Fertiliser Subsidy in India

Fertiliser subsidy is one of the largest Union Budget expenditures in India, projected to remain high in FY26. Reform is urgently needed for both fiscal sustainability and agricultural efficiency.

Current Status of Fertiliser Subsidy in India

Budget Size: Fertiliser subsidy is about ₹1.68 lakh crore (FY 2025–26 BE); it was ~₹1.71 lakh crore (FY 2024–25 RE) and ~₹1.88 lakh crore (FY 2023–24 Actual).
Urea Dominance: Urea subsidy is about ₹1.19 lakh crore (FY 2025–26 BE), while P&K (NBS) support is about ₹49,000 crore.
Fiscal Weight: Fertiliser subsidy is roughly ~3%+ of total Union expenditure in FY26.

Need for Fertiliser Subsidy in India

Food Security: Fertiliser subsidy boosts crop yields, enabling self-sufficiency and stable buffer stocks since the Green Revolution.
Cost Relief: Subsidised urea at ₹242 per 45-kg bag lowers input costs for small and marginal farmers.
Price Stability: Lower production costs help control food inflation and stabilise PDS staple prices.
Rural Equity: Affordable fertilisers support poor farmers in rain-fed, low-productivity regions.

Long-Term Costs of Fertiliser Subsidy

Soil Degradation: Excessive urea use distorts the NPK ratio, reducing long-term soil fertility.
Water Pollution: Nitrate leaching contaminates groundwater, affecting drinking water and ecosystems.
Greenhouse Emissions: Nitrous oxide from fertilisers has ~273 times the warming impact of CO₂.
Fiscal Burden: Subsidy ~₹1.68 lakh crore (FY26 BE) strains Union budget finances.

Key Problems in the Current Fertiliser Subsidy Regime

Price Distortion: Urea is fixed at ₹242 per 45-kg bag, while DAP ~₹1,350 per 50-kg, MOP ~₹1,525–1,650 per 50-kg, skewing farmers towards cheaper nitrogen.
Imbalanced Use: All-India NPK (nitrogen, phosphorus, and potassium) ratio worsened to 10.9:4.4:1 (2023–24) vs the ideal 4:2:1, affecting long-term soil fertility.
Low Efficiency: Nutrient Use Efficiency (NUE) is only ~35–40% showcasing significant loss.
Falling Returns: Fertiliser-to-grain response dropped from ~1:10 (1970s) to ~1:2.7 (2015).

Government Initiatives in the Fertiliser Sector

Nutrient Subsidy: Nutrient-Based Subsidy (NBS) scheme provides fixed support for P&K fertilisers, promoting balanced nutrient use.
ONOF Scheme: One Nation One Fertiliser standardises branding under ‘Bharat’ for transparency and quality.
Nano Fertilisers: Promotes nano urea, nano DAP, and neem-coated urea for efficient nutrient use.
Digital Platforms: iFMS (Integrated Fertiliser Management System) and mFMS (Mobile Fertiliser Management System) track fertiliser supply and enable real-time access for farmers.
PM-PRANAM Scheme: Aimed at reducing the use of chemical fertilisers and encouraging balanced nutrient application.

Challenges in Reforming Fertiliser Subsidy

Political Sensitivity: Farm policy reforms have recently seen strong pushback; E.g., the 2020–21 farm protests and subsequent repeal of farm laws in Nov 2021 show high political risk.
Global Price Volatility: Fertiliser subsidy jumped from ~₹79,530 crore (FY 2020–21) to ~₹2.25 lakh crore (FY 2022–23) during the global energy/fertiliser shock
Tenant Exclusion: Leased-in operated area was about 10.88 million ha (Jul–Dec 2018) and 8.44 million ha (Jan–Jun 2019), so a large tenant base can miss land-record-linked compensation.
Leakage Enforcement: Diversion to industry/cross-border trade persists despite tracking; E.g. Subsidised urea diversion is estimated at ~20–25%, weakening welfare targeting.
Behavioural Lock-in: Strong dependence on urea that is hard to reverse quickly without yielding anxiety.

Way Forward

Gradual Decontrol: Phase out urea price controls slowly while protecting farmers via cash support; E.g., add a fertiliser top-up through PM-KISAN–style seasonal transfers.
Precision Nutrients: Shift support towards balanced, efficient products and application; E.g., scale Soil Health Card recommendations and fertigation in horticulture clusters.
NBS Extension: Expand the Nutrient-Based Subsidy approach to nitrogen and rebalance NPK support.
Tenant Mapping: Include tenants using triangulated datasets beyond land titles; E.g., combine land records, fertiliser sales, crop-sown data and satellite imagery to tag cultivators.
Leakage Control: Tighten last-mile sale authentication and movement analytics; E.g., mandatory retailer PoS verification and anomaly flags for unusually high offtake patterns.

Fertigation is a precision farming technique where water-soluble fertilisers are mixed directly into irrigation water (like drip or sprinkler systems) and applied to crops, delivering nutrients and water simultaneously to the root zone for maximum efficiency, higher yields, and reduced waste

“The soil is the great connector of life.” Fertiliser subsidy reform can turn a fiscal burden into a driver of balanced nutrients, higher productivity, and climate-resilient agriculture.

Reference: The Indian Express

PMF IAS Pathfinder for Mains – Question 470

Q. Fertiliser subsidies in India represent a trade-off between short-term food security and long-term ecological sustainability. Critically analyse this trade-off and suggest policy corrections. (250 Words) (15 Marks)

Approach

Introduction: Write a brief introduction about the fertiliser subsidies and mention the latest data.
Body: Analyse the short-term food security and long-term ecological sustainability, and suggest policy corrections.
Conclusion: Emphasis on One Nation One Fertiliser strategy to balance short-term productivity and long-term sustainability through climate-smart fertiliser use.