Fertiliser subsidy reform: urea pricing, NPK imbalance and DBT option
Why in the news
A rapidly swelling subsidy bill and distorted soil nutrient use have revived calls to shift from blanket fertiliser subsidies to direct support for farmers.
Key facts
- Subsidy bill: over Rs 1.87 trillion by February 2026, beyond the revised Budget estimate.
- Urea price: Rs 270 per 45-kg bag versus roughly $850/tonne globally.
- Soil ratio: actual 10.9:4.1:1 against ideal about 4:2:1, harming soil health and yields.
- Gap: Urea is outside the NBS regime, so its price stays low and detached from the market.
Core concepts
- N:P:K: proportion of Nitrogen, Phosphorus and Potassium in soil.
- Nutrient-Based Subsidy (NBS): a fixed subsidy tied to nutrient content (N, P, K and S) instead of a fixed retail price; P and K fertilisers are covered.
- Price arbitrage: the gap between subsidised and market prices tempts illegal diversion of farm urea to industry such as plywood or chemicals, or smuggling abroad.
Challenges and reforms
- Fiscal strain: plugging leakage could free money for irrigation and soil health.
- Technology limits: AgriStack and Point-of-Sale authentication track sales but cannot curb overuse while the price signal is broken.
- DBT: a per-acre cash transfer to bank accounts would protect incomes and let urea reach market price, discouraging waste.
- Soil Health Card: linking subsidy to its data would match use to need.
Exam angle
- Ideal N:P:K ratio: 4:2:1; actual: 10.9:4.1:1.
- Urea remains outside NBS, largely for political reasons.
- Terms: NBS, DBT, arbitrage, AgriStack, Soil Health Card.