[Economic Survey] Ch8: Agriculture Fertilizer, Nutrient Based Subsidy Policy, Budget 2014, Schemes, Funds

Support StaffEconomy55 Comments

Mrunal Patel is providing free updates to the Economy current affairs, budget & Economic survey for the upcoming UPSC Prelims and Mains under this Win21 Series. In Pillar4C, he'll cover new developments related to GDP, Inflation, Unemployment including latest budget and economic survey!
  1. Prologue
  2. [Act 1] Fertilizers: Botany /Chemistry angle (NCERT)
  3. [Act 2] Subsidies: Where is it counted in budget?
  4. [Act 3] What is Nutrient Based subsidy (NBS)?
    1. Disadvantages of NBS?
    2. Urea smuggling
  5. [Act 4] Budget-2014 on Agriculture
    1. Soil Health card
    2. National market & Food security
    3. AGRO Finance
    4. AGRO Funds
    5. AGRO R&D support
  6. Appendix:
    1. Indigenous cattle breed
    2. Existing Agriculture extension services
    3. National Food Security Mission (NFSM):
    4. Stupid statistics


Economic Survey Chapter 8: Agriculture and Food Management. SIX subparts:

  1. Fertilizer subsidy & schemes, Budget-2014 announcement
  2. Minimum support pricing, Sugar pricing, Procurement reforms
  3. National food security act (NFSA)
  4. WTO Bali Summit
  5. APMC reforms, National market for agriculture, NSEL crisis
  6. El Nino and its impact on Indian monsoon

[Act 1] Fertilizers: Botany /Chemistry angle (NCERT)

  • Source: NCERT Biology Class11, Ch.12

Essential elements classified into two parts:

Macro nutrients Micro Nutrients
  • Absorbed from H2O and CO2: Carbon, hydrogen, oxygen
  • Absorbed from Soil: nitrogen, phosphorous, sulphur, potassium, calcium and magnesium
Iron, manganese, copper, molybdenum, zinc, boron, chlorine and nickel.
present in large amount in the tissue Needed in very small amount


Nutrient deficiency in plant
Nutrient Symptoms visible in Why?
  1. nitrogen, potassium
  2. magnesium
  • because during deficiency, the older leaves transfer these nutrients to younger leaves
  • Nitrogen deficiency: Choruses – loss of Chlorophyll, delayed flowering
  1. sulphur
  2. calcium
  • because calcium and Sulphur are immobile, older leaves cannot transfer them to younger leaves
  • Calcium deficiency: Necrosis- death of leaf tissue
  • Sulfur deficiency: retarded cell division in plant, delayed flowering, retarded cell division.

if soil is deficient in any nutrient, we’ve to artificially fill it up with fertilizer or manure.

so, What’s the difference?
Fertilizer Manure
Inorganic salt Natural substance from decomposition of organic waste.
doesn’t provide humus to soil yes, provides
rich in nitrogen, phosphorous, potassium (depending on composition) less rich
prepared in factories prepared in fields


Fertilizer Ratio* source
Nitrogen (Urea) 4
  • Urea (Neptha + fuel oil)
  • 25% demand met through imports. Only government agencies can import.
Phosphorous 2 80-85% via import
Potash 1 100% via import

*Ideal ratio for Indian soil

[Act 2] Subsidies: Where is it counted in budget?

Fertilizer subsidy Buget classification
Budget type: revenue vs. capital

revenue part capital part
receipt Expenditure receipt Expenditure
  • Tax
  • Non-tax
subsidy counted here

Budget type: plan vs Non-plan

Fertilizer subsidy non plan Expenditure

Total Receipts Total Expenditure
revenuereceipts capitalreceipts plan Expenditure non plan Expenditure
revenueExpenditure capitalExpenditure
subsidies counter here

Ranking of Subsidies

Budget 2014 Revenue Expenditure subsidies

Ranking 2013 Food > Petroleum > fertilizer
Ranking 2014 Food > Fertilizer > Petroleum

Amount of Subsidies (Cr.)

Subsidycomponent RE-2013 Jaitley fullBE-2014
Food 92000 115000 (same as Chindu interim)
Fertilizer 67971 72970(increased over Chindu interim)
Petroleum* 85480 63427(same as Chindu interim)

* given to state-run oil companies for selling fuel, LPG and kerosene below cost price.

Fertilizer subsidy internal ranking

Jaitley budget 2014 Rs. Crore
  1. Urea Domestic
  1. Decontrolled Fertilizers (Phosphorous, Potassium)
  1. Urea Imported

Ranking: Domestic urea >> (P,K) >> Imported Urea

[Act 3] What is Nutrient Based subsidy (NBS)?

  • Launched in 2010. Before that, we had “product based subsidy”.
  • Under NBS, govt. gives subsidy based on weight of the different Macro/micro nutrient in the fertilizer.
  • In this way, fertilizers companies can make new product mixes with micro-nutrients, according to soil requirement in each region.
  • And farmers can afford to buy these tailor-made fertilizers because government gives subsidy to keep them cheap.

Disadvantages of NBS?

  • Urea not covered in this scheme.
  • Delay in NBS subsidy payments.
  • Therefore Fertilizer companies focus more on Urea more than other fertilizers.
  • Result: shortage of (Cheap) non-urea fertilizers.
  • So, farmers also overuse Urea. ideal ratio of NPK disrupted
Nutrient Ratio in soil Ideal real
Nitrogen (N) 4 8.2
Phosphorus (P) 2 3.2
Potassium (K) 1 1
  • Result? Ground water pollution, Soil fertility declined, especially in Punjab and Haryana
  • Additional nitrogen doesn’t improve crop yield beyond a point.
  • Farmer doesn’t move to specialized fruits, vegetable, horticulture cropping- because they require special non-Urea fertilizers, which are not easily available at cheap rates.
  • So, one hand, tax payers pay for subsidies (and MSP), yet consumers still suffer from food inflation due to low production.
  • Shortage of coal and natural gas has decreased Urea production. Government has to import from abroad.

Urea smuggling

UP, Bihar urea smuggled to Bangladesh and Nepal
Maharashtra, Gujarat and Haryana Urea smuggled to chemical industries- especially in dyeing, inks, coatings, plastics and paints.
  • Result: nearly 3 million tonnes of Urea, doesn’t reach farmers.
  • And since Government gives Rs.5360 subsidy PER tonne to urea companies so imagine the loss of public money!
  • Thus fertilizer subsidy hurts everyone: farmers, firms, taxpayers, and consumers

Economic Survey reforms:

  1. Add Urea in the NBS regime.
  2. Pay fertilizer subsidy directly to farmer (i.e. by bank transfer) as per Nilekani Task force recommendations.
  3. Then, fertilizer companies & their middlemen will have no benefit in smuggling.
  4. Encourage Indian companies to setup joint ventures with foreign fertilizer companies.
  5. Enter in long term fertilizer supply agreement with foreign countries.

[Act 4] Budget-2014 on Agriculture

Soil Health card

  • Mission mode project (100 crores)
  • For all farm lands
  • 100 Mobile Soil Testing Laboratories to be Set up
  • A computerized system will facilitate local agriculture science centres to keep details of ‘soil test’ results of their area.
  • The system will give allot a unique number to ‘Soil Health Card’ of each soil sample.
  • The card will carry crop-wise recommendations of nutrients and fertilizers
  • This way, any change in ownership of the farm lands will not create any problem in updating the information

 Gujarat’s soil health card projects

  • 2006: Gujarat becomes the first state to launch Soil health card scheme.
  • First the soil properties tested-mineral composition, water retaining capacity etc.
  • Then farmer gets a soil health cards containing information on what kind of pesticides, fertilisers, seeds and how much water should be used, to get MAXIMUM productivity from his land.

National market & Food security

National market Food security
  • Union will work closely with the State Governments to re-orient their respective APMC Acts.
  • Will help establishing private market yards/ private markets.
  • Will help develop Farmers’ Markets in town areas to enable the farmers to sell their produce directly.
  • We’ll restructure FCI
  • to reduce losses in transportation and distribution losses
  • We’ll enhance the PDS efficacy. (Efficacy = Capacity or power to produce a desired effect)
  • Even if there is inadequate rainfall (to due EL NINO), we’ll still provide wheat and rice at reasonable prices to poors.
  • If and when required, we’ll sell FCI’s foodgrains in open market to keep prices under control (for the middle class)

AGRO Finance

Bhoomi Heen Kisan
  • Don’t have land titles, so banks don’t give them loans easily, they become victims of moneylenders.
  • Via NABARD, Government will give loans to 5 lakh such landless farming groups.
PSU Banks
  • Will give 8 lakh crores as agriculture loans.
  • Last year’s target was 7 lakh crore and Sarkaari banks achieved it.
  • Agro Credit giving banks: Scheduled Commercial Banks > Cooperative Banks> Regional Rural Banks
Interest subvention
  • Existing: farmer gets loan @7%
  • New: if he pays EMI on time, will get 3% interest subvention (meaning government will pay that much interest on his behalf)
  • NABARD operates the Rural Infrastructure Development Fund (RIDF).
  • Corpus enhanced to 25,000 crores.

AGRO Funds

Numbers not important
National Adaptation Fund100 cr
  • To combat climate change, protect agriculture from vagaries of climate change
Price Stabilization Fund.500 cr
  • To combat agriculture price volatility
Warehouse Infrastructure Fund (5k cr.)
  • To prevent wastage of food produce
  • Producers Development and Upliftment Corpus (PRODUCE)
  • Via NABARD: To increase profitability of small and marginal farms.
Long Term Rural Credit Fund (5k) NABARD To provide refinance to cooperative and RRBs
Short Term Cooperative Rural Credit (50k cr.)
  • Government will give money to NABARD for agro loans, so NABARD doesn’t have to borrow from market.

AGRO R&D support

  • Existing: Indian Agricultural Research Institute, Pusa
  • Proposed: two more in Assam and Jharkhand
Teaching Agro universities @Andhra + Rajasthan
Horticulture Universities  @Telangana + Haryana
Soil testing labs 100 mobile labs across country
blue revolution in inland fisheries 50 crore
Kisan TV
  • New channel (100 cr)
  • Will show programs for new farming techniques, water conservation, organic farming etc.
Indigenous cattle breed 50 crore


  • This appendix contains the topics, scheme discussed in Economic Survey.
  • Beyond that, remaining (truckload of schemes), FDI conditions already under the [Food processing] Article series. click me.

Indigenous cattle breed

Bovine productivity
World average 2238 kg/year
India 1538 kg/year
  • This is mainly due to low genetic potential of indigenous cattle breed, shortage of fodder and prevalence of diseases.
  • There 37 recognised indigenous cattle breed in India- Gir, rathi, Sahiwal, Kasaragod Dwarf, Kankrej etc.
  • 2013: Animal Husbandry Department launched a project to conserve indigenous breeds.
  • Indigenous cattle breeds are better than exotic cattle breed due to following reasons:
    1. resistant to climate change and diseases
    2. need less fodder
    3. suitable for drought work
    4. Although they give less milk but its quality better than that of hybrid or cross breed cattle.

Existing Agriculture extension services

  1. National Mission on Agricultural Extension and Technology (NMAET). FOUR submissions on Agriculture Extension, Seed and Planting Material, Agricultural Mechanization, Plant Protection & Quarantine
  2. District-level Agriculture Technology Management Agencies (ATMAs)
  1. Kisan Call Centre schemes
  2. SMS portal for farmers.
  3. Agri-Clinics and Agri-Business Centres (ACABC)
  1. National Initiative on Climate Resilient Agriculture (NICRA). With focus on developing need seeds/plants that are tolerant to high temperature and shortage of water.
  2. Krishi Vigyan Kendras (KVK)
  1. Earth System Science Organization (ESSO) issues agro-meteorological advisories in 12 languages to 600 districts
  2. Gramin Krishi Mausam Sewa.
  • 100% FDI permitted for seed Development.
  • simplified procedures to introduce new varieties from OECD’s seed scheme

2013: launched Seed rolling plan to identify good domestic seed varieties & improve their production, preservation. (expires in 2016-17)

  • To introduce new crop varieties rich in micro-nutrients such as iron-rich bajra, protein-rich maize, and zinc-rich wheat
  • as a sub-scheme of RKVY Rashtriya Krishi Vikas Yojana

National Food Security Mission (NFSM):

Do not confuse between “ACT” and “MISSION”.

National food security who?
Act(for giving cheap grains to junta) Dept. of Food and public distribution under consumer affairs ministry
mission(for increasing agro production) Ministry of agriculture (discussed below)

Food security mission has FIVE components:

  1. Rice
  2. Wheat
  3. Pulses
  4. Millets (coarse cereals)
  5. Commercial crops- cotton, sugarcane and Jute

+cotton development program added recently

Targets @end of 12th FYP Million tonnes
Foodgrains 25
Rice 10
Wheat 8
Pulses 4
Coarse cereals 3

Related: Rashtriya Krishi Vikas Yojana (RKVY)

Stupid statistics

Agriculture growth rateincluding fishing and forestry 4.7%
contribution to GDP
  • Agriculture: 14% (exact number 13.9)
  • Ranking: service > industries > Agro & allied
Contribution to employment Agro > Services > industries (Ref. Survey box 1.2)
Contribution to total inputs in economy Industries > Services > Agro (Ref. Survey box 1.3)


Employment Question
Assertion in recent years, the real farm wages have increased
Reason there has been a shift from farm to non-farm employment
Correct answer both right and R explains A, because Economic Survey says so


Rainfall and irrigation trivia
75% Of annual rainfall comes from south-west monsoon (from June to September). During El Nino, it’ll decline to 70%
60% Of total foodcrop & oilseed grown in kharif season
35% Of areable area is being irrigated
45% of net cropped area, is irrigated.

55 Comments on “[Economic Survey] Ch8: Agriculture Fertilizer, Nutrient Based Subsidy Policy, Budget 2014, Schemes, Funds”

  1. Sir, thanks for your great work. considering very short time left for pre, will you able to provide matter on initial chapters , which seems more important.

  2. Thank you sir for your effort.Sir,please create one thread after prelims for the search of hostels in old rajendhernagar, karolbagh, mukerjeenagar etc., It will save time,money,energy of so many aspirants.Thank you very much.

    1. mrunal.org for the guys who are doing self prep. and its the step to make upsc aspirants to prepare efficiently NOT for coaching institutes…

  3. sir plz explain how to do that “graph” question in csat ?
    every year upsc asks a single question on it
    plz throw some light if possible…

  4. Hi. Mrunal
    Can we get the copies of our CSE mains answer sheet by using RTI.if yes,then kindly tell me the procedure for it.

    1. Lord Dufferin, farmers can sell grains at the APMC mandi. If they’re not getting good price, they can opt for Government’s MSP.

  5. Just wanted to confirm something. El Nino officially didn’t arrive this year right? Because monsoon was late but nevertheless, it arrived and fed most regions well.

  6. A and B start from the same point and in the same direction at 7 a.m to walk around a rectangle field 400*300 m, AandB walk at the rate of 3 km/hr and 2.5km/hr respctvly. how many times shall they cross each other if they continue to walk till 12:30 p.m

    1. @Sakshi
      In these type of questions always proceed with concept of relative speed
      Speed of A – 3 km/hr
      Speed of B – 2.5 km/hr

      relative speed in advantage of A = 3.0 – 2.5 = 0.5 km/hr
      when you take this concept you assume that one is stationary (in this case B) and only A is moving (since it has advantage in relative speed)

      So B stays at starting point and A moves around a rectangular field 0f perimeter = 2 * (400+300) = 1400 mts = 1.4 km

      So it means to pass B , A has to cover distance of 1.4 Km
      so Distance = 1.4 km
      Speed ( in this case relative speed) = 0.5 km/hr
      hence time taken to pass B by A – 1.4 / 0.5 = 2.8 hr = 168 minutes
      Means, A takes 168 minutes to pass B When they walk relatively
      So in 5 hrs and 30 min = 330 minutes

      A will cross B only once as 168*2 = 336 min but that is greater than 330 min

      Hence it will cross B only once.
      ( if any problem do tell where you did not get it )

    2. In these types of question take the ratio of the speeds as in this case 3:2.5 => 30:25, now reduce this ratio to the lowest form like 6:5 and then take difference 6-5 = 1. So they will meet only once.

      if they are moving in opposite direction then u have to add them 6+5 = 11

  7. I have another question..plz attempt this as well..

    28 steps – A is at 1st step and 28th step..with A taking 1 step at a time, and B taking 2 steps at a time.Both start simultaneously..at which step do they meet.

    Plz help me, how to go abt such questions..lot of confusion..

    1. @Hriti
      Assumption : both A and B start simultaneously and at same speed
      A takes one step at a time; this he does say “X” times
      So after X time he will be on step no = 1+X

      At the same time B takes 2 steps downwards at a time and B also does this “X” times as A has done “X” times

      So after “X” times , B will be at step = 28 – (2*X)

      So if they meet both equations have to be equal

      1+X = 28 – (2*X)
      X = 9

      Meaning they do it 9 times
      This implies that they are at ( if you take A’s equation ) = 1+X = 1+9 = 10th step
      OR if you take B’s equation = 28 – (2*X) = 28 – (2*9) = 10th step

      So answer : 10th step

      So to meet them both have to be equated

      1. thanks Maharaj, i got ur logic towards the approach. But one doubt –

        for A u have X+1(X steps + 1 to indicate he was there at step 1) , but for B, 28 – 2X (not considering the step on which B is) ?

        1. @Hriti
          Do not get confused
          Look at equation 1 of A : 1 + X ( the step on which A is + how many times does he does this act of climbing 1 step at a time)

          now take a look at equation of B : 28 – (2*X) [ the step on which B is – no of times he does his act of coming down 2 steps at a time { here 2*X because X is the activity of climbing 1 stairs upwards or coming 1 step downwards}]

          So in both cases of the equation i have takes the step at which presently A and B are.
          Hope ur crystal clear now

      2. nice explanation Maharaj , my approach is a bit different though

        initially the distance between them is of 26 steps and after each stride taken by both of them distance reduces by three steps so an AP generates 26,23,20,17 and so on the term which will be zero or the first term before negative term will be the step where they will meet

        1. @Nikhil
          Every question has multiple ways of solving
          Many short cuts, but my aim here is to kill the beast itself ” Even if you do not have a short cut or encounter a never before done question, still you re able to do them and that too correctly”

          As i am always guided by one motto ” Never feed a fish to hungry. Teach him to catch fish himself and by doing this you have you have quenched his hunger for lifetime”

          1. i was just telling my approach , you are doing a commendable job and olready appreciated your explanation in previous comment :)

          2. thanks to both Nikhil and Maharaj.

            @ I got it this time. Lemme apply it to some questions to get hands on. Thanks once again..

            I guess I read ur guiding motto somewhere…i think at ICICI CSR adv..

          3. See this solution !
            Since A and B are coming towards each other so relative velocity(not speed) of A w.r.t B = 3 steps per second so 28 steps will be covered in 9.33 seconds take it as a 9 seconds so A travelled for 9 seconds and in 9 seconds steps covered = 9 + 1( on which A was originally at) hence ans = 10th step
            Whenever 2 bodies move relative to each other use the concept of relative velocity with it u can give ans in seconds (without using pen) + it doesnot use equations or A.P which are error prone..

  8. Can anybody share the trick of solving question like “if there is storm light will not blink. Only if light blink flight take off”..

  9. Hello! Mrunal I am done with all my previous 4 attempts. I am 26 years old and fall in general category. If I don’t give my attempt this year so can I appear next year. Because someone was saying that we have to give exam this year otherwise we are not eligible for attempting upsc exam next year.

      1. If u gave exam in 2011,you will get another attempt in 2015….first point..
        Such restrictions are not mentioned in notification….

      2. And if you were asking about an extra attempt for those who appeared in 2011 , i personally do not know
        As Mr jitendra Singh’s statement “Candidates who appeared in Civil Services examination 2011 may be given one more attempt in 2015” here mentions may…up till now no conditions applied that you have to give 2014 exam to be eligible for 2015..

    1. Banks can give loans to real estate firm and can fix the amortization period for say 25 years with periodic refinance facilities in say 5 years. Meaning real estate firm can pay loan (principal and interest) amount via installments in 25 years and can also get refinance facilities in 5 years. It will be good for real estate sector as most of the projects take longer time to complete and become commercially viable.
      I hope it is clear enough.

  10. Thanks for everything sir……you helped us a lot…and we r getting tensed when ubr uploading new articles……sir we are trying very hard to read but those r not getting to mind …so i think no more new updates frm u and once again thank alot ….

  11. sir can u give some info about rajasthan five year’s plan in hindi …….. many many thanks in advance……

  12. sir, why was urea not covered in nutrient based subsidy earlier when others where included? on what basis was urea subsidised previously?

  13. Q. If Urea is also subsidised but not under NBS then how does it encourage the companies to produce more urea than any other fertilizers ?

  14. Sir,Please rectify the soil health card scheme.It is originally started by PM narndra modi at Rajasthan and punjab is the 1st state to implement this soil health card scheme..Please rectify it..You are mentioned that Gujurat….

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