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Q4 (IAS/2020) Economy › Agriculture & Rural Economy › Fertilizers and soil nutrients Official Key

With reference to chemical fertilizers in India, consider the following statements : 1. At present, the retail price of chemical fertilizers is market-driven and not administered by the Government. 2. Ammonia, which is an input of urea, is produced from natural gas. 3. Sulphur, which is a raw material for phosphoric acid fertilizer, is a by-product of oil refineries. Which of the statements given above is/are correct ?

Result
Your answer: —  ·  Correct: B
Explanation

The correct answer is Option 2 (2 and 3 only). Below is the comprehensive explanation:

  • Statement 1 is incorrect: The retail price of chemical fertilizers in India is not entirely market-driven. Urea is under statutory price control, and its Maximum Retail Price (MRP) is fixed by the Government. For Non-Urea fertilizers (DAP, MOP, NPK), the government implements the Nutrient Based Subsidy (NBS) scheme, where it provides a fixed subsidy, though it still monitors prices to keep them affordable.
  • Statement 2 is correct: Ammonia ($NH_3$) is a critical precursor for Urea. In India, the majority of ammonia is produced through the Haber process using natural gas (methane) as the primary feedstock for hydrogen.
  • Statement 3 is correct: Sulphur is a vital raw material for manufacturing phosphoric acid. It is primarily obtained as a by-product during the desulphurization of crude oil in petroleum refineries and natural gas processing.

Therefore, since statements 2 and 3 are factually accurate while statement 1 is false, Option 2 is the right choice.

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Q. With reference to chemical fertilizers in India, consider the following statements : 1. At present, the retail price of chemical fertiliz…
At a glance
Origin: Books + Current Affairs Fairness: Moderate fairness Books / CA: 6/10 · 4/10
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This question perfectly bridges Economy (Subsidy Policy) and Geography (Industrial Inputs). Statement 1 is the 'Gatekeeper'—knowing Urea is still under price control eliminates the extreme 'market-driven' claim. Statements 2 and 3 reward those who studied the *supply chain* of industries, not just the final output.

How this question is built

This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.

Statement 1
As of 2020, are retail prices of chemical fertilizers in India market-driven (decontrolled) or administered by the Government?
Origin: Direct from books Fairness: Straightforward Book-answerable
From standard books
Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 9: Subsidies > 9.4 Fertilizer Subsidies > p. 287
Presence: 5/5
“The four major fertilizers consumed in India are Urea, Diammonium Phosphate (DAP), Muriate of Potash (MoP) and Complex Fertilizers. Urea prices are regulated/fixed by the Govt, but the prices of DAP, MoP and Complex Fertilizers have been deregulated (market driven). Fertilizers provides three major nutrients which increase agriculture yields. The optimal N:P:K ratio varies across soil types but is generally around 4:2:1”
Why this source?
  • Explicitly states urea prices are regulated/fixed by the Government while DAP, MoP and Complex Fertilizers have been deregulated (market driven).
  • Directly contrasts the regulatory status of different fertilizer categories, supporting a mixed (partially administered, partially market-driven) regime.
Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 9: Subsidies > DAP (P) and MOP (K) and Complex Fertilizers (NPK) [Nutrient Based Subsidy] > p. 290
Presence: 5/5
“This means that the producers and importers are free to sell these fertilizers at any price but since they receive a fixed subsidy from the government and due to competition in the market, they reduce the market price in proportion to the subsidy. The government involvement in DAP and MOP fertilizers is limited to paying producers and importers a fixed nutrient-based subsidy which works out to be roughly 35 percent of the cost of production. The department of fertilizer has fixed the subsidies for the various nutrients for the year 2020-21 at the following rates: nitrogen (N) at Rs 18.78 per kg, Phosphorus (P) at Rs 14.88 per kg, Potash (K) at Rs 10.11 per kg and Sulphur (S) at Rs.”
Why this source?
  • Says producers and importers of DAP and MOP are free to sell these fertilizers at any price, i.e., market-driven.
  • Explains government role is limited to paying a fixed nutrient-based subsidy for these fertilizers, not price control.
Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 9: Subsidies > Following are some of the benefits of "new urea policy 2015": > p. 289
Presence: 5/5
“Presently Govt. intervenes in the production and distribution of urea in the following ways: • Govt. sets a controlled Maximum Retail Price (MRP) at which urea must be sold to the farmers which is Rs. 5.36/kg (Rs. 268/ per bag of 50 kgs) excluding tax (imported/ international price is approximately Rs. 20/kg).• Government provides subsidy to urea plants based on the difference between the MRP and cost of production (group-based norms) and is paid to the fertilizer company.• Only three companies are allowed to import urea into India (canalisation).• About half of the movement of fertilizer is directed i.e., the government tells manufacturers and importers how much to import and where to sell their urea.”
Why this source?
  • Describes Government-set controlled Maximum Retail Price (MRP) for urea and subsidy payment mechanism to cover cost difference.
  • Notes other administrative controls for urea (import canalisation and directed movement), reinforcing that urea retail price is administered.
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