In addition to the fixed subsidy on above mentioned nutrients, there will be an additional per tonne subsidy for subsidised fertiliser carrying other secondary nutrients and micro nutrients in formulations approved under FCO 1985.
Fertilizer subsidy is second largest subsidy after food and has become sensitive political issue. Proper pricing and application of fertilizers could reduce subsidy bill. Moreover with complex grade of fertilizers there was a need for simplified pricing formula. India also has obligation under AOA to reduce it's agriculture subsidy. Nutrient - Based subsidy will provide incentive to farmers to test their soil and recommendation of crop and doses of nutrient. Fertilizer uses can be considerably reduced by applying recommended doses of fertilizer.
There are growing evidences to show that underground water quality in rural area is deteriorating due to excessive use of nitrogen based fertilizers. There is little private cost with unbalanced application of nutrients but large environmental and negative externalities are associated. Bio- fertilizers is another option, but willingness to adopt bio- fertilizers is more among those who have better access to agricultural information , high income and animal husbandry.
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