ISSUES IN INDIA’S FERTILISER SUBSIDY REGIME

• Fertiliser subsidy has risen sharply to ₹2.51 lakh crore in FY26, becoming the second-largest subsidy after food subsidy and exceeding the Ministry of Agriculture & Farmers’ Welfare allocation of ₹1.37 lakh crore.
• Rising subsidy reflects increased fertiliser consumption, high input costs, and heavy import dependence:
  • 78% for natural gas (urea),
  • 90% for phosphatic fertilisers,
  • Near-total dependence for potash.
• Urea price distortion is central to the problem:
  • Urea sold at a fixed subsidised price of ₹242 per 45-kg bag, among the cheapest globally.
  • DAP and MOP prices are decontrolled under the Nutrient-Based Subsidy (NBS) regime (since 2010).
• This price asymmetry has encouraged excessive urea use and under-application of phosphorus and potassium, degrading soil health and productivity.
• India’s N:P:K ratio has deteriorated to 10.9:4.4:1, far from the recommended 4:2:1.
• Despite a larger net sown area (168.3 million hectares), India’s agri-GVA is $0.63 trillion with fertiliser use of 182 kg/ha, reflecting weak productivity outcomes.
• Distorted nutrient use is evident in Punjab:
  • 61% excess nitrogen,
  • 89% deficit in potassium,
  • Around 8% deficit in phosphorus.
• Excess nitrogen causes initial lush growth, but inadequate phosphorus and potassium lead to yield stagnation, deteriorating grain quality, and rising costs.
• The NBS regime has failed to promote integrated nutrient management:
  • Over 60% fertiliser use in China is through complex fertilisers,
  • Compared to only 17% in India.
• Nutrient Use Efficiency (NUE) remains low at 35–40%, meaning most fertiliser does not reach crops.
• Escaped nitrogen:
  • Emits nitrous oxide, a greenhouse gas 278 times more potent than CO₂,
  • Leaches as nitrate, contaminating groundwater.
• The fertiliser-to-grain response ratio declined from 1:10 in the 1970s to 1:2.7 by 2015 in irrigated areas, alongside declining soil organic carbon.
• An estimated 20–25% of subsidised urea is diverted to non-agricultural uses or smuggled.

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SOLUTIONS SUGGESTED IN THE EDITORIAL

• The best reform path is to gradually dismantle price controls while protecting farmers through equivalent direct income support.
• A deregulated fertiliser market would:
  • Spur innovation,
  • Improve efficiency,
  • Restore correct price signals for balanced nitrogen, phosphorus, and potassium use.
• Promoting micronutrients, soluble fertilisers, fertigation, and customised blends would further enhance productivity.
• The main constraint is identifying tenant farmers who remain outside formal land records.
• This can be addressed by triangulating:
  • Land records,
  • PM-KISAN databases,
  • Fertiliser sales,
  • Crop-sowing data,
  • Satellite imagery,
  • Procurement records,
    using AI and machine learning.
• A second-best option is to bring urea under the NBS regime, as originally envisaged in 2010.
• Rationalising subsidies by reducing nitrogen support and increasing support for phosphorus and potassium—without increasing the total subsidy bill—would correct price signals and improve soil health.
• The editorial estimates annual savings of around ₹40,000 crore, which can be redirected towards agri-R&D, irrigation, and high-value agriculture.
• Though reform demands political courage, it promises higher output, improved nutrient efficiency, higher farm incomes, stronger rural demand, and a virtuous growth cycle.