India's Fertiliser-Subsidy Challenge

The Comptroller and Auditor General's latest data indicates that India's fertiliser-subsidy bill exceeded ₹1.87 trillion by February 2025, surpassing the revised budget estimate before the fiscal year ended. This is indicative of deeper issues within India's agricultural policy, which is becoming fiscally burdensome, inefficient, and unsustainable.

Key Issues in Fertiliser Pricing

• Subsidised Urea:
  • Urea, a major input, is heavily subsidised, priced at approximately ₹270 per 45-kg bag while global prices are nearly $850 per tonne.
  • This insulation from price volatility leads to overuse of nitrogen as it is cheaper than other nutrients, causing an imbalanced N:P:K ratio of 10.9:4.1:1, exceeding the agronomic norm.
• Leakages and Diversion:
  • Subsidised fertilisers are often diverted for non-agricultural uses or smuggled, despite reforms like point-of-sale authentication.

Fiscal Cost and Economic Impact

• Fertiliser subsidy is a significant government expenditure, yet part of it is not used productively on farms.
• Reducing leakages and improving targeting could lead to substantial savings, allowing redirection of funds towards irrigation, extension services, or soil health investments.

Possible Reforms

• Bringing urea under the nutrient-based subsidy (NBS) regime and rationalising diammonium phosphate (DAP) could align relative prices and promote balanced nutrient use.
• Despite political challenges, a gradual increase in urea prices paired with direct, per-acre transfers to farmers could be a viable alternative.

Role of Technology

• Platforms like Agristack aim to track fertiliser purchases and curb diversion.
• Soil-health cards provide crop- and soil-specific nutrient guidance, but technology cannot replace the need to correct pricing.

Long-term Solutions

• Transition from subsidising fertilisers to directly supporting farmers through incentives for better farming practices linked to soil health data.
• Implementing a framework that maintains farm incomes and restores price signals to discourage overuse, focusing on soil and crop-specific needs.