The Nutrient-Based Subsidy (NBS) Regime in India: A Current Assessment
The Nutrient-Based Subsidy (NBS) regime, introduced in India, represents a shift towards a more rationalized and efficient fertilizer subsidy system. While designed to promote balanced fertilization and enduring agricultural practices, its implementation has encountered several challenges despite ongoing reforms. This analysis, current as of November 8, 2025, details the scheme’s structure, limitations, recent developments, and importance for India’s agricultural policy.
The NBS framework aims to provide subsidies based on the nutrient content of fertilizers, rather than the price of the fertilizer itself. This approach intends to encourage the use of fertilizers containing phosphorus (P) and potassium (K), which are frequently enough under-applied, and to move away from a system heavily reliant on subsidized urea. However, several factors have limited the scheme’s full potential.
Key Challenges Facing the NBS Regime:
A primary obstacle is the exclusion of urea from the NBS. Urea, the most consumed fertilizer in India, continues to be sold at a fixed, heavily subsidized price.This creates a significant price disparity between urea and P&K fertilizers, incentivizing farmers to overuse nitrogen while neglecting other essential nutrients. Consequently, imbalanced fertilizer use persists across the contry.While the NBS has contributed to some advancement, the ideal Nitrogen:Phosphorus:Potassium (N:P:K) ratio of 4:2:1 remains elusive, with many regions exhibiting ratios as skewed as 8:3:1 or worse.
Price volatility in the global market also impacts the effectiveness of the NBS. As Maximum Retail Prices (MRPs) for P&K fertilizers are linked to international raw material and energy costs, fluctuations can make these fertilizers expensive even after subsidies are applied, notably impacting small and marginal farmers.
Despite the NBS’s attempt to rationalize subsidy calculations, the overall subsidy burden remains substantial, frequently exceeding budgetary allocations due to currency fluctuations and increasing import costs.Furthermore, monitoring and implementation present ongoing administrative hurdles. Ensuring fertilizer quality, preventing diversion to non-agricultural uses, and verifying actual nutrient composition require continuous vigilance. the need for local customization is apparent; uniform national subsidy rates may not adequately address the diverse soil nutrient deficiencies, cropping patterns, and climatic conditions found across India’s varied agricultural landscape.
Recent Reforms and Developments:
The Government has actively pursued reforms to strengthen the NBS framework. A significant step has been the implementation of Direct Benefit Transfer (DBT). Subsidies are now disbursed to fertilizer companies only after sales to farmers are verified through point-of-sale (POS) devices, enhancing transparency and accountability within the system.
To address fluctuating global prices, the NBS rates are reviewed bi-annually to align with current international fertilizer input costs. The scheme has also been expanded to include new fertilizer grades and fortified variants, offering farmers a wider range of choices. Crucially, discussions regarding the inclusion of urea within the NBS regime are ongoing, a move that could address the existing price distortions and promote more balanced fertilization practices.
For the Rabi 2025-26 season, the Government approved revised NBS rates for P&K fertilizers, aiming to balance affordability for farmers with the need for fiscal discipline.
Significance for India’s Agricultural Policy:
The NBS regime is integral to India’s broader agricultural and environmental objectives, including sustainable soil management, efficient resource utilization, and fiscal consolidation. It supports the nation’s goal of achieving food security without compromising environmental sustainability. By linking subsidies to nutrient content and promoting transparency, the NBS facilitates evidence-based policymaking and improved coordination between agricultural extension services, fertilizer distribution networks, and soil health management initiatives.
Originally written on October 18, 2018, and last modified on November 8, 2025.
