The government's plan is being actively considered by the Group of Ministers, headed by agriculture minister Sharad Pawar, it is learnt.
In the subsidy scheme, the GoM is also considering the proposal to include, instead of conventional fertilisers, new generation products like water-soluble fertilisers that increase the nitrogen intake of a plant to up to 80 per cent.
Of the 90 products that are approved under the Fertiliser (Control) Order 1985, only 15 are currently eligible for subsidies.
The government intends to explore the possibilities of including more complex products from the approved list to encourage the use of a wider range of fertilisers including bio-fertilisers among farmers. The idea has the support of the agriculture ministry.
The major share of the current fertiliser subsidy, which amounts to over Rs 20,000 crore (Rs 200 billion) annually, goes to urea manufacturers for supplying urea at subsidised prices to the farmer.
The total fertiliser subsidy bill, including the pending subsidy bills for the previous years, for 2006-07 was Rs 34,000 crore (Rs 340 billion). The budgetary allocation for 2007-08 was Rs 22,452 crore (Rs 224.52 billion), a figure highly inadequate considering the pending payments worth Rs 12,000 crore (Rs 120 billion) of the previous year.
The industry feels that the government will have to allocate Rs 50,000 crore (Rs 500 billion) during the current year if it has to clear all pending subsidy bills.
Though the government's current plans may not result in a reduction in its subsidy burden, it may bring in a more equitable distribution of fertiliser subsidies among various segments of fertiliser manufacturers.
The fertiliser movement in the country is heavily subsidy dependant as 98 per cent of the current fertiliser sales in the country come from those products that are eligible for subsidy.
The relatively high cost of non-subsidised fertilisers is a deterrent to not just the manufacturers, but also to the farmers. The government move is to rectify this anomaly.
According to fertiliser department officials, the whole idea of expanding the subsidy base is based on the concept of integrated nutrient management and balance fertilisation.
"Balanced use of fertilisers is the only way to arrest the decline in the productivity of the soil. Such an approach provides mix of major nutrients like N, P and K and facilitates the use of secondary and micro nutrients like sulphur, calcium, magnesium, zinc, boron, iron through fortification and enrichment of different fertiliser grades," they said.
However, the expansion of subsidised product basket is unlikely to increase the subsidy burden on the government. The officials said the increase in the number of eligible products will only result in a wider distribution of subsidy but not an increase in the use of fertilisers and a resultant increase on subsidy burden.
Meanwhile, chemicals and fertilisers minister Ram Vilas Paswan has called for a meeting of a National Fertiliser Advisory Forum in New Delhi on Wednesday to discuss issues such as fertiliser pricing, nutrient subsidy, alternative methodologies for delivery of fertiliser subsidy to farmers and usage of water-soluble fertilisers.
The last meeting of the forum was held in March last year.