The Government of India (Gol) had introduced a 'Concession Scheme for decontrolled Phosphatic and Potassic (P&K) fertilizers' in 1992 which continued up to 31 March 2010. The basic objective of the Concession Scheme w as to provide P&K fertilizers to farmers at affordable prices. The Maximum Retail Price (MRP) of P&K fertilizers was fixed by Gol at a level lower than the actual cost and the difference betw een the actual cost and MRP was reimbursed by Gol to manufacturers/importers in the form of subsidy.
The Department of Fertilizers (DoF) notified a new scheme i.e. "Nutrient Based Subsidy" (NBS) w.e.f. 1 April 2010 in order to improve agriculture productivity, ensure balanced use of fertilizers, promote growth of indigenous fertilizer industry and to reduce the burden of subsidy. Under NBS Policy, MRP of P&K fertilizers has been left open and the manufacturers/importers/marketers are allowed to fix MRP of P&K fertilizers at 'reasonable level'. Subsidy is determined on the basis of the nutrient contained in the fertilizers i.e. 'N' (Nitrogen), 'P' (Phosphate), 'K' (Potassium), and 'S' (Sulphur). NBS to be paid on each nutrient is decided annually by Gol.
State Governments intimate their requirements of fertilizers to the Department of Agriculture and Cooperation (DAC), which is conveyed to DoF for arranging supplies by fertilizer companies to the States. Distribution and movement of fertilizers are monitored by DoF through the online web based Fertilizer Monitoring System (FMS).