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History of Fertiliser Pricing and Subsidy in India
History of Fertiliser Pricing and Subsidy in India
History of Fertiliser Pricing and Subsidy in India
Introduction
Subsidies have been used in India as an important instrument of development policy to fulfill growth and distributional objectives. In the agricultural sector, input and credit subsidies have been extensively used along with support prices to At the time of introduction of these subsidies attainment of self-sufficiency in food grain production was of prime in the 1950s and 1960s. The policy of input subsidies and price support helped in attaining the objective of self-sufficiency in food grains.
Trends in subsidies
Although control on fertilizer prices was introduced in 1943, till the early 1970s there was no burden on the central budget on account of fertilizer subsidy. The situation changed radically after 1973-74 following the first oil price shock . The introduction of the Fertilizer Retention Price Scheme 1977 further contributed to the sharp rise in budgetary subsidy to fertilizer sector . Fertilizer subsidy, which stood at a meager Rs 60 crores in 1975-76 increased nearly 10-fold to Rs 603 crores in 1978-79 . It jumped to Rs13,250 crores in 1999-00. As a percentage of GDP, fertilizer subsidy has increased from 0.26 per cent to 0.79 per cent over this period. Its share in total central government subsidy has also gone up from around 20 per cent to over 50 per cent.
Trends in subsidies
Fertilizer subsidy has been increasing at a faster rate than total subsidy of the central government (Table 2). It increased at the rate of nearly 30 per cent during the 1980s. The growth rate came down to 12.85 per cent during the 1990s when a determined effort was made to bring down the fiscal deficit. However, since the mid-1990s we again find that the growth rates on subsidies have increased sharply. The ratio of subsidies to GDP has, however, steadily declined in the 1990s.
History
Indian Fertilizer Subsidies began in 1977 with the introduction
of the Retention Price cum Subsidy scheme (RPS). RPS, in which the government set fertilizer prices for farmers at below the cost of production, remained in place until 2003, although fertilizer prices rose rapidly in the 1990s under a neoliberal economic agenda. In 2003, RPS was replaced with the New Pricing Scheme (NPS).
All fertilizers were sold at the government-set price, so imported fertilizers were subsidized as well. In August 1992, phospahtic and potassic fertilizers were removed from the RPS system. Later, in October 1994, ammonium chloride, ammonium sulphate and calcium ammonium nitrate were also removed, leaving only urea. RPS was dismantled in March 31, 2003 and was replaced with the New Pricing Scheme (NPS) on April 1, 2003.
Formulation of policy for existing urea beyond Stage-III of New Pricing Scheme
A Group of Minister (GoM) constituted to review the fertilizer policy has decided in the meeting held on 5th January 2011 to set up a Committee under the Chairmanship of Shri Saumitra Chaudhuri, Member, Planning Commission to examine the proposal for introduction of Nutrient Based Subsidy (NBS) in urea and to make suitable recommendations.
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. 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.
Title
Formulation of policy for existing urea beyond Stage-III of New Pricing Scheme
A Group of Minister (GoM) constituted to review the fertilizer policy has decided in the meeting held on 5th January 2011 to set up a Committee under the Chairmanship of Shri Saumitra Chaudhuri, Member, Planning Commission to examine the proposal for introduction of Nutrient Based Subsidy (NBS) in urea and to make suitable recommendations.
Title
Formulation of policy for existing urea beyond Stage-III of New Pricing Scheme
A Group of Minister (GoM) constituted to review the fertilizer policy has decided in the meeting held on 5th January 2011 to set up a Committee under the Chairmanship of Shri Saumitra Chaudhuri, Member, Planning Commission to examine the proposal for introduction of Nutrient Based Subsidy (NBS) in urea and to make suitable recommendations.