Nutrient-Based Subsidy (NBS) Scheme

The Government of India introduced the Nutrient-Based Subsidy (NBS) Scheme with effect from April 1, 2010, marking a major policy reform in the fertilizer sector. The scheme aims to ensure the availability of fertilizers to farmers at affordable and fair prices, while promoting their balanced and efficient use.

Core Framework of the NBS Scheme
Under the NBS regime, fertilizer subsidies are linked to the nutrient content rather than the product itself. Subsidy rates are fixed for four key nutrients—Nitrogen (N), Phosphorus (P), Potassium (K), and Sulphur (S)—commonly referred to as NPKS.

Coverage and Subsidy Mechanism
The scheme provides a fixed subsidy, revised annually or biannually, on Phosphatic and Potassic (P&K) fertilizers, including DAP (Di-Ammonium Phosphate). The subsidy amount varies according to the nutrient composition of each fertilizer grade. At present, the government supplies 28 types of P&K fertilizers at subsidized rates through authorized manufacturers and importers.

Decontrolled Pricing with Oversight
The P&K fertilizer sector operates under a decontrolled pricing regime, allowing companies to fix the Maximum Retail Price (MRP). However, MRPs remain subject to government oversight to protect farmers’ interests. Farmers receive the subsidy benefit directly at the point of purchase, as the subsidy is built into the MRP.

Regulatory Safeguards
Fertilizer companies are required to:

• Submit audited cost data as per prescribed guidelines.
• Regularly report MRPs of all P&K fertilizer grades to the Department of Fertilizers (DoF).
• Ensure MRPs are aligned with notified subsidy rates and remain reasonable.

To prevent profiteering, profit margins are capped:

• Up to 8% for importers,
• 10% for manufacturers, and
• 12% for integrated manufacturers,
  over the cost of production of the final P&K product. Any excess profit is treated as unreasonable and recoverable by the government.