Fertiliser Subsidy Reform: Why India Needs a Policy Overhaul
Why in the news
An analysis argues the fertiliser subsidy is costly, inefficient and harmful to environment and health, while productivity keeps slipping.
Key facts
- Subsidy: nearly ₹1.9 trillion in FY25; FY26 allocation near ₹1.6 trillion.
- Hidden support: gas to plants at about 50% of market price.
- Imports expected to rise from 10 to 12 million tonnes.
- Farm value addition per unit land is just 38% of China.
| Issue | Data point |
|---|---|
| Nitrogen (urea) absorbed | Under 35% |
| Phosphorus absorbed | About 20% |
| Potassium absorbed | 50-80% |
| Grain response to fertiliser | About 1:10 in the 1970s; about 1:2.7 in irrigated areas, 2015 |
| NPK ratio | Ideal 4:2:1; India 10.9:4.4:4 |
Concerns
- Cheap urea is overused, causing nitrous oxide emissions and nitrate leaching into groundwater.
- Fertiliser is diverted for resale or lost to air and water.
Reforms suggested
- Direct cash transfers to farmers based on cultivated area, not ownership.
- Market-determined prices, letting firms innovate with nano and complex fertilisers.
- Coal gasification to substitute imported LNG as feedstock.
Exam angle
- Ideal NPK ratio: 4:2:1.
- DCT linked to cultivated area.