Phosphatic and Potassic (P&K)

Concession scheme/nutrient based subsidy policy for decontrolled Phosphatic & potassic fertilizers

Government of India decontrolled Phosphatic and Potassic (P&K) fertilizers with effect from 25th August 1992 on the recommendations of Joint Parliamentary Committee. Consequent upon the decontrol, the prices of the Phosphatic & Potassic fertilizers registered a sharp increase in the market, which exercised an adverse impact on the demand and consumption of the same. It led to an imbalance in the usage of the nutrients of N, P & K (Nitrogen, Phosphate and Potash) and the productivity of the soil. Keeping in view the adverse impact of the decontrol of the P&K fertilizers, Department of Agriculture & Cooperation introduced Concession Scheme for decontrolled Phosphatic & Potassic (P&K) fertilizers on ad-hoc basis w.e.f. 1.10.1992, which has been allowed to continue by the Government of India upto 31.3.2010 with changed parameters from time to time. Then the Government introduced Nutrient Based Subsidy Policy w.e.f. 1.4.2010 (w.e.f. 1.5.2010 for SSP) in continuation of the erstwhile Concession Scheme for decontrolled P & K fertilizers.

The basic purpose of the Concession Scheme and Nutrient Based Subsidy Policy has been to provide fertilizers to the farmers at the subsidized prices. Initially, the ad-hoc Concession Scheme was introduced for subsidy on DAP, MOP, NPK Complex fertilizers. This scheme was also extended to SSP from 1993-94. Concession was disbursed to the manufacturers/importers by the State Governments during 1992-93 and 1993-94 based on the grants provided by Department of Agriculture & Cooperation. Subsequently, DAC started releasing payment of concession to the fertilizer companies based on the certificate of sales issued by the State Governments on 100% basis.

The Government introduced the system of releasing 80% 'On Account' payment of concession in 1997-98 to the fertilizer companies month-wise, which was finally settled based on the certificate of sales issued by the State Government. During 1997-98, Department of Agriculture & Cooperation also started indicating an all India uniform Maximum Retail Price (MRP) for DAP/NPK/MOP. The responsibility of indicating MRP in respect of SSP rested with the State Governments. The Special Freight Subsidy Reimbursement Scheme was also introduced in 1997 for supply of fertilizers in the difficult areas of J&K and North-eastern States, which continued upto 31.3.2008. Based on the cost price study of DAP and MOP conducted by Bureau of Industrial Costs & Prices (BICP - now called Tariff Commission), Department of Agriculture & Cooperation started announcing rates of concession based on the cost plus approach on quarterly basis w.e.f. 1.4.1999. The total delivered cost of fertilizers being invariably higher than the MRP indicated by the Government, the difference in the delivered price of fertilizers at the farm gate and the MRP was compensated by the Government as subsidy to the manufacturers/importers for selling the fertilizers at the MRP indicated by the Government.

The administration of the scheme was transferred from Department of Agriculture & Cooperation to Department of Fertilizers w.e.f. 1.10.2000. The Government introduced a new methodology for working out subsidy to complex fertilizers w.e.f. 1.4.2002 based on the recommendations of the Tariff Commission. The complex manufacturers were divided into groups based on feedstock for sourcing Nitrogen, such as gas, naphtha, imported ammonia. With the passage of time, the structure of DAP industry also changed as some of the new DAP manufacturing plants were established using the Rock Phosphate for manufacturing indigenous Phosphoric acid/DAP. Accordingly, the Tariff Commission made a fresh Cost Price Study and submitted its report in February 2003. Payment of concession to the DAP manufacturing units from 2003-04 to 2007-08 was made as per two groups depending upon the source of the raw materials (Rock Phosphate/ Phosphoric acid). Based on the decisions of the Government in 2004-05, Department of Fertilizers framed a proposal suggesting methodology to link phosphoric acid price with international DAP price. Subsequently, the matter was referred to the Expert Group. The Expert Group under Prof. Abhijit Sen, submitted its report in October 2005.

The recommendations of the Expert Group were considered by an Inter-Ministerial Group (IMG). Tariff Commission conducted fresh cost price study of DAP/MOP and NPK complexes and submitted its report in December 2007. Based on the examination of the Tariff Commission Report and the longterm approach suggested by the Expert Group under the Chairmanship of Prof. Abhijit Sen, the Government approved the Concession Scheme with effect from 1.4.2008 for DAP/MOP/NPK Complexes/ MAP, which continued upto 31.3.2010 with certain modifications. The final rates of concession were worked out on monthly basis. Concession for indigenous DAP was the same as that of imported DAP (on the basis of import parity price). Concession on complex fertilizers was based on the methodology recommended by Tariff Commission with certain modifications.

The NPK complex industry was divided into 4 groups, depending upon the source of Nitrogen, gas, naphtha, imported Urea-ammonia mixture and imported Ammonia. A separate cost of 'S' for Sulphur containing complex fertilizers was recognized w.e.f. 1.4.2008. The input/fertilizer prices for Concession Scheme was derived on the basis of an outlier methodology. The Buffer Stocking Scheme was allowed to continue with 3.5 Lakh MTs for DAP and 1 Lakh MTs for MOP as buffer. Modifications in certain elements of the Concession Scheme were also carried out with effect from 1.4.2009 to adjust parameters of concession scheme to International pricing dynamics and rationalize 'N' pricing group-wise as well as payment system. Certain changes were effected in the existing policy for P &K Fertilizers. Accordingly, w.e.f. 1.4.2009 final rates of concession were worked out on monthly basis, taking into account the average international price of the month preceding the last month or the actual weighted average C&F landed price at the Indian ports for the current month, whichever lower with respect to DAP and MOP. In case of raw materials/ inputs for complex fertilizers, there was a lag of one month. From 1.12.2008, payment of concession has been made to the manufacturers/importers of the Decontrolled fertilizers (except SSP) on the basis of arrival/ receipt of fertilizers and certificate of receipt by the State Government/statutory auditor of the company subject to final settlement on the basis of sale of the quantity.

The MRPs of the P&K fertilizers, which has been indicated by the Government/State Government, has been constant since 2002 till 31.3.2010. The MRPs of the NPK complexes were reduced w.e.f. 18.6.2008. In order to enhance the basket of fertilizers in the Concession Scheme, Mono- Ammonium Phosphate (MAP) was included into the Concession Scheme w.e.f. 1.4.2007, Triple Super Phosphate (TSP) was inducted into the Concession Scheme w.e.f. 1.4.2008 and Ammonium Sulphate (AS) manufactured by M/s FACT and M/s GSFC was inducted w.e.f. 1.7.2008.

(A) Nutrient Based Subsidy Policy for decontrolled Phosphatic & Potassic fertilizers

In the implementation of Concession Scheme, it has been experienced that no investment has taken place in last decade. The subsidy outgo increased exponentially by 530% during 2004 to 2009 with about 90% of the increase due to rise in the international prices of fertilizers and inputs. Agricultural productivity did not register increase in commensurate with the increase in the subsidy bill. The MRP of the fertilizers remained constant from 2002 onwards. A Group of Ministers (GoM) constituted to look into all aspects of the fertilizer regime, recommended that Nutrient Based Subsidy (NBS) may be introduced based on the contents of the nutrients in the subsidized fertilizers. The Hon'ble Finance Minister in its Budget Speech 2009 announced for introduction of Nutrient Based Subsidy Policy for Phosphatic & Potassic fertilizers with the objective of ensuring Nation's food security, improving agricultural productivity and ensuring the balanced application of fertilizers. The Government introduced the Nutrient Based Subsidy (NBS) Policy w.e.f. 1.4.2010 in continuation of the erstwhile Concession Scheme for decontrolled P & K fertilizers (w.e.f. 1.5.2010 for SSP). The details of Nutrient Based Subsidy Policy are as under:

• NBS is applicable for Di Ammonium Phosphate (DAP, 18-46-0), Muriate of Potash (MOP), Mono Ammonium Phosphate (MAP, 11-52-0), Triple Super Phosphate (TSP, 0-46-0), 12 grades of complex fertilizers and Ammonium Sulphate (AS - (Caprolactum grade by GSFC and FACT), which were covered under the earlier Concession Scheme for Phosphatic and Potassic (P&K) fertilizers up to 31st March 2010 and Single Super Phosphate (SSP). Primary nutrients, namely Nitrogen 'N', Phosphate 'P' and Potash 'K' and nutrient Sulphur 'S' contained in the fertilizers mentioned above are eligible for NBS.
• Any variant of the fertilizers mentioned above with secondary and micro-nutrients (except Sulphur 'S'), as provided for under FCO, is also eligible for subsidy. The secondary and micro-nutrients (except 'S') in such fertilizers attracts a separate per tonne subsidy to encourage their application along with primary nutrients.
• An Inter-Ministerial Committee (IMC) has been constituted with Secretary (Fertilizers) as Chairperson and Joint Secretary level representatives of Department of Agriculture & Cooperation (DAC), Department of Expenditure (DOE), NITI Aayog and Department of Agricultural Research and Education (DARE). This Committee recommends per nutrient subsidy for 'N', 'P', 'K' and 'S' before the start of the financial year for decision by the Government (Department of Fertilizers). The IMC also recommends a per tonne additional subsidy on fortified subsidized fertilizers carrying secondary (other than 'S') and micro-nutrients. The Committee considers and recommends inclusion of new fertilizers under the subsidy regime based on application of manufacturers/ importers and its need appraisal by the Indian Council for Agricultural Research (ICAR), for decision by the Government.
• NBS to be paid annually on each nutrient namely, 'N', 'P', 'K' and 'S' has been decided by the Government for 2010-11 on recommendation of IMC. For 2010-11, per kg NBS and per tonne NBS for each subsidized fertilizer w.e.f 1st April 2010 has been announced.
• Distribution and movement of fertilizers along with import of finished fertilizers, fertilizer inputs and production by indigenous units continues to be monitored through the on-line web based "Fertilizer Monitoring System (FMS)" as being done under the outgoing Concession Scheme for P&K fertilizers.
• 20% of the price decontrolled fertilizers produced/imported in India is now in the movement control under the Essential Commodities Act 1955 (ECA). Department of Fertilizers will regulate the movement of these fertilizers to bridge the supplies in under-served areas.
• In addition to NBS, freight for the movement and distribution of the decontrolled fertilizers by rail and road is being provided to enable wider availability of fertilizers in the country.
• Import of all the subsidized P&K fertilizers, including 13 grades of complex fertilizers has been placed under Open General License (OGL). Earlier, no concession was available for imported complex fertilizers. Now, NBS is available for imported complex fertilizers also. However, subsidy will not be applicable on imported Ammonium Sulphate (AS), as NBS is applicable only to Ammonium Sulphate produced by FACT and GSFC.
• Though the market price of subsidized fertilizers, except Urea is determined based on demand-supply balance, the fertilizer companies are required to print Maximum Retail Price (MRP) along with applicable subsidy on the fertilizer bags clearly. Any sale above the printed net MRP is punishable under the EC Act.
• Manufacturers of customized fertilizers and mixture fertilizers are eligible to source subsidized fertilizers from the manufacturers/ importers after their receipt in the districts as inputs for manufacturing customized fertilizers and mixture fertilizers for agricultural purpose. There is no separate subsidy on sale of customized fertilizers and mixture fertilizers.
• A separate additional subsidy is provided to the indigenous manufacturers producing complex fertilizers using Naphtha based captive Ammonia to compensate for the higher cost of production of 'N'. However, this will be for a maximum period of two years from 01.04.2010 during which the units will have to convert to gas or use imported Ammonia. The quantum of additional subsidy will be finalized by Department of Fertilizers in consultation with DOE, based on study and recommendations by the Tariff Commission.
• The NBS is being released through the industry during the first phase. The payment of NBS to the manufacturers/ importers of DAP/MOP/Complex Fertilizers/ MAP/TSP, SSP and AS is released as per the procedure notified by the Department.

 

(B) Nutrient Based Subsidy Per Kilo Gram of Nutrients

Based on the recommendations of the Inter Ministerial Committee constituted under the Nutrient Based Subsidy Policy, the Government has allowed the per Kg NBS for 'N', 'P', 'K' & 'S' (Nitrogen, Phosphate, Potash and Sulphur) and the amount of subsidy per MT on the Phosphatic & Potassic fertilizers for 2010-11 to 2017-18 is as follows:

 Per Kg NBS rates fornutrients N, P, K, S for the 2010-11 to 2017-18: 

NBS rates (Rs. per Kg)
Nutrients	1st  Apr - 31st  Dec 2010 *	1st  Jan- 31st  Mar 2011**	2011-12	2012-13	2013-14	2014-15	2015-16	2016-17	2017-18
‘N’ (Nitrogen)	23.227	23.227	27.153	24.000	20.875	20.875	20.875	15.854	18.989
‘P’ (Phosphate)	26.276	25.624	32.338	21.804	18.679	18.679	18.679	13.241	11.997
‘K’ (Potash)	24.487	23.987	26.756	24.000	18.833	15.500	15.500	15.470	12.395
‘S’ (Sulphur)	1.784	1.784	1.677	1.677	1.677	1.677	1.677	2.044	2.240

 

*Including Rs. 300/- per MT for secondary freight from rake point to retail points.

** Excluding the secondary freight of Rs. 300/- PMT, which was being paid separately on per ton per Km basis.

(C) The per MT Nutrient Based Subsidy during 2010-11 to 2017-18 is as follows:

NBS rates from 2010-11 to 2017-18 (Rs. per MT)
Sl. No.	Fertilizer Grades(FG)	2010-11		2011-12	2012-13	2013-14	2014-15	2015-16
	(N P K S nutrient)	1.4.2010 to 31.12.2010	1.1.2011 to 31.3.2011						2016-17	2017-18
1	DAP (18-46-0-0)	16268	15968	19763	14350	12350	12350	12350	8945	8937
2	MAP  (11-52-0)	16219	15897	19803	13978	12009	12009	12009	8629	8327
3	TSP    (0-46-0-0)	12087	11787	14875	10030	8592	8592	8592	6091	5519
4	MOP  (0-0-60-0)	14692	14392	16054	14400	11300	9300	9300	9282	7437
5	SSP (0-16-0-11)	4400	4296+200	5359	3676	3173	3173	3173	2343	2166
6	16-20-0-13	9203	9073	11030	8419	7294	7294	7294	5451	5729
7	20-20-0-13	10133	10002	12116	9379	8129	8129	8129	6085	6488
8	20-20-0-0	9901	9770	11898	9161	7911	7911	7911	5819	6197
9	28-28-0-0	13861	11678	16657	12825	11075	11075	11075	8147	8676
10	10-26-26-0	15521	15222	18080	14309	11841	10974	10974	9050	8241
11	12-32-16-0	15114	14825	17887	13697	11496	10962	10962	8615	8101
12	14-28-14-0	14037	13785	16602	12825	10789	10323	10323	8093	7753
13	14-35-14-0	15877	15578	18866	14351	12097	11630	11630	9020	8593
14	15-15-15-0	11099	10926	12937	10471	8758	8258	8258	6685	6507
15	17-17-17-0	12578	12383	14662	11867	9926	9359	9359	7576	7375
16	19-19-19-0	14058	13839	16387	13263	11094	10460	10460	8467	8242
17	Ammonium Sulp (20.6-0-0-23)	5195	5195	5979	5330	4686	4687	4686	3736	4408
18	16-16-16-0 (w.e.f. 1.7.2010)	11838	11654	13800	11169	9342	8809	8809	7130	6941
19	15-15-15-9 (w.e.f. 10.2010)	11259	11086	13088	10622	8909	8409	8409	6869	6709
20	24-24-0-0 (from 1.10.10 to 29.5.12 and w.e.f. 22.6.2012)	11881	11724	14278	10993	9493	9493	9493	6983	7437
21	24-24-0-8	NA	NA	NA	NA	9493	9493	9493	6983	7437

 

(D) Department of Fertilizers has also provided additional subsidy on the NPK complex fertilizers based on Naphtha/ Furnace Oil for Nitrogen for a period of two years w.e.f. 1.4.2010 as follows:

Name of the Company	Grades of Fertilizers	Amount of additional compensation (provisional) in ' per MT
FACT (Cochin)	20-20-0-13 (APS) (Udyogmandal and Cochin)	2331
	Ammonium Sulphate (20.6-0-0-13) (Udyogmandal)	2792
MFL, Manali	20-20-0-13 (APS)	4784
	17-17-17-0	4079
GNVFC, Bharuch	20-20-0-0 (ANP)	1914

 

The above rates are on ad-hoc basis subject to finalisation of report by Tariff Commission.

(E) Subsidy for fortified fertilizers

Per MT additional subsidy for fortified fertilizers with secondary and micro-nutrients as per FCO has also been allowed under NBS as follows:

Sl. No	Nutrients for fortification as per FCO	Additional subsidy per MT of fortified fertilizers (')
1.	Boron 'Bn'	300
2.	Zinc 'Zn'	500

 

(F) Procedure for Payment of subsidy under NBS:

Department of Fertilizers releases 85% (90% with Bank Guarantee) 'On Account' payment of subsidy month-wise to the manufacturers/ importers of P&K fertilizers (SSP) based on receipt of fertilizers in the districts/States. The manufacturers/importers claim the 'On Account' payment in prescribed Proforma 'A' duly certified by the authorized signatory as well as the statutory auditor of the company. The balance payment of subsidy is also claimed by the fertilizer companies based on information in prescribed Proforma 'D' duly certified by the authorized signatory as well as the statutory auditor of the company. The State Governments are required to submit certificate to DOF in receipt of the fertilizers in prescribed Proforma 'B'. The payment of subsidy to SSP is released on sales basis. Accordingly, the eligible units are allowed to claim 85% 'On Account' payment of subsidy based on the information in respect of sale of SSP duly certified by the authorized signatory as well as the statutory auditor of the company. The balance payment is released by DOF based on the certification of sales issued by the State Governments in prescribed Proforma 'B'. Importer guidelines dated 21.9.2017 for importers of P&K Fertilizers under the NBS Scheme are annexed as per Annexure – ‘A’. Freight Policy dated 23.7.2012 for P&K fertilizers are annexed as per Annexure – ‘B’.