Nutrient-Based Subsidy (NBS) Scheme in India: A Deep Analysis
- GS-3: Agriculture, fertilizer subsidy, soil health, food security, DBT reforms.
- GS-2: Government policy, implementation, rural credit, subsidy management.
- Essays: Sustainable agriculture, subsidy reforms, rural development, policy analysis.
- Prelims: Major schemes, types of fertilizers, NBS basics.
Introduction
Fertilizers are the backbone of Indian agriculture. They have played a crucial role in the Green Revolution and continue to sustain the food security of over 1.4 billion people. Historically, India followed a product-based fertilizer subsidy regime focused chiefly on urea. However, this approach led to severe nutrient imbalance, declining soil health, and unsustainable fiscal burdens. To address these issues, India adopted the Nutrient Based Subsidy (NBS) Scheme—a reform aimed at aligning fertilizer usage with agronomic needs, ensuring balanced crop nutrition, and rationalizing government expenditure.
What is the NBS Scheme?
The Nutrient Based Subsidy (NBS) Scheme was launched in April 2010 by the Department of Fertilizers under the Ministry of Chemicals and Fertilizers. The scheme’s primary objective is to promote balanced fertilizer use, improve soil health, and rationalize subsidy costs. NBS covers all non-urea (Phosphatic & Potassic or P&K) fertilizers—such as DAP, MOP, SSP, MAP, TSP, and various NPK grades. The focus is to shift farmers away from the excessive application of urea and rectify the Nitrogen (N), Phosphorus (P), Potash (K), and Sulphur (S) balance in Indian soils.
Key Features
- Subsidy on Nutrient Content: NBS provides a fixed, annual per-kilogram subsidy for each nutrient—N, P, K, S—regardless of the product’s brand or blend. This encourages manufacturers/importers to innovate and optimize blends.
- Annual Notification: Subsidy rates are notified yearly by the government after reviewing global prices, availability, and exchange rates.
- Market-Linked Pricing: Fertilizer companies determine the Maximum Retail Price (MRP); the government only intervenes to ensure affordability and check windfall profits.
- Coverage: Encompasses over 25 grades of P&K fertilizers, incentivizes additional support for micronutrient-fortified and specialized grades.
- Direct Benefit Transfer (DBT): Subsidies are disbursed directly to manufacturers upon actual sale to farmers at retailer PoS using Aadhaar-based authentication.
- Decontrol of P&K sector: Unlike urea, the P&K sector is deregulated under NBS, allowing competition and innovation.
How NBS Works: Process Flow
- Government Announcement & Rate Fixation: NBS nutrient rates are set for the financial year.
- Subsidy Calculation: Each P&K fertilizer receives subsidy as per nutrient content (per Kg for N, P, K, S).
- Manufacturing/Import: Companies procure/manufacture accordingly, and set MRPs.
- Distribution: Retail outlets equipped with PoS machines distribute to farmers, verifying sale through Aadhaar.
- DBT Release: After retail sale, government transfers subsidy directly to manufacturers’ accounts.
Objectives & Expected Outcomes
- Promote Balanced Fertilization: Encourage optimal N:P:K use, reduce dependence on subsidized urea.
- Improve Soil Health: Minimize nutrient depletion and soil degradation from imbalanced input use.
- Increase Efficiency: Foster targeted, efficient fertilizer usage and encourage adoption of micro- and secondary nutrients.
- Fiscal Prudence: Stabilize or gradually lower the subsidy bill as market forces encourage innovation and efficiency.
- Empower Farmers: Offer increased fertilizer options, flexibility, and access to improved blends.
Achievements & Impact
- Higher P&K Usage: P&K fertilizer consumption, especially DAP and complexes, has increased—helping narrow the N:P:K imbalance.
- Soil Management: New fortified blends and micronutrient-fortified products are being adopted.
- Reduction in Leakages: DBT and Aadhaar-verified PoS sales have curbed black marketing and regional arbitrage.
- Increased Choices: Farmers have a wider range of custom and complex blends.
- Price Transparency: While price volatility exists, MRP is more market-aligned.
Issues & Limitations
- Urea Exclusion: Urea remains fully subsidized under a separate policy with a government-fixed low MRP, keeping its use artificially high and fertilizer use imbalanced.
- MRP Volatility: Phosphate (DAP), potash, and imported fertilizers show sharp price spikes during global shocks (e.g., Ukraine war).
- Farmer Awareness: Many small and marginal farmers are unaware of balanced fertilization practices and soil test recommendations.
- Soil Degradation: Despite reforms, legacy overuse of nitrogen and minimal secondary/micro-nutrient use persists, especially in rice-wheat systems.
- High Fiscal Burden: Overall fertilizer subsidy still exceeds ₹2 lakh crore (2024-25), and efficiency gains are gradual.
- Distribution Reliance: Infrastructure for last-mile delivery and DBT is still developing, limiting reach in poorly connected areas.
NBS vs Urea Subsidy Policy: Comparison Table
| Criteria | NBS Scheme | Urea Policy |
|---|---|---|
| Coverage | P&K fertilizers | Urea only |
| Pricing | Market-linked + subsidy | Government-fixed MRP |
| Nutrient Balance | Yes | Distorted |
| Reform Push | High | Low |
| Soil Impact | Balanced nutrients | Excess nitrogen usage |
Government Reforms & Complementary Steps
- Neem-coated Urea: Slows nitrogen release, reduces misuse, and curbs black marketing.
- PM-PRANAM Scheme: Incentivizes states reducing chemical fertilizer usage, promoting alternative practices like organic and micronutrient usage.
- One Nation One Fertilizer (BHARAT): Unified branding for transparency and portability.
- Soil Health Card Scheme: Soil testing for scientifically recommended nutrient application.
- Nano-Urea Introduction: Liquid formulations to increase efficiency and reduce bulk logistics.
- Promotion of Organic & Bio-Fertilizers: Encourages integrated and sustainable nutrient management.
Global Fertilizer Policy Brief
- China: Gradual phase-down of blanket subsidies, strong extension on integrated nutrient management, and farmer education.
- European Union: Strict regulations, incentives for environmental stewardship, emphasis on integrated plant nutrition.
- USA: Targeted subsidies, support for conservation, and environmental compliance.
- Lessons for India: Move towards nutrient-based targeting for all fertilizers (including urea), robust extension systems, fiscal target-setting, and climate-smart incentives.
Way Forward
- Include Urea under NBS: An integrated policy covering all major nutrients will correct distortion, reduce overuse, and simplify administration.
- Expand Soil Testing: Increase mobile labs, digital apps, and mass awareness to drive real-time, accurate nutrient recommendations.
- Farmer Education: Intensify advisory services, demonstrations, and mobile-based push messages on balanced fertilization.
- Micro-nutrients & Organics: Incentivize use and research on bio-fertilizers, secondary and micronutrient fortification.
- Domestic Manufacturing: Strengthen indigenous P&K production, diversify import sources, and develop R&D for alternatives.
- Climate-Smart Fertilization: Align fertilizer use policies with environmental and climate goals for long-term agricultural resilience.
Conclusion
The Nutrient Based Subsidy Scheme marked a paradigm shift toward balanced agriculture and fiscal sustainability. Deepening and broadening its scope—especially by including urea and integrating soil health—are vital for doubling farmer incomes, protecting the environment, and ensuring sustainable food security for India.
FAQs
Q1. What is the NBS Scheme in India?
It is a government subsidy policy launched in 2010 providing fixed per-kg subsidies on the nutrient content of P&K fertilizers to promote balanced fertilizer use.
Q2. Is urea covered under NBS?
No, urea continues under a separate government-fixed MRP regime; only P&K fertilizers are covered by NBS.
Q3. What are the objectives of the NBS Scheme?
It targets balanced fertilization, improving soil health, rationalizing subsidies, and boosting crop productivity.
Q4. How is the subsidy delivered under NBS?
Subsidy is reimbursed to manufacturers/importers via Direct Benefit Transfer after Aadhaar-authenticated sale at retailers.
Q5. What is a key limitation of NBS?
Exclusion of urea causes persistent overuse and nutrient imbalance in Indian agriculture.
