy on Cost Plus Basis, where the subsidy a firm receives is based on its cost of production: greater the cost, the larger the subsidy. Consequently, inefficient firms with high production costs survive, and the incentive to lower costs is blunted.

4. Environmental & Health Externalities

• Since Urea is cheaper than other Fertilizers, it creates a situation of urea overuse which is detrimental for the soil. Consequently, the soil’s N:P: K ratio is disturbed (Rajasthan – N:P: K = 25:12:1 instead of 4:2:1). 
• The declining response ratio or marginal productivity of fertilizers since the 1970s is a pointer to their inefficient use in Indian agriculture.
• Fertilizer use is leading to harmful effects on the human health such as respiratory diseases, cancer etc.

1. Direct Benefit Transfer 

• Earlier, the government used to give subsidies to the fertilizer company when fertilizer left the company’s godowns. 
• This system has been changed. Now, Fertilizer companies are paid subsidies only after the retailer has sold the fertilizer to the farmer through a Point of Sale (PoS) device.
• This system prevents the diversion of subsidized urea towards non-agricultural purposes and smuggling to Nepal and Bangladesh.

2. Pradhan Mantri Bhartiya Janurvarak Pariyojana (PM BJP) – One Nation One Fertilizer Scheme

• The scheme aims at marketing fertilizers in the country under ‘Bharat’ brand name.
• The uniform design of bags across the country will now mention them as ‘Bharat Urea’, ‘Bharat DAP’, ‘Bharat MOP’, ‘Bharat NPK’.
• Under the scheme
  • The new “Bharat” brand name and PMBJP logo will cover two-thirds of the front of the fertilizer packet.
  • The manufacturing brands can only display their name, logo, and other information on the remaining one-third space.

3. Neem Coated Urea

• The government started this scheme in 2015.
• Under this scheme, urea is coated with neem, which has the following benefits
  1. It stops diversion to industrial consumers as neem coated urea cant be used in Ammonia-based industry due to adverse reactions that neem can cause.
  2. It helps in slowing down the Nitrification of urea & increasing the efficacy of urea.
  3. Due to the pesticidal properties of neem, the amount of pesticides required is reduced.   

4. Soil Health Card

• Soil Health Card Scheme is a component of NMSA (National Mission on Sustainable Agriculture).
• In this, farmer’s land is tested for 12 parameters and given Soil Health Card (updated every 3 years).
• The card also advises the farmer about the type of crops that can be grown and fertilizer requirements to achieve maximum yield for various crops.  

Importance

• Assist farmers in supplying proper fertilizer mix, which is currently dominated by urea. 
• It will help the farmer to select the most appropriate crop pattern.
• This will lead to a diverse crop pattern that currently revolves around wheat & rice.

5. Size of Urea Bag  reduced

• In 2018, the size of the Urea Bag was reduced to 45 kg instead of earlier 50 kg.
• Reason: Neem Coated Urea has increased the effectiveness of urea. Since farmers mainly assess the requirement of urea in terms of bags, the government has decided to reduce the size of the bag. 

6. Nano Urea

• Nano Urea is made by IFFCO.
• It comes in liquid form and needs to be sprayed on the crop.
• It is more efficient than normal urea. Nutrient Use Efficiency (NUE) of nano urea is over 80% against 30-50% of conventional granular urea. Hence, farmer can achieve the same efficiency by applying lower quantity, thus reducing the overall cost per hectare.
• Nano Urea’s limitation is that, being a liquid fertiliser, it can only be sprayed after the crop has developed leaves.

7. PM PRANAM Scheme

• PM PRANAM: PM Program for Restoration, Awareness Generation, Nourishment and Amelioration of Mother-Earth
• Aim: To reduce the use of fertilizers in the farming
• The scheme aims to encourage the state governments to reduce the consumption of fertilizers in their state. If state government is successful in reducing the consumption of fertilizers in their state, the Union government will transfer some percentage of the savings in the subsidy bill arising due to decrease in fertilizer consumption as grant.

8. Joint Venture

• To reduce the cost of imported urea, the Indian government is setting up Joint Ventures with companies of oil rich countries like Oman, where gas prices are low, resulting in cheaper production of fertilizers. 

1. Manure

• Manure is a natural substance made by the decomposition of organic waste.
• Apart from nutrients, it also provides humus to the soil.
• But manure is less rich in nutrients compared to fertilizers.
• The government is promoting the use of manure via schemes like
  1. Gobar Dhan Yojana: For converting cattle dung and solid waste from farms and fields to manure, biogas and Bio-CNG (India has 300 million cows generating 3 million tons of dung).
  2. City Compost Scheme: Fertilizer companies and marketing entities will also co-market City Compost with chemical fertilizers.

2. Vermicompost

• Vermicompost is a mixture of earthworms and decomposed food, leading to the breakdown of organic matter.
• Benefits of Vermicompost:
  1. Increase in soil aeration by earthworms.
  2. Enriches soil with microorganisms.
  3. Water retention of soil capacity increases.
  4. Easy to produce at an affordable cost.

3. Biofertilizer

Biofertilizer uses Micro-Organisms to produce impact similar to Fertilizers. Eg

1. Rhizobium Bacteria for Nitrogen Fixation.
2. Mycorrhiza Fungi for Phosphorus.