Finance Minister Nirmala Sitharaman in the Interim Budget has lowered the allocation for fertiliser subsidy by 13 percent to Rs 1.64 lakh crore for 2024-25 as compared to Rs 1.89 lakh crore revised budget estimate for FY24.
The allocation for fertiliser subsidy for FY24 was budgeted at Rs 1.75 lakh crore in FY24.
The government provides nutrient-based subsidy on fertilisers and subsidy on urea. The cut in the subsidy in FY25 is being seen because of a drop in international prices, government push towards schemes for the use of bio and organic fertilisers, and increased use of nano urea.
Urea contributes 55-60 percent of the total fertiliser consumption, which is met through imports and indigenous production. The urea subsidy scheme ensures constant availability of urea to farmers at the same price of Rs 242 per 45-kg bag, excluding taxes and neem coating charges. The actual cost of the bag is around Rs 2,200.
The government push towards nano urea, the liberalised Market Development Assistance (MDA) scheme and the PM PRANAM (PM Programme for Restoration, Awareness, Nourishment and Amelioration of Mother Earth) are expected to result in less expenditure on subsidy towards indigenous urea and thus a lower allocation in FY25.
In 2022-23, the country’s fertiliser subsidy reached a record Rs 2.25 lakh crore due to global supply shocks and political factors.
According to the International Fertilizer Association (IFA), fertiliser regulations in the major countries, as part of the EU Nitrate Directive and the EU Green Deal, are expected to reduce the global demand by at least 20 percent by 2030. In addition, the shift to organic farming in the EU will also have a huge impact. According to IFA, the organic agricultural area in the EU is at 10 percent in 2021 and is expected to reach 15 percent by 2030.
PM PRANAM
PM PRANAM incentivises state governments to reduce the consumption of chemical fertilisers and increase the use of bio and organic fertilisers. States which reduce the consumption of chemical fertilisers compared to their average of the last three years get financial incentives. The consumption of chemical fertiliser that is reduced will be monetised and the state will get 50 percent of the subsidy saved as a financial incentive. This incentive is conditional upon chemical fertiliser consumption of neighbouring districts not increasing and the reduced consumption not being the result of floods or any natural calamity.
Market Development Assistance
The Market Development Assistance (MDA) scheme, which promotes composting, is likely to be expanded to organic wastes, including biogas, green manure, and composting, in rural areas. It will promote the use of alternative fertilisers and complement the Swachh Bharat Mission.
Nano urea
Liquid nano urea, a nitrogen fertiliser which is said to be cheaper and more efficient, holds the promise of lowering imports of granular urea substantially. Developed using nanotechnology, it can improve the efficiency of crop nutrients.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
