Fertilizer Retention Price Scheme
Also called: Retention Price Scheme, RPS · Topic: Land Reforms, the Green Revolution and Farm Subsidies · NCERT: Beyond NCERT
Meaning
The Fertilizer Retention Price Scheme (RPS) was the old way India subsidised urea production. Before the Nutrient Based Subsidy began in 2010, the government set a "retention price" for each urea plant. This price covered the plant's own production cost plus a fair return. The farmer paid a fixed, lower sale price, and the government paid the plant the gap. The scheme also covered freight, which is the cost of moving fertiliser to the farm areas.
So the subsidy followed each plant's own cost. A costlier plant got a bigger subsidy. Critics said this gave plants no reason to cut costs, because higher costs simply brought more support. For urea, RPS was later replaced by the New Pricing Scheme (NPS).
Example
Take an old high-cost urea plant and a modern low-cost, gas-based plant, both selling at the same fixed price to farmers. Under RPS, the old plant got a larger subsidy on every tonne it produced. The government was in effect paying for its inefficiency.
Don't confuse with
- Nutrient Based Subsidy (NBS): in force from 1 April 2010, it covers only phosphatic and potassic (P&K) fertilisers. The subsidy is fixed per kg of nutrient and does not depend on what each plant spends.
- New Pricing Scheme (NPS): this is the regime that replaced RPS for urea. Urea stays outside NBS and is sold at a fixed MRP set by the government.