Urea Subsidy: Why Farmers Pay About ₹242 for a Bag That Costs Much More
The Union Finance Ministry said that the Centre is paying a subsidy (government support that lowers the price) of about ₹2,700 on every bag of urea, as the import cost of urea has gone up to as much as ₹3,000 per bag.
Farmers keep paying a low, fixed price. The official Maximum Retail Price (MRP) of a 45-kg bag of urea is ₹242, not counting neem-coating charges and taxes. Officials spoke of it in rounded terms as about ₹300.
The rise in global costs has been linked to disruptions such as the pandemic and the tensions in West Asia, which push up the prices of imported fertiliser and of the natural gas used to make it.
Under the Urea Subsidy Scheme, the government pays urea makers and importers the gap between the full delivered cost of urea and the low price they get from farmers.
The statement was made at an event in Madanapalle, Andhra Pradesh, where Centre and state initiatives for horticulture and agriculture were announced. Officials linked fertiliser supply with other farm support such as PM-KISAN income support and Kisan Credit Cards.
Urea Subsidy Scheme: How India Keeps Urea Cheap
Urea is the most used fertiliser in India. It is a white, grainy chemical that gives plants nitrogen, the nutrient that makes leaves green and helps crops grow fast. The government fixes a very low price for urea by law and pays the companies the rest of its cost. This arrangement is called the Urea Subsidy Scheme, and it is one of the biggest subsidies in the Union Budget.
The Centre's statement that it is paying about ₹2,700 per bag shows exactly how the Urea Subsidy Scheme works: the farm price stays fixed while the subsidy expands to absorb global price shocks. When import costs rise to around ₹3,000 a bag, the gap between delivered cost and MRP, and so the subsidy bill, grows sharply.
Nutrient Based Subsidy (NBS) Scheme
The Nutrient Based Subsidy (NBS) Scheme is the system India uses to give subsidy on fertilisers other than urea, mainly phosphatic (P) and potassic (K) fertilisers like DAP and MOP. Under it, the government fixes a subsidy for each kilogram of nutrient (nitrogen, phosphorus, potash and sulphur) inside a fertiliser. The company then gets a subsidy based on how much of these nutrients its product contains. Unlike urea, the selling price of these fertilisers is not fixed by law.
The same global shocks that are raising the cost of urea are also raising the cost of DAP and other imported fertilisers. While urea's price is fixed by law, the NBS system shows how the government manages the other half of the fertiliser bill, and why the gap between cheap urea and costlier P and K fertilisers is linked to unbalanced fertiliser use.
- Subsidy now being absorbed: about ₹2,700 per bag of urea, with import costs up to about ₹3,000 per bag
- Urea MRP: ₹242 per 45-kg bag (excluding neem coating charges and taxes)
- Bag size cut from 50 kg to 45 kg on 1 March 2018
- New Urea Policy: notified 25 May 2015
- Department of Fertilisers allocation 2026-27 (BE): ₹1.71 lakh crore; 2025-26 (RE): ₹1.86 lakh crore
- India's domestic urea output: about 30 to 31 million tonnes a year
- NBS Scheme in force since 1 April 2010, covering 28 grades
- Recommended N:P:K ratio 4:2:1; actual about 10.9:4.1:1 (2023-24)