Fertilizer Policy

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Fertilizer Policy
 
        
At present, there are 30 urea units in the country out of which 27 urea units use Natural Gas (using
either domestic gas/LNG or both) and remaining three urea units use Naphtha as feedstock. The
MRP of urea is statutorily fixed by the Government of India and at present it is Rs. 5360/- per MT
(exclusive of the Central/State Taxes), which includes Rs. 180/MT as dealer margin for private
traders/PSUs & Rs. 200/MT for Co-operatives and Rs. 50/MT to retailers for acknowledging the
receipt and reporting the stock in mFMS (iFMS) as additional incentive. An extra MRP of 5 %
(of Rs. 5360/- per MT) is charged by fertilizer manufacturing entities on Neem Coated Urea. The
difference between the delivered cost of fertilizers at farm gate and MRP payable by the farmer is
given as subsidy to the fertilizer manufacturer/importer by the Government of India.
 
        
The following policies regarding subsidy payment to urea units were in place since 2003:
                    i.         

New Pricing Scheme (NPS) - I for the period from 01.04.2003 to 31.03.2004.
                   ii.         

NPS – II for the period from 01.04.2004 to 31.09.2006.

                  iii.         

NPS – III for the period from 01.10.2006 to 01.04.2014.

                  iv.         

Modified NPS – III for the period from 02.04.2014 to 31.05.2015

 
        
The current policies by which subsidy is being paid to urea units are as under:
                v.            

NPS-III and Modified NPS – III regarding compensation of fixed cost and variable cost e.g. the cost of
bag, water charges & electricity charges to continue till further orders.
               vi.            

New Urea Policy – 2015 for the period 01.06.2015 to 31.03.2019 (Applicable for 25 gas based urea
units).
              vii.            

Notification dated 17th June, 2015 – Applicable for Madras Fertilizers Limited- Manali Southern
Petrochemicals Industries Corporation (SPIC) - Tuticorin and Mangalore Chemicals & Fertilizers
Limited (MCFL).
 
New Urea Policy (Applicable for 25 gas based urea units)
 
        
The New Urea Policy-2015 (NUP-2015) has been notified by Department of Fertilizers on 25th May,
2015, effective from 1st June, 2015 upto 31st March, 2019, with the objective of maximizing indigenous
urea production, promoting energy efficiency in urea production and rationalizing subsidy burden on
the government.
 
        
As per NUP – 2015, the preset energy norms for the 25 gas based urea units fixed during earlier
policies have been mopped up and they are eligible to get the concession rate on the basis of revised
energy norms fixed for each group from 1st June, 2015 to 31St March, 2018 which would be the simple
average of pre-set energy norms of NPS-III and average actual energy consumption achieved during
the years 2011-12, 2012-13 and 2013-14 or the pre-set set energy norms of NPS-III, whichever is
lower.
 
        
The urea units have been given target energy consumption norms to be achieved in the year 2018-
19. For Group-I, target energy norms for the year 2018-19 is 5.5 G Cal/MT (except Tata Chemicals
Limited-Babrala for which existing pre-set energy consumption norm of NPS-III i.e. 5.417 G Cal/MT
will continue).  For Group-II and Group-III, the target energy consumption norms for the year 2018-19
have been 6.2 G Cal/MT and 6.5 G Cal/MT respectively.
 
        
For production upto 100% re-assessed capacity (RAC), the 25 gas based urea units are entitled to get
total cost of production of urea, which includes fixed cost and variable cost.
 
        
For production beyond RAC, the units are entitled for their respective variable cost and a uniform per
MT incentive equal to the lowest of the per MT fixed costs of all the indigenous urea units subject to
import parity price plus weighted average of other incidental charges which the government incurs on
the imported urea.  However, vide notification dated 7th April, 2017, a further amendment was
incorporated for production of urea beyond RAC during 2016-17 such that units were entitled beyond
their respective variable cost and a uniform per MT incentive equal to the lowest of the per MT fixed
cost of all indigenous urea units subject to sum of import parity price, other incidental charges which
the Government incurs on the import of urea and weighted average of Central Government levies of
urea paid by the urea manufacturing units. Vide said amendment, it has been decided that in event of
any fluctuation in Import Parity Price that would have adverse impact on the production beyond RAC
by urea units, Department of Fertilizers is authorized to take appropriate decision in consultation with
Department of Expenditure.
 
        
The compensation for other variable cost e.g. the cost of bag, water charges & electricity charges and
fixed cost are determined in accordance with existing provisions of NPS-III and Modified NPS-III.
 
        
Five units namely MFL-Manali, MCFL-Mangalore, SPIC-Tuticorn, BVFCL-Namrup-II and BVFCL-
Namrup-III are not covered under this scheme because these units are not connected to gas pipeline
network in the country.  As per NUP – 2015, Namrup-II and Namrup-III units of BVFCL are proposed
to be closed and a new high efficiency unit will be installed, which will be dealt separately under their
restructuring proposal. Till then, these two units will function under the provisions of Modified NPS-III.
 
 
For Naphtha based urea units

          
The three Naphtha based urea units viz., Madras Fertilizers Limited- Manali (CPSU), Southern
Petrochemicals Industries Corporation (SPIC) - Tuticorin and Mangalore Chemicals & Fertilizers
Limited (MCFL) are governed by Policy Notification dated 17th June, 2015, which allows these units to
operate urea production using Naphtha as feedstock till gas availability and connectivity to these three
units either by gas pipeline or by any other means The Naphtha based urea units are entitled to get
subsidy as per the following conditions:
(i)       These units will be eligible for subsidy on the basis of the revised energy norms from the
date of notification, which would be the simple average of pre-set energy norms of New
Pricing Scheme (NPS) – III and lowest yearly specific energy consumption achieved
during the years 2011-12, 2012-13 and 2013-14 or the pre-set energy norms of NPS –
III, whichever is lower.

(ii)      The concession rate for these plants will be determined notionally on the basis of
weighted average of the delivered cost of RLNG to recently converted plants after
deducting state taxes (VAT, Entry tax) on RLNG or the cost of production of urea from
Naphtha/FO after deducting state taxes levied on Naphtha/FO consumed for urea
production (VAT, Entry tax) on Naphtha/FO, whichever is lower.

(iii)     The compensation for other variable cost e.g. the cost of bag, water charges & electricity
charges and fixed cost will be determined in accordance with existing provisions of NPS
– III and Modified NPS – III.

 
New Investment Policy – 2012
 
        
The Government has notified New Investment Policy – 2012 on 2 nd January, 2013 with the main
objectives to facilitate fresh investment, make India self and reduce import dependency in urea sector.
The salient features of NIP – 2012 are as follows:-
 
                      i.       

The policy supports gas based plants only.

                     ii.       

It has structure of a flexible floor and ceiling price calculated at delivered price of gas from US $6.5 to
US $ 14/mmbtu.
                    iii.       
The floor price has been determined at a Return on Equity (RoE) of 12% and the ceiling price at a
RoE of 20%.
                    iv.       

For Greenfield/Revival and Brownfield Projects, the floor and ceiling shall increase in tandem with
increase in delivered gas price i.e. every USD 0.1/mmbtu increase in delivered gas price will increase
the floor and ceiling by USD 2/MT upto delivered gas price of USD 14/mmbtu.
                     v.       

Beyond delivered gas price of USD 14/mmbtu, only floor will be increased.
                    vi.       

For Revamp Projects, floor and ceiling have been linked to delivered gas price of USD 7.5/mmbtu and
floor and ceiling shall increase by USD 2.2/MT for every increase in delivered gas price of 0.1/mmbtu.
                   vii.       

It supports revival of closed units.

                  viii.       

It encourages investment by Indian industry in Joint Venture abroad in resource rich countries
                    ix.       

The policy incentivizes units to produce urea in granulated or coated/fortified form to improve the
efficiency in the use of Urea with additional amount of USD 10/MT allowed in floor and ceiling prices.
                     x.       

For units in North Eastern states, the special dispensation regarding gas price that is being extended
by GOI/State governments will be available to any new investment. Suitable adjustments will be made
to applicable floor and ceiling price in case the delivered price (after allowing for special dispensation)
falls below USD 6.5 per mmbtu, subject to approval of Ministry of Finance.
 
Amendment in NIP-2012
 
        
Vide notification dated 7th October, 2014, the following amendments were made in the New
Investment Policy–2012 (NIP-2012):-
(i)           Para 8.1 of NIP-2012   is replaced as follows:
‘Only those units whose production starts within five years from the date of this
amendment notification will be covered under the policy.  Subsidy will be given only
upon domestic sale as at present for a period of 8 years from the date of start of
production. Thereafter, the units will be governed by the urea policy prevalent at that
time.’
(ii)         To ensure seriousness/credibility of the project proponents under NIP-2012 and for
timely execution of the projects, all the project proponents will be required to furnish
Bank Guarantee (BG) of Rs. 300 crores for each project. The BG will be linked to
milestones in the project cycle. Out of Rs. 300 crores, Rs. 100 crores of BG will be
released after finalization of LSTK/ EPCA contractors and release of advance to the
contractor’s account; Rs. 100 crores of BG will be released on completion of
equipment ordering and supply to the site or midpoint of the project cycle, whichever
is earlier; and the balance of Rs. 100 crores of BG on completion of the project. 
PSUs are, however, exempted from furnishing the BG.
 (iii)        A Committee of Secretaries comprising Secretary (Fertilizers), Secretary
(Department of Expenditure), Secretary (MoPN&G), Secretary (Planning
Commission) and Secretary (Agriculture) with Secretary (Fertilizers) as Chairman is
constituted to take decisions on various issues which will arise during the
implementation of NIP-2012.
Uniform Freight Policy
 
        
DOF announced the uniform freight policy (UFP) with effect from April 1, 2008 vide notification dated
July 17, 2008 with an objective to ensure the availability of fertilizers in all parts of the country,
especially distant/remote corners of the country. The freight subsidy is paid to the urea units for the
transportation of urea from Plant/Port to the Block/District.
 
        
The slab-wise rates in respect of primary road movement for the year 2008-09 and escalated/de-
escalated upto financial year 2015-16 have been notified by Department of Fertilizers.
 
 
        
Department of Fertilizers had also notified the Per Tonne Per kilometre (PTPK) rates upto financial
year 2015-16 for road transportation in the case of secondary movement of fertilizers from unloading
rake point to retail point. 
 
Fertilizer Subsidy Policy for Phosphatic & Potassic (P&K) Fertilizers:

1          Historical Background:

1.1       Since independence, Government of India has been regulating sale, price and quality of fertilizers.
For this purpose, Government of India has passed Fertilizer Control Order (FCO) under Essential
commodity Act (EC Act) in the year 1957.  In order to regulate the distribution of fertilizer, Movement
Control Order was passed in 1973. No subsidy was paid on Fertilizers till 1977 except Potash for which
subsidy was paid only for a year in 1977.
1.2       On the recommendation of the Maratha Committee, the Government had introduced Retention
Price Scheme (RPS) for nitrogenous fertilizers in November 1977.  Subsequently, RPS was extended to
phosphatic and other complex fertilizers from February 1979 and to Single Super Phosphate from May
1982, which continued up to 1991.  Later on, subsidy was also extended to imported phosphatic and
potassic (P&K) fertilizers.
            In early 1990s, the country was facing mounting fiscal deficit and there was an impending danger
of foreign exchange crisis. In order to contain the subsidy burden, Government announced an increase of
40% in the price of fertilizers in July, 1991. Some of the fertilizers which were under the subsidy scheme
were decontrolled. Subsequently, apprehending low consumption of fertilizer due to increase in prices and
consequently, low agriculture productivity, Government rolled back 10% of increase in Urea price.
1.3       In December 1991, Government set up a Joint Parliamentary Committee (JPC) on Fertilizer Pricing
to review the existing methods of computation of retention prices for different manufactures of fertilizers
and to suggest measures for reducing fertilizers prices without straining the exchequer. JPC submitted its
report on 20th August 1992.  The main conclusions and recommendations of the Committee were that the
rise in subsidy was mainly due to increase in the cost of imported fertilizers, de-valuation of rupee in July
1991 and the stagnant farm gate prices from 1980 to 1991. The Committee did not favour total
decontrolled of fertilizers but recommended decontrol of import based phosphatic and Potassic fertilizers
along with a marginal 10% reduction in the consumer price of Urea.
 
2          Concession Scheme for P&K Fertilizers:
2.1       Based on the recommendations of Joint Parliamentary Committee, Government of India
decontrolled all Phosphatic and Potassic (P&K) fertilizers namely DAP, MOP, NPK complex fertilizers
and SSP with effect from 25th August 1992 which were under Retention Price Scheme (RPS) since 1977
except Urea which continued to remain under RPS. Since subsidy was retained on the Nitrogenous
fertilizers (Urea) while phosphatic fertilizers were decontrolled, the prices of phosphatic fertilizers in the
market became comparatively high.  As a result, production and consumption of nitrogenous fertilizers
increased and consumption of P&K fertilizers decreased. This led to severe imbalance in consumption of
nitrogenous, phosphatic and Potassic fertilizers.  Fearing imbalance fertilization of the soil, un affordability
by farmers due to increase in phosphatic and potassic fertilizer prices, Government  of India announced ad
hoc Concession Scheme for phosphatic and potassic fertilizers from Rabi 1992 to cushion the impact of
price hike with a view to encourage balanced fertilizer consumption.
2.2       The basic purpose/objective of the Concession Scheme for P&K fertilizers has been to provide
P&K fertilizers to the farmers at affordable prices so as to increase the food productivity in the country
through balanced use of fertilizers.  The concession scheme was also aimed at ensuring reasonable rate of
return on the investments made by the entrepreneurs in the fertilizer sector.
2.3       Initially, the ad-hoc Concession Scheme was applicable 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(DAC).
2.4       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.  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.
2.5       Till 30th September 2000, the issues relating to fertilizer subsidy was being looked after by DAC
and thereafter it was continued by Department of Fertilizers with changed parameters from time to time. 
The MRP of P&K fertilizers were revised on 28.2.2002, which continued upto  31.3.2010 in case of DAP
and MOP.  However, in case of complex fertilizers, the MRP was revised on  18.6.2008. 
2.6       The MRP of SSP, which was used to be declared by the respective State Governments up to 30th
April, 2008, was announced by DOF at Rs. 3400/MT uniformly all over the country. w.e.f.1.5.2008 to
30.9.2009 and subsidy on SSP was decided by DOF on monthly basis based the report of Cost Account
Brach.  MRP of SSP was left open w.e.f. 1.10.2009 to 30.4.2010 and a fixed of Rs. 2000 PMT was paid on
SSP as subsidy.
 
3          Computation of Subsidy on P&K fertilizers under Concession Scheme:
3.1       The computation of subsidy on P&K fertilizers was based on Cost Price Study on DAP and MOP
conducted by Bureau of Industrial Costs and Prices (BICP) now called Tariff Commission (TC).   The
subsidy rates were decided on the cost plus approach on quarterly basis w.e.f. 1.4.1999.    The total
delivered cost of the fertilizers being invariably higher than MRP indicated by the Government, the
difference between delivered price of fertilizers at farm gate level and the MRP was compensated by
Government in the form of subsidy.
3.2       The Government introduced a new methodology for working out subsidy on complex fertilizers
w.e.f. 1.4.2002 based on the recommendation of TC. The complex manufacturers were divided into two
groups based on feed stock for sourcing nitrogen i.e. Gas and Naphtha.    With passage of time, DAP
industry started using different raw materials such as Rock Phosphate for producing phosphoric acid.  DOF
framed a proposal suggesting methodology to link phosphoric acid price with international DAP price. 
The matter was referred to Expert Group under chairmanship of Prof. Abhijit Sen. The report of this Group
was submitted in October 2005 and considered by Inter-Ministerial group.  TC conducted fresh cost price
study of DAP/MOP and NPK complexes and submitted its report in December 2007. Based on this TC
report, the subsidy was calculated on monthly basis till 31.3.2010.
 
4          MRP of P&K fertilizers under Concession Scheme:
The MRP was fixed by the Government with effect from 1.4.1997 and the details of MRP fixed by the
Government from 1997 to 31.3.2010 are mentioned in the table below:
 
Maximum Retail Price (MRP) of P&K fertilizers (in Rs. per Metric Tonne)

1.4.97 29.2.00 28.2.02 28.2.03

# Grades of Fertilizers 28.2.00 27.2.02 27.2.03 11.3.03

1 DAP : 18-46-0-0 8300 8900 9350 9550

2 MAP : 11-52-0-0  NA NA   NA NA 

3 TSP : 0-46-0-0  NA NA   NA NA 

4 MOP : 0-0-60-0 3700 4255 4455 4455

5 16-20-0-13 6400 6740 7100 7300

6 20–20–0-13  NA NA   NA NA 

7 23–23–0-0  NA NA   NA NA 

8 10–26–26-0 7300 7880 8360 8560

9 12–32–16-0 7400 7960 8480 8680

10 14–28–14-0 7300 7820 8300 8500

11 14–35–14-0 7500 8100 8660 8860

12 15–15–15-0 6000 6620 6980 7180

13 AS: 20.3-0-0-23  NA NA   NA NA 

14 20-20-0-0 6500 6880 7280 7480

 Maximum Retail Price (MRP) of P&K fertilizers (in Rs. per Metric Tonne)

15 28–28–0-0 8000 8520 9080 9280

16 17–17–17-0 7200 7680 8100 8300

17 19–19–19-0 7300 7840 8300 8500

MRP was fixed by respective State Governments upto April 2008.

18 SSP(0-16-0-11) W.e.f. 1.5.2008 to 30.9.09 all India MRP of Rs. 3400 PMT fixed by Govt
fixed by SSP units.
 
 
5          Impact of Concession Scheme:
5.1       The MRP of P&K fertilizers were much lower than its delivered cost.  This led to increase in
consumption of fertilizers during the last three decades and consequently increase in food grain production
within the country.  However, it was observed in last few years that the marginal response of agricultural
productivity to additional fertilizer usage in the country had fallen sharply, leading to near stagnation in
agricultural productivity and consequently agricultural production. The disproportionate NPK application,
rising multi-nutrient deficiency and lack of application of organic manures leading to reduction in carbon
content of the soil, was attributed to the stagnating agricultural productivity. The fertilizer sector worked in
a highly regulated environment with cost of production and selling prices being determined by the
Government of India. Due to this fertilizer industry suffered from low profitability as compared to other
sectors. The growth of fertilizer industry was stagnated with virtually no investments for the past 11 years
in urea sector and for over eight years in P&K sector. The fertilizer industry had no incentive to invest on
modernization and for increasing efficiency.  The innovation in fertilizer sector also suffered as very few
products were introduced by fertilizer companies, since they get out priced by subsidized fertilizers. The
industry had no incentive to focus on farmers leading to poor farm extension services, which were
necessary to educate farmers about the modern fertilizer application techniques, soil health and promote
soil test based application of soil and crop specific fertilizers. 
5.2       The subsidy outgo of Government also increased exponentially by 500% during the past five years
(2005-06 to 2009-10) under the Concession Scheme with about 94% of the increase caused by increase in
international prices of fertilizers and fertilizer inputs, and only 6% attributable to increase in consumption. 
5.3       It was, thus, observed that over the last few years the product based subsidy regime (erstwhile
concession scheme) had been proving to be a losing proposition for all the stake holders viz farmers,
industry and the Government. Accordingly, considering all the issues relating to agriculture productivity,
balanced fertilization and growth of indigenous fertilizer industry, competitiveness amongst the fertilizer
companies and to overcome the deficiency of concession scheme, the Government introduced Nutrient
Based Subsidy (NBS) Policy for P&K fertilizers w.e.f. 1.4.2010.  
 
6          Nutrient Based Subsidy (NBS) Policy (w.e.f. 1.4.2010):
6.1       The Department is implementing NBS Policy for P&K fertilizers w.e.f. 1.4.2010. Under the NBS
Policy, a fixed rate of subsidy (in Rs. per Kg basis) is announced on nutrients namely Nitrogen (N),
Phosphate (P), Potash (K) and Sulphur (S) by the Government on annual basis.   The salient features of
NBS Policy are as under:
 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), Planning Commission 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 recommends a per tonne additional subsidy on fortified subsidized fertilizers carrying
secondary (other than ‘S’) and micro- nutrients. The Committee also 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. 
 The per Kg subsidy rates on the nutrient N, P, K, S is converted into per Tonne subsidy on the
various P&K fertilizers covered under NBS Policy.
 Any variant of the fertilizers covered under the subsidy scheme with micronutrients namely Boron
and Zinc, is eligible for a separate per tonne subsidy to encourage their application along with primary
nutrients. 
 At present 22 grades of P&K fertilizers namely DAP, MAP, TSP, MOP, Ammonium Sulphate,
SSP and 16 grades of NPKS complex fertilizers are covered under the NBS Policy. 
 Under the NBS regime, MRP of P&K fertilizers has been left open and fertilizer
manufacturers/marketers are allowed to fix the MRP at reasonable rates.
 MRP of P&K fertilizers has been left open and fertilizer manufacturers/marketers are allowed to
fix the MRP at reasonable rates. In effect, the domestic prices are determined by demand supply
mechanism. 
 The distribution and movement of fertilizers along with import of finished fertilizers, fertilizer
inputs and production by indigenous units is monitored through the online web based “Fertilizer
Monitoring System (FMS)” as was being done under the Concession Scheme for P&K fertilizers.
 20% of the decontrolled fertilizers produced/imported in India has been placed in the movement
control under the Essential Commodities Act 1955 (ECA). Department of Fertilizers regulates the
movement of these fertilizers to bridge the supplies in underserve 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 even in the remotest places in the
country.   
 Import of all the subsidized P&K fertilizers, including complex fertilizers has been placed under
Open General License (OGL). NBS is available for imported complex fertilizers also except Ammonium
Sulphate. However, in case of Ammonium Sulphate (AS) the NBS is applicable only to domestic
production by M/s FACT. 
 Though the market price of subsidized fertilizers, except Urea, is determined based on demand-
supply dynamics, the fertilizer companies are required to print Retail Price (RP) along with applicable
subsidy on the fertilizer bags clearly. Any sale above the printed MRP is punishable under the EC Act. 
 Manufacturers of customized fertilizers and mixture fertilizers have been permitted 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. However, no
separate subsidy is provided on sale of customized fertilizers and mixture fertilizers.
 A separate additional subsidy is also provided to the indigenous manufacturers producing complex
fertilizers using Naphtha based captive Ammonia to compensate for the higher cost of production of ‘N’
for a maximum period of two years w.e.f. 1.4.2010 to 31.3.2012 during which the units are required to
convert to gas or use imported Ammonia as feedstock.  The quantum of additional subsidy is finalized by
Department of Fertilizers in consultation with DOE, based on study and recommendations by the Tariff
Commission.
 The NBS is passed on to the farmers through the fertilizer industry. The payment of NBS to the
manufacturers/importers of P&K fertilizers is released as per the procedure notified by the Department.
6.2       The per kg NBS rate and per Metric Tonne subsidy on different grade of P&K fertilizers
announced by the Government during the year 2010-11 to 2014-15 is as under:
Per Kg NBS rates for nutrients NPKS for the 2010-11 to  2014-15 (in Rs. per Kg)

Nutrients 1st  Apr - 31st  Dec 2010 * 1st  Jan- 31st  Mar 2011** 2011-12 2012

‘N’ (Nitrogen) 23.227 23.227 27.153 24.0

‘P’ (Phosphate) 26.276 25.624 32.338 21.8

‘K’ (Potash) 24.487 23.987 26.756 24.0

‘S’ (Sulphur) 1.784 1.784 1.677 1.67

*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.
 
Per MT subsidy on different grade of P&K fertilizers during the year 2010-11 to 2014-15 (in Rs. PMT)

2010-11  
Fertilizer Grades(FG)
Sl. No. 1.4.2010 to 2011-12 20
(N P K S nutrient) 1.1.2011 to 31.3.2011
31.12.2010

1.   DAP     (18-46-0-0) 16268 15968 19763 14

2.    MAP     (11-52-0-0) 16219 15897 19803 13

3.    TSP      (0-46-0-0) 12087 11787 14875 10

4.    MOP     (0-0-60-0) 14692 14392 16054 14

5.    SSP      (0-16-0-11) 4400 4296+200 5359 36

6.    16-20-0-13 9203 9073 11030 84

7.    20-20-0-13 10133 10002 12116 93

8.    20-20-0-0 9901 9770 11898 91

9.    28-28-0-0 13861 11678 16657 12

10.    10-26-26-0 15521 15222 18080 14

11.    12-32-16-0 15114 14825 17887 13

  
Per MT subsidy on different grade of P&K fertilizers during the year 2010-11 to 2014-15 (in Rs. PMT)

12.    14-28-14-0 14037 13785 16602 12

13.    14-35-14-0 15877 15578 18866 14

14.    15-15-15-0 11099 10926 12937 10

15.    17-17-17-0 12578 12383 14662 11

16.    19-19-19-0 14058 13839 16387 13

Ammonium Sulphate 53
17.    5195 5195 5979
 (20.6-0-0-23)  

18.    16-16-16-0 (w.e.f. 1.7.2010) 11838 11654 13800 11

15-15-15-9
19.    11259 11086 13088 10
 (w.e.f. 1.10.2010)

24-24-0-0 (from 1.10.10 to 29.5.12 and

20.    11881 11724 14278 10
w.e.f. 22.6.2012)

21.    DAP Lite(16-44-0-0) (w.e.f. 1.2.11) NA 14991 18573 13

24-24-0-8 (wef 12.11.13 to 14.2.15) without

22.    NA NA NA N
subsidy on S

23.    23-23-0-0 (upto22.6.2012) 11386 11236 13686 10

DAP 4S (w.e.f. 25.2.13 to 7.11.13) without

24.    NA NA NA 14
subsidy on S 

DAP Lite-II(14-46-0-0)
25.    NA NA 18677 13
(w.e.f. 30.8.2011 to 29.8.2012)

MAP Lite (11-44-0-0)

26.    NA NA 17276 12
(w.e.f. 30.8.2011 to 29.8.2012)

13-33-0-6
27.    NA NA 14302 10
(w.e.f. 30.8.2011 to 29.8.2012)
 
NA means not covered under Subsidy regime.
 
6.3 Additional compensation to Naphtha based NPK complex fertilizer
manufacturing units: 
Under the NBS Policy, a separate additional subsidy is also provided to the indigenous manufacturers such
as M/s FACT, M/s MFL and M/s GNVFC producing complex fertilizers using Naphtha based captive
Ammonia to compensate for the higher cost of production of ‘N’ for a maximum period of two years (upto
31.3.2012) during which the units are required to convert to gas or use imported Ammonia as feedstock.
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 above said additional
compensation has been extended beyond 31.3.2012 to 4.10.2013 for M/s FACT only and the proposal of
extension of additional compensation beyond 31.3.2012 for M/s MFL & GNFVC is under consideration in
the Department. Pending finalization of Tariff Commission’s Report, the Department has announced ad
hoc rate of additional compensation to M/s FACT, M/s GNVFC & M/s MFL as under
 
Companies Fertilizer Products Amount of ad hoc additional compensation (Provisional)
(in Rs. Per MT)

Earlier (ref. circular dated Revised on 29.4.2011 (w.

22.10.2010  1.4.2010)

FACT, Cochin 20-20-0-13S 2331 3121

Amm. Sulphate  2792 3658

(20.6-0-023)

MFL, Manali 20-20-0-13S 4784 5434

17-17-17-0 4079 4640

GNVFC, Bharuch 20-20-0-0 1914 2534

 
 
6.4       Prices (MRP) of P&K fertilizers under NBS regime: 
Our country is fully dependent on imports in Potassic sector and to the extent of 90% in Phosphatic sector
in the form of either finished products or its raw material. Subsidy being fixed, any fluctuation in
international prices has effect on the domestic prices of P&K fertilizers.
 
            A Statement showing MRP of P&K fertilizers during the year 2010-11 to 2013-14 is at Annexure-
I.
 
6.5       Reasonableness of MRP:
  Under NBS policy companies are allowed to fix the MRP on their own. The intention behind introduction
of NBS was to increase competition among the fertilizer companies to facilitate availability of diversified
products in the market at reasonable prices. However, the prices of P&K fertilizers have gone up
substantially and doubts have been raised about reasonableness of the prices fixed by the companies. The
prices have gone up substantially on the account of increase in prices of raw materials / finished fertilizers
in international market, depreciation of Indian rupee w.r.t US Dollar and also due perhaps to larger profit
margins by the companies. This has lead to lot of hue and cry from the various quarters and has also lead
to imbalance in use of fertilizers. Accordingly, in order to check the prices fixed by P&K companies, the
Government vide notification dated 8.7.2011 directed the fertilizer companies to fix the prices of P&K
fertilizers at reasonable level under the NBS regime. 
 
6.5.1    In order to ensure reasonableness of prices fixed by fertilizer companies, while announcing the
NBS Policy and rates for the year 2013-14, the following clauses have been incorporated in NBS Policy
applicable with effect from 1.4.2012:
(i)            It shall be mandatory for all the fertilizer companies to submit, along with their claims of
subsidy, certified cost data in the prescribed format and as per the requirement for the purpose of
monitoring of MRPs of P&K fertilizers fixed by the fertilizer companies.
(ii)           In cases, where after scrutiny, unreasonableness of MRP is established or where there is no
correlation between the cost of production or acquisition and the MRP printed on the bags, the subsidy
may be restricted or denied even if the product is otherwise eligible for subsidy under NBS. In proven case
of abuse of subsidy mechanism, DOF, on the recommendation of IMC may exclude any grade/grades of
fertilizers of a particular company or the fertilizer company itself from the NBS scheme.
(iii)          The reasonableness of MRP will be determined with reference to the MRP printed on the bags.
(iv)         The companies shall continue to submit the certified cost data as per the requirement and
direction of DOF from time to time.  The companies shall also report MRPs of P&K fertilizers regularly to
DOF.
(v)          The P&K companies should have the same MRP printed on the bags as applicable for each State
in FMS. In other words, there should not be any difference in MRP printed on the fertilizer bags and that
reported in the FMS for a particular state.
(vi)         The fertilizer companies henceforth will certify the correctness of MRPs of their products entered
in FMS while claiming ‘On Account’ claims for a particular month and also ensure that the MRPs are
updated in the FMS upto the date of submission of bill.
 
6.6       Monitoring of MPR of P&K fertilizers:
In order to monitor the prices of P&K fertilizers fixed by fertilizer companies, they have been asked to
submit cost data of the P&K fertilizers under NBS scheme from 2012-13 onwards on six monthly basis.   In
order to collect actual farm gate prices of P&K fertilizers, the Department is evolving a mechanism in
consultation with Department of Consumer Affairs and other concerned Organizations.
 
6.7       Freight subsidy Policy in respect of P&K fertilizers under NBS regime:
(a.)        The freight subsidy for distribution/movement of subsidized P&K fertilizers (except SSP) under
the NBS Policy w.e.f. 1.4.2010 to 31.12.2010 was restricted to the rail freight, whereas the secondary
freight (from rake point to districts) was assumed to be part of the fixed subsidy.  Freight reimbursement
on account of direct road movement was made payable as per the actual claim subject to the equivalent rail
freight upto a maximum of 500 Kms.
(b.)        W.e.f. 1.1.2011 to 31.3.2012, freight on account of Primary Movement (by rail from the plant or
the port to various rake points) and Secondary Movement (by road from nearest rake points to the block
headquarters in the Districts) of all P&K fertilizers (except SSP) was reimbursed as per the Uniform
Freight Subsidy policy applicable to urea during the period. Freight subsidy for Direct Road Movement
(by road from plant or port to blocks) of all P&K fertilizers (except SSP) was reimbursed as per actual
claim subject to the equivalent rail freight upto a maximum of 500 Kms.  The rates for reimbursement of
freight for direct road movement from 1.4.2010 to 31.3.2012 were as under:
Movement(K.M.) Rates Rs. per MT

Upto 100 108

101-200 183

201-300 256
 Movement(K.M.) Rates Rs. per MT

301-400 327

401-500 400
 
(c.)        W.e.f. 1.4.2012, freight subsidy for P&K fertilizers is as under:
(i)      Freight on account of Primary Movement of all P&K fertilizers (except SSP) is reimbursed on the
basis of actual rail freight, as per the railway receipts.
(ii)      No reimbursement on account of Secondary Movement of all P&K fertilizers (including SSP), is
provided.
(iii)     Freight subsidy for Direct Road Movement of all P&K fertilizes (excluding SSP) is reimbursed as
per the actual claims subject to equivalent rail freight to be announced by DOF time to time.  However, the
maximum allowable distance under the direct road movement shall be 500 KMs.
(iv)    Special compensation on account of Secondary movement for all P&K fertilizers (except SSP) is
provided for difficult areas namely Himachal Pradesh, Uttarakhand, Sikkim, J&K, 7 North Eastern states
and A&N Islands.
 
6.8       Procedure for Payment of subsidy under NBS:
(a.)        P&K Fertilizers except SSP:  85% (90% with Bank Guarantee) of the subsidy claims of fertilizer
companies is paid as ‘on account’ payment on receipt of fertilizers in the district on certification by the
Company’s Statutory Auditor. The balance 15-10% is released on State government’s certification of
quantity in m-FMS and fertilizer receipt confirmation by retail dealers through mobile Fertilizer
Monitoring System (m-FMS).
(b.)       SSP:   85% (90% with Bank Guarantee) of the claim of subsidy is paid as ‘on account’ payment
on 1st point sale of fertilizers in the districts on certification by the Company’s Statutory Auditor. The
balance 10-15% claim is released subject to State Government’s certification on quantity and quality in m-
FMS as well as fertilizer receipt confirmation by retail dealers through m-FMS.
 
7.         Concession Scheme/Nutrient Based Subsidy for SSP :
After decontrol of P&K fertilizers, Concession Scheme for SSP was introduced w.e.f. 1993- 94, which
continued on ad-hoc basis for concession upto 30.4.2008. After the transfer of the administration of the
Concession Scheme from Department of Agriculture & Cooperation to DOF w.e.f. October 2000, DOF
revised the guidelines. Accordingly, a Technical Audit and Inspection Cell (TAC) under the aegis of PDIL
was constituted vide guidelines dated 17.5.2001. The SSP manufacturers were required to use only those
grades of Rock Phosphate, which has been notified by DOF from time to time, for claiming payment of
concession. All the new SSP manufacturing units were required to undergo first time technical inspection
of the units to ascertain their technical competence to manufacture SSP of the standards laid down under
the FCO. Subsequently, the units were also required to undergo six monthly inspection to ascertain as to
whether the units are working as per the tenets of the Concession Scheme.
The units were allowed to claim 85% 'On Account' payment of concession to be settled subsequently by
DOF based on the certification of sales issued by the State Governments in prescribed Proforma 'B'. This
practice has also been allowed to continue till date though the other policy parameters for SSP have been
changed from time to time.
The Government vide notification dated 25.8.2008 revised the Concession Scheme for SSP w.e.f.
1.5.2008, which continued upto 30.9.2009. As per this policy, Department of Fertilizers announced All
India MRP at Rs. 3400 PMT in place of the earlier system of indicating MRP by each State. As per the
policy-dated 25.8.2008, the concession rates were announced month-wise separately for SSP based on the
imported Rock Phosphate and that based on indigenous Rock Phosphate. The Concession was escalated/
de-escalated based on the rise/fall of the prices of the raw materials of Rock Phosphate, Sulphur and also
the exchange rate. In order to ensure quality of SSP, the SSP manufacturers are required to produce a
certificate of quality issued by the State Governments in which the units are located. The units are required
to write/print "Quality Certified" on each bag of the SSP.
The Department vide notification dated 13.8.2009 further revised concession scheme for SSP policy which
was effective from 1.10.2009 to 30.4.2010. As per this policy, the Government decided to leave the selling
price of SSP open w.e.f. 1.10.2009 instead of the earlier MRP of Rs. 3400 PMT on all India basis and
provided ad hoc concession for an amount of Rs. 2000 PMT for powdered, granulated and boronated SSP.
Only those SSP manufacturers were allowed to claim subsidy, which produced 50% of the annual installed
capacity or 40,000 MTs per annum. The system of releasing 'On Account' as well as balance payment of
concession continued as it was.
W.e.f. 1.5.2010, the Nutrient Based Subsidy Policy has also been extended to SSP.
 
The rate of subsidy and MRP of SSP during the year 1993-94 to 2014-15 is as under:
Period Rate of Subsidy MRP (in Rs. PMT

Under Concession Scheme

1993-94 to 2007-08 Different amount of subsidy Upto 30.4.2008, MRP wa

of SSP within their State

2008-09 Month-wise subsidy announced by GOI W.e.f. 1.5.2008 to 30.9.20

(1.5.2008 to 30.9.2009) as mentioned below Table-A
 
2009-10 Rs. 2000 PMT W.e.f. 1.10.2009 to 30.4.2
(1.10.2009 to 30.4.2010)

Under NBS scheme

May 2010 to Dec.2010 4400 MRP under control as per M

Jan. 2011 to March 2011 4296+Rs. 200 freight

April 2011 to March 2012 5359 open MRP w.e.f. 3.5.2011

April 2012 to March 2013 3673 open MRP

April 2013 to March 2014 3173 open MRP

April 2014 to March 2015 3173 open MRP

Table A
 Rate of Concession for SSP for the period May 2008 to September 2009 under Concession Scheme for SSP (Po
25.8.2008 was based on report of Cost Account Branch 2004) (Fixed all India MRP of Rs. 3400/- PMT and mont
indigenous  Rock)

Month/year Rates of Concession based on Imported Rock Rates of

Phosphate Phosphate
(Rs. PMT) (Rs. PMT

May, 2008 6406 4587

June, 2008 8942 5383

July, 2008 9160 5674

August, 2008 10391 6776

September, 2008 11661 6990

October, 2008 13003 5823

November,2008 7914 3070

December, 2008 8965 2012

January, 2009 8075 1967

February, 2009 7503 1961

March, 2009 5870 1944

April, 2009 2927 1873

May, 2009 2709 2006

June, 2009 2453 1982

July, 2009 2510 1986

August 2009 1951 2331

September 2009 2251 2295
 
8.         Quality of Fertilizers :
The Government of India has declared fertilizer as an essential commodity under the Essential
Commodities Act, 1955 (ECA) and has notified Fertilizer Control Order, 1985 (FCO) under this Act.
Accordingly, it is the responsibility of the State Governments to ensure the supply of quality of fertilizers
by the manufacturers/importers of fertilizers as prescribed under the FCO under the ECA. As per the
provision of the FCO, the fertilizers, which meet the standard of quality laid down in the order can only be
sold to the farmers. There are 71 fertilizer testing laboratories including four laboratories of the
Government of India at Faridabad, Kalyani, Mumbai and Chennai with an annual analyzing capacity of
1.34 lakh samples. The quality of the fertilizers imported in the Country is invariably checked by the
fertilizer quality control laboratories of the Government of India.
The State Governments are adequately empowered to draw samples of the fertilizers anywhere in the
Country and take appropriate action against the sellers of Non- Standard fertilizers. The penal provision
includes prosecution of offenders and sentence if convicted up to seven years imprisonment under the
ECA, 1955 besides cancellation of authorization certificate and other administrative action. The
Department of Fertilizers make deductions along with penal interest on the quantity of the fertilizers for
which the State Governments have reported to be Non- Standard.
Payment of concession for P&K fertilizers and for Single Super Phosphate (SSP) is made by the
Department taking into account the certificate of quality given by the respective State Governments in
Proforma 'B' for the fertilizers received and sold in the State. Further, SSP units are required to produce
month-wise 'Quality Certificates' issued by the State Governments of the State in which the units are
located. The units are required to have well equipped laboratory to test the sample of its SSP.
The SSP units are also required to print 'Quality Certified' on each bag released in the market. DOF also
deputes PDIL to conduct first time technical inspection of the new SSP units. PDIL conducts six monthly
inspections of the SSP units to check the quantity and quality of the fertilizers for which the units are
claiming payment of subsidy. The units are also required to use only those grades of Rock Phosphate as
inputs for manufacturing SSP under the NBS, which are notified by DOF from time to time. A statement
showing the notified grades is at Annexure-XIII. DOF has also asked the State Government to constitute
teams with that of PDIL to test samples of Single Super Phosphate (SSP) at the retailer level. The
marketers of the SSP are also responsible for the quality of the fertilizer marketed by them. Department of
Fertilizers has also constituted vigilance teams of the Officers of the Department to check the availability
and quality of the fertilizers in the States.
 
9.         Subsidy outgo on P&K fertilizers and Urea during the last 10 years:
                                                                                                                                                                    
(in Rs. Crore.)
Year Subsidy on P&K Subsidy Regime for Subsidy on Urea Subsidy Regime
fertilizers P&K fertilizers for urea fertilizer

2005-06   6596.19 Concession Scheme 12793.45  

2006-07 10298.12 17721.43  

 
2007-08 16933.80 26385.36
New Pricing
2008-09 65554.79 33939.92 Scheme

2009-10 39452.06 24580.23

2010-11 41500.00   24336.68

2011-12 36107.94 NBS regime 37683.00

2012-13 30576.10 40016.00

2013-14 29426.86 41853.30

2014-15 (BE) 24670.30 47400.00

 
 
10        Study on the impact of NBS Policy:
In order to have better results in implementation of NBS Policy, the Department has assigned the task of
study of impact of NBS policy to a consultancy firm namely M/s Ernst & Young(EY).  The key focus
areas of the Study are as under:
 
(i)    Impact of NBS Policy on prices and availability of fertilizers in India.
(ii)   Impact of NBS Policy on balance fertilization of soil and its impact on agricultural productivity.
(iii)  Mechanism to ascertain ‘reasonability’ of MRP.
(iv) Identification of additional mechanism under NBS policy to make it more effective in achieving its
objectives.
(v)  Monitoring and regulation of prices.
(vi) Price Discovery and Fixation of Prices.
The report received from M/s EY has been circulated to concerned Ministries for their comments. The
Department will take appropriate measures in this regard after examination of comments received from
concerned Ministries/Departments and stake holder companies. 
 
 Highest Maximum Ratail Price (MRP) in Rs/MT of P&K fertilizers fixed
   
Nutrient Based Subsidy regime

10-11(Qtr. Wise) 11-12(Qtr. Wise) 2012-13(Qtr. Wise)

# Grades of Fertilizers
I II III IV I II III IV I II III
995 995 995 1075 1250 1820 2029 2480 2650 2650
1 DAP : 18-46-0-0  20000
0 0 0 0 0 0 7 0 0 0
995 1820 2000 2000 2420 2420
2 MAP : 11-52-0-0 NA NA NA   20000
0 0 0 0 0 0
805 805 805 1700 1700
3 TSP : 0-46-0-0 8057 8057 8057 17000 NA NA
7 7 7 0 0
505 505 505 1130 1204 1669 2310 2400
4 MOP : 0-0-60-0 5055 6064 12040
5 5 5 0 0 5 0 0
662 662 662 1440 1530 1530 1820 1820
5 16-20-0-13 7200 9645 15300
0 0 0 0 0 0 0 0
728 728 739 1140 1480 1580 1900 2480 1917
6 20–20–0-13  8095 15800
0 0 5 0 0 0 0 0 6
Excluded from NBS
7 23–23–0-0  NA NA NA 7445 7445 7445
Policy                                  
819 830 1010 1091 1600 1663 2190 2222 2222
8 10–26–26-0  NA 16386
7 0 3 0 0 3 0 5 5
863 823 863 1131 1640 1650 2230 2330 2250
9 12–32–16-0 9437 16400
7 7 7 3 0 0 0 0 0
1495 1702
10 14–28–14-0 NA NA NA NA   NA NA NA NA
0 9
1162 1514 1742 1760 2330 2330
11 14–35–14-0 NA NA NA 9900 17600
2 8 4 0 0 0
1100 1150 1300 1560 1560
12 15–15–15-0 NA NA NA 7421 8200 11500
0 0 0 0 0
13 AS: 20.3-0-0-23 860 860 760 8700 7600 1130 1030 10306 1101 1101 1101
  Highest Maximum Ratail Price (MRP) in Rs/MT of P&K fertilizers fixed
   
Nutrient Based Subsidy regime
0 0 0 0 6 3 3 3
594 624 1400 1550 1870 2445 2445
14 20-20-0-0 NA 7643 9861 18700
3 3 0 0 0 0 0
1118 1181 1574 1851 2472 2472 2390
15 28–28–0-0 NA NA NA 18700
1 0 0 2 0 0 5
2042 2052 2057
16 17–17–17-0               17710
7 2 2
1947 1947 1947
17 19–19–19-0               18093
0 0 0
320 320 320
18 SSP(0-16-0-11)* 3200 3200 4000 to 6300 6500 to 7500  
0 0 0
1520 1520
19 16-16-16-0       7100 7100 7100 15200    
0 0
1176 1760 1950 1950 2493 2493
20 DAP lite (16-44-0-0)       NA 19500
0 0 0 0 8 8
1290 1575 1500 1500 1500
21 15-15-15-09       6800 9300 14851
0 0 0 0 0
1155 1415 1480 1622 1622
22 24-24-0-0       7768 9000 14297
0 1 2 3 3
1620 1740 1740 1740 1740
23 13-33-0-6           17400
0 0 0 0 0
MAP lite (11-44-0- 1600 1800 1800 2150 2150
24           18000
0) 0 0 0 0 0
DAP lite-II(14-46-0- 1490 1869 1830 2480 2480
25           18300
0) 0 0 0 0 0
MRP is exclusive of
                     
Taxes
Fertilizers grade mentioned at Sr No 7,23,24,25 are not under
           
subsidy scheme presently. 
Blank space/NA means not available in the market/not under
           
subsidy scheme.