UPSC Prelims Practice Questions — India raises fertilizer subsidy by 64%, overshoots Budget estimates

Q1. With reference to the Nutrient Based Subsidy (NBS) scheme for fertilizers in India, consider the following statements: Which of the statements given above is/are correct?

  1. The subsidy is fixed in rupees per kilogram of nutrients such as nitrogen, phosphate, potash and sulphur, and not as a single amount per product.
  2. The government notifies the maximum retail price of each subsidised grade of P&K fertilizer.
  3. Urea is subsidised under a separate regime and is not covered by the NBS scheme.
  • A. 1 and 2 only
  • B. 2 and 3 only
  • C. 1 and 3 only
  • D. 1, 2 and 3

Q2. Suppose the international prices of both urea inputs and DAP rise sharply in the middle of a season. The government does not change the retail price of urea or the per-nutrient subsidy rates under the Nutrient Based Subsidy scheme. Which of the following best describes the immediate effect?

  • A. The urea subsidy bill rises, while the higher DAP cost falls on its retail price or on company margins
  • B. Neither subsidy bill changes, since both subsidies are fixed in rupees per kilogram of nutrient
  • C. Both subsidy bills rise automatically, since both subsidies are computed as cost minus retail price
  • D. The DAP subsidy bill rises, while the higher urea cost falls on its retail price or on company margins

Q3. Consider the following statements: Which of the following is correct in respect of the above statements?

  1. Fertilizer use in India tends to be skewed towards nitrogen relative to phosphorus and potassium, which works against balanced use of nutrients.
  2. The maximum retail price of urea is statutorily fixed by the government, whereas the prices of P&K fertilizers are left to market dynamics.
  • A. Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
  • B. Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
  • C. Statement-I is correct, but Statement-II is incorrect
  • D. Statement-I is incorrect, but Statement-II is correct

Q4. Consider the following statements: Which of the following is correct in respect of the above statements?

  1. A sustained rise in international LNG prices increases the Centre's subsidy outgo even on urea manufactured within India.
  2. Domestically manufactured urea is sold at a market-determined price that passes higher input costs on to farmers.
  • A. Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
  • B. Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
  • C. Statement-I is correct, but Statement-II is incorrect
  • D. Statement-I is incorrect, but Statement-II is correct

Q5. The Union Government's fertilizer subsidy for 2026-27 may reach about ₹3 lakh crore, against a Budget Estimate of ₹1.71 lakh crore. In this context, consider the following statements: Which of the statements given above is/are correct?

  1. Since fertilizer subsidy is capital expenditure, the overshoot would widen the fiscal deficit but leave the revenue deficit unaffected.
  2. Since fertilizer subsidy is expenditure charged on the Consolidated Fund of India, the extra amount can be spent without any further vote of the Lok Sabha.
  3. Expenditure beyond the amount authorised by Parliament has to be authorised through supplementary or excess grants under Article 115 of the Constitution.
  • A. 1 and 2 only
  • B. 2 and 3 only
  • C. 1 only
  • D. 3 only

Q6. Consider the following assertion: Keeping urea outside the nutrient-based subsidy regime works against the goal of balanced use of fertilizer nutrients. Which of the following statements support/supports the above assertion?

  1. The maximum retail price of urea is statutorily fixed, so its farm-gate price does not rise when its cost of production rises.
  2. The retail prices of P&K fertilizers are left to market dynamics and so tend to move with the cost of imported inputs.
  3. Fertilizer subsidy is released to companies on the basis of actual sales to buyers recorded through PoS devices at retail shops.
  • A. 1 and 3 only
  • B. 1 and 2 only
  • C. 2 and 3 only
  • D. 1, 2 and 3

Q7. With reference to Direct Benefit Transfer (DBT) in fertilizer subsidy in India, consider the following statements: Which of the statements given above is/are correct?

  1. The subsidy is credited to the farmer's bank account after the farmer buys fertilizer at the full unsubsidised price.
  2. The subsidy is released to fertilizer companies on the basis of actual sales to farmers or buyers.
  3. Sales to buyers are captured through Point of Sale (PoS) devices installed at retail shops.
  • A. 1 only
  • B. 2 and 3 only
  • C. 1 and 3 only
  • D. 1, 2 and 3

Q8. Consider the following features of fertilizer subsidy regimes in India: Which of the above features apply to urea?

  1. Its maximum retail price is statutorily fixed by the government.
  2. It receives a fixed subsidy in rupees per kilogram of nutrient, announced in advance.
  3. Its manufacturers are allowed to fix its retail price as per market dynamics.
  4. Its subsidy outgo rises when its cost goes up while its retail price stays unchanged.
  • A. 2 and 3 only
  • B. 2 and 4 only
  • C. 1 and 4 only
  • D. 1, 3 and 4 only