Union Budget 2023: FM allocates Rs 1.75 lakh crore to fertiliser subsidies

Fertiliser subsidy is payments made to manufacturers or importers to cover the excess of the cost of production/import and distribution.

Finance Minister Nirmala Sitharaman on February 1 allocated Rs 1.75 lakh crore for fertiliser subsidies in the budget for the next financial year, according to budget documents.

The announcement was part of the Union Budget for FY2024, the last full fiscal package before the general elections due next year. India’s fiscal year runs from April 1 through March 31.

The allocation for the next fiscal year is lower than the revised estimate for fertiliser subsidy spending of Rs 2.25 lakh crore for this year.

Centre had budgeted Rs 1.05 lakh crore for fertiliser subsidy in FY23 but raised the allocation to Rs 2.25 lakh crore amid a spike in prices of the farm nutrient. The government had spent Rs 1.5 lakh crore on fertiliser subsidy in 2021-22.

The government allows fertiliser companies to fix retail prices but subsidises the companies to help shield domestic farmers from global price shocks.

Russia’s invasion of Ukraine has disrupted supplies of inputs such as potash and phosphate that account for the bulk of non-urea-based soil nutrients.

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India is one of the largest importers of fertiliser, which it needs to boost the yield of its vast farm sector which employs half the country’s labour force and makes up about 15 percent of economic output.

Following the spike in fertiliser prices, the government had notified the rates under the Nutrient-Based Subsidy scheme in such a way that the international price increase did not affect farmers and ensured that the nutrient was affordable.

The difference between the delivered price to the farm gate and net market realisation is paid as a subsidy to fertiliser manufacturing companies or importers.