Scheme for incentives to reduce fertiliser usage in final phase
The scheme, announced in the federal budget for 2023-24, is part of a broader push to limit fertilizer subsidies.
The chemicals and fertiliser ministry is finalising a cabinet note to implement PM Pranam, a new central scheme that will provide cash incentives to states that cut consumption of chemical soil nutrients by switching to sustainable alternatives, said a person aware of the development.
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The scheme, announced in the federal budget for 2023-24, is part of a broader push to limit fertilizer subsidies, secure supplies through long-term import deals to hedge against geopolitical risks and raise domestic production, apart from promoting natural and organic farming.
Food and fertiliser subsidies accounted for about one-eighth of India’s budget worth nearly ₹39 lakh crore in the year ended March 31. India, the world’s third-largest fertilizer buyer, relies on imports to meet domestic demand. Under the proposed scheme, 50% of fertilizer subsidy saved by a state will be given back to it as a grant, which they can put to any use, according to the draft cabinet proposal, the person said, seeking anonymity.
“PM Program for Restoration, Awareness, Nourishment and Amelioration of Mother Earth (PM PRANAM) will be launched to incentivise states and Union territories to promote alternative fertilisers and balanced use of chemical fertilisers,” finance minister Nirmala Sitharaman had said in her budget speech on February 1.
The country’s food security is closely linked to availability of crop nutrients, whose prices rocketed in 2022 due to the Ukraine conflict, stretching the government’s estimated spending on fertiliser subsidies for 2022-23 to a record ₹2.25 lakh crore. Fertilisers are sold by manufacturers at a discount to millions of farmers, which are reimbursed by the Centre.
The incentive will be calculated at 50% of the subsidy savings by way of reduced consumption for a given year, based on a baseline average consumption of the past three years, according to the methodology fixed.
“In other words, if a state saves ₹3,000 crore, it will get back ₹1500 crore,” the person said. The cabinet proposal is likely to be moved soon after the current Parliament session concludes, the person added.
The scheme will consider alternative fertilisers as those based on natural, organic matter, nano urea and nano DAP. Both nano urea and nano DAP are indigenously made highly efficient versions of their conventional forms.
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India has sufficient stocks of key fertilisers for the summer cropping season beginning next month and won’t need to import at least two types of crop nutrients (urea and DAP) as they are aplenty, chemicals and fertiliser minister Mansukh Mandaviya said on March 22.
“It appears to be an incentive scheme to states. It indirectly aims to balance the use of NPK (nitrogen, phosphorus and potassium) group of fertilisers, which sees the highest distortion and overuse. Some states, such as Gujarat, which has the largest area under natural farming, will be big gainers,” said Abhishek Agrawal, an analyst with Comtrade, a commodity firm.
