Diammonium Phosphate (DAP) is a critical fertiliser containing Phosphorus which is required by the crops during early stages of root & shoot development. Farmers usually apply at the time of sowing, along with the seeds. China has been the top supplier of DAP to India, however, it has recently put restrictions on its exports, thus triggering a shortage of DAP in India.
Fertilizers are essential for India’s agricultural productivity, helping to sustain high crop yields for a large and growing population. India is one of the world’s largest producer, consumer & importer of fertilisers in the world. This article explores the role of the fertiliser sector, its associated challenges, and the policy reforms required to address these critical issues.
What is the SIGNIFICANCE of the fertilizer sector in India?
1. Ensure the availability of essential soil nutrients: The fertiliser sector has played a crucial role in sustaining India’s agricultural output by ensuring the timely availability of essential nutrients such as nitrogen (N), phosphate (P), and potash (K) through both domestic production and imports.
According to recent reports Indian soils suffer from acute deficiencies in essential nutrients which are listed below. These nutrient deficiencies severely affect soil fertility and crop yields:
| Nitrogen Deficiency | Less than 5% of Indian soils have adequate nitrogen levels, essential for healthy plant growth. |
| Phosphate Deficiency | Only 40% of soils are sufficient in phosphate, an important nutrient for root development and flowering. |
| Potash Deficiency | 32% of soils are deficient in potash, which is crucial for plant disease resistance and overall growth. |
| Organic Carbon Deficiency | Just 20% of soils have adequate organic carbon, which is necessary for improving soil structure and water retention. |
| Micronutrient Deficiencies | Soils in India also suffer from deficiencies of micronutrients such as Zinc, Iron, Sulphur, and Boron, which are critical for optimal plant growth. |
2. Driving Agriculture Productivity:
- The fertilizer sector has been a key driver in India’s Green Revolution and sustained agricultural growth, enabling higher cereal production to feed the growing population.
- Between 2020-21 and 2022-23, India exported 85 million tonnes of cereals and ensured food security for hundreds of millions during crises.
3. Economic Growth & Employment Generation:
- India is the second-largest consumer and third-largest producer of fertilizers globally, with domestic production steadily rising.
- The sector supports significant rural employment directly and indirectly in production, distribution, and retail networks.
4. Driving India’s Agricultural Dominance: The efforts of the fertiliser industry in supplying critical nutrients have helped India maintain its status as a global agricultural powerhouse. Between 2020-21 and 2022-23, the country exported 85 million tonnes of cereals while providing near-free grain to over 813 million people during the pandemic.
5. Sustainability Initiatives: The fertiliser sector encourages the use of advanced products like slow-release fertilisers and those fortified with micronutrients to enhance efficiency and reduce environmental impact.
6. Education and Awareness: The sector works closely with farmers to educate them about proper fertiliser application techniques, soil testing (Soil Health Card), and nutrient management for maintaining soil vitality.
What are the CHALLENGES related to fertilisers in India?
1. Imbalanced Fertiliser Use: A major issue in Indian agriculture is the overuse of nitrogen (N) fertilisers, especially urea, while other essential nutrients like phosphorus (P) and potassium (K) are underused. For e.g. in Punjab, nitrogen use is 61% higher than recommended, but under uses potash by 89% and phosphate by 8%. This imbalance results in green fields but lower crop yields, as plants need all three nutrients for optimal growth.
2. Low Nutrient Use Efficiency (NUE): The efficiency of fertiliser use in India is very low, with only 35-40% of fertilisers being absorbed by crops. The rest is wasted or lost to the environment, such as nitrogen escaping as nitrous oxide, a harmful greenhouse gas. This inefficiency leads to higher costs for farmers and environmental harm.
3. Issues related with fertiliser subsidy:
- Nutrient Imbalance: By focusing heavily on urea, the subsidy system has encouraged an imbalanced use of fertilisers, with nitrogen being overused and phosphate and potash underused. This imbalance harms soil health and reduces agricultural productivity in the long run.
- Financial Strain on the Government: Fertiliser subsidies are a significant financial burden on the government, amounting to ₹1.88 lakh crore, or nearly 4% of the Union budget. This high expenditure diverts resources away from other critical sectors, such as health and education.
4. Environmental Harm: Excessive and imbalanced fertilizer use has severe environmental consequences:
- Groundwater Contamination: Leaching of excess nitrates into groundwater, posing health risks (e.g. “blue baby syndrome”).
- Water Body Eutrophication: Runoff of nitrogen and phosphorus into surface water bodies (lakes, rivers) leads to algal blooms, depleting oxygen and harming aquatic life.
- Greenhouse Gas Emissions: Nitrous oxide (), a potent greenhouse gas, is emitted from agricultural soils due to nitrogenous fertilizer use, contributing to climate change. Ammonia volatilization also contributes to air pollution and acid rain.
- Soil Degradation: Long-term overuse of chemical fertilizers can alter soil pH, increase salinity in some areas, and negatively impact soil microbiology and structure.
5. Fertiliser Diversion and Smuggling: A significant portion (20-25%) of subsidised urea is diverted for non-agricultural uses or smuggled out of the country. This deprives farmers of necessary fertilisers and strains government finances.
6. Neglect of Micronutrients: Micronutrients like zinc, boron, and iron are often overlooked, despite their crucial role in plant growth. Their deficiency is widespread and contributes to the decline in soil health and agricultural productivity.
7. High import dependency & Global volatility = India does not produce enough fertilizers or their raw materials to meet its domestic demand:
- DAP: DAP is India’s 2nd most consumed fertiliser (Annual avg sale = 103.4 lt). A significant portion of the consumption comes from imports (57 lt) (because India has limited rock phosphate deposits). China has been one of the top supplier of phosphate fertiliser to India. However, China has put curbs on its exports – to ensure that its farmers has access to the product first & also to meet the growing demand for phosphate in production of EV batteries. It resulted into shortage of key fertiliser DAP in India.
- MOP (Muriate of Potash): India is 100% dependent on imports for MOP, as there are no domestic potash reserves. Similarly, India imports about 90% of its phosphatic fertilizers.
- Vulnerability to Global Price Fluctuations: This heavy import dependence makes India highly vulnerable to geopolitical events (like the Ukraine-Russia conflict, Gaza crisis), supply chain disruptions, and fluctuations in international prices of fertilizers and their raw materials (e.g., natural gas, phosphoric acid, rock phosphate). This directly impacts the cost of fertilizers for farmers and the government’s subsidy bill.
What are the various GOVERNMENT INITIATIVES related to fertilisers in India?
1. Fertiliser Subsidy: The government provides a subsidy to fertiliser producers so farmers can buy fertilisers at lower prices. The subsidy covers the difference between the cost of making or importing the fertiliser and the price farmers pay. Subsidy on 3 basic fertilisers in India- Urea, DAP and Muriate of Potash (MOP) is discussed below:
- Subsidy on Urea: Urea is the most widely produced and used fertiliser in India. It is subsidised only for agricultural use. The government pays a subsidy based on the cost of production at each plant, and urea is sold at a fixed Maximum Retail Price (MRP).The subsidized MRP of 45 kg bag of urea is Rs.242 per bag (exclusive of charges towards neem coating and taxes applicable).
- Subsidy on Non-Urea Fertilisers: Non-urea fertilisers, such as DAP and MOP, are generally sold at market prices, but the government has recently regulated them due to global price increases (especially after the Russia-Ukraine war). These fertilisers are covered under the Nutrient-Based Subsidy (NBS) Scheme. The MoP is being sold at Rs 1,500-1,600 per bag, while the price of DAP is Rs 1,350 per bag.
Fertiliser subsidy schemes:
| Urea Subsidy Scheme | a. Under the Urea Subsidy Scheme, urea is sold at a statutorily notified uniform MRP (Maximum Retail Price). Farmers pay a subsidised price of ₹242 per 45 kg bag of urea, significantly lower than the market price. b. The difference between the cost of production/importation and the retail price is paid to the urea manufacturer/importer by the government as a subsidy |
| Nutrient-Based Subsidy (NBS) Scheme | a. The NBS scheme was introduced in 2010 to address the nutrient imbalance in Indian agriculture. b. Under this scheme, fertilisers are provided at subsidised rates based on the nutrients they contain, namely nitrogen, phosphate, potash, and Sulphur. c. Fertilisers fortified with secondary and micronutrients are also given additional subsidies. However, urea is excluded from the NBS scheme. |
2. Direct Benefit Transfer (DBT) of Fertilizer Subsidy: 100% subsidy on various fertilizer grades is released to fertilizer companies after actual sales are made to farmers by retailers through Point of Sale (PoS) machines. Farmers are identified through their Aadhaar card at the retail outlet. The aim is to improve transparency, reduce diversion, ensure the subsidy reaches the intended beneficiaries, and track real-time sales data.
3. Boosting Domestic Production and Self-Sufficiency:
- Revival of Closed Fertilizer Units: A major focus has been on reviving defunct or sick urea fertilizer plants to increase domestic production capacity and reduce import reliance for e.g. Hindustan Urvarak & Rasayan Limited (HURL), Ramagundam Fertilizers and Chemicals Ltd (RFCL), Talcher Fertilizers Limited (TFL).
- New Urea Policy (NUP) – 2015: For existing gas-based urea units, this policy aimed at maximizing indigenous urea production, promoting energy efficiency, and rationalizing the subsidy burden. It has led to a significant increase in indigenous urea production.
- Potash Derived from Molasses (PDM): To reduce 100% import dependence for Potash, indigenous production of Potash Derived from Molasses has been encouraged and included under the NBS scheme.
4. Promoting Balanced Fertilizer Use and Soil Health:
- Neem-Coated Urea (NCU): The government mandated 100% neem-coating of all indigenously produced and imported urea.
- Soil Health Card (SHC) Scheme: Promotes soil test-based and balanced use of fertilizers, reduce overuse of chemical fertilizers, save costs for farmers, and improve soil health and productivity.
- Promotion of Bio-fertilizers and Organic Manures: Schemes like Paramparagat Krishi Vikas Yojana (PKVY), National Project on Organic Farming (NPOF), Mission Organic Value Chain Development for North-Eastern Region (MOVCDNER), and Bhartiya Prakritik Krishi Padhati (BPKP) provide assistance and promote the use of organic fertilizers and bio-fertilizers.
5. PM Programme for Restoration, Awareness Generation, Nourishment, and Amelioration of Mother-Earth (PM-PRANAM): States/UTs receive a grant equivalent to 50% of the fertilizer subsidy saved by reducing chemical fertilizer consumption (Urea, DAP, NPK, MOP) compared to the average of the previous three years. This grant is to be used by states to promote alternative fertilizers and related assets.
6. One Nation, One Fertilizer (ONOF) / Pradhan Mantri Bhartiya Jan Urvarak Pariyojana (PMBJP): Standardize fertilizer brands, reduce farmer confusion, reduce criss-cross movement of fertilizers (thus saving freight subsidies), and ensure a uniform appearance and quality perception for subsidized fertilizers.
7. Nano Fertilizers: The government is actively promoting the adoption of nano-fertilizers, particularly Nano Urea Liquid e.g. IFFCO Nano Urea Liquid.
What can be the WAY FORWARD?
1. Rationalizing the Subsidies: The government should bring urea under the Nutrient-Based Subsidy (NBS) scheme to balance the prices of nitrogen, phosphate, and potash. This will encourage balanced fertiliser use and reduce reliance on urea.
2. Deregulating Fertiliser Prices: Allowing market forces to set fertiliser prices can remove distortions caused by price controls. Farmers should receive direct income support, such as digital coupons or cash transfers, to purchase fertilisers based on their needs.
3. Promoting Micronutrient Use: To address micronutrient deficiencies, the government should promote fertilisers enriched with micronutrients. Encouraging balanced fertiliser use, including micronutrients, is crucial for better soil health and crop yields.
4. Improving Nutrient Use Efficiency (NUE): Improving NUE is essential, which can be achieved through precision farming, better soil testing , and using technology to apply fertilisers more efficiently.
5. Direct Income Support to Farmers: Explore replacing product-specific subsidies with a system of direct income support to farmers (like PM-KISAN, but specifically tied to fertilizer use or nutrient management). This would empower farmers to choose the right fertilizers based on their soil needs, reduce distortions, and prevent diversion.
6. Diversify Import Sources: Reduce over-reliance on a few countries for raw materials (rock phosphate, phosphoric acid) and finished fertilizers (MOP, DAP). Forge long-term agreements and joint ventures with resource-rich countries beyond traditional partners, including those in West Asia, Africa, Latin America, and other regions.
7. Integrated Nutrient Management (INM):Vigorously promote INM, which combines chemical fertilizers with organic manures, bio-fertilizers, and green manures, to improve soil health and reduce reliance on synthetic inputs.
CONCLUSION:
India needs to build a fertilizer sector that is not only robust and self-sufficient but also environmentally responsible, fiscally sustainable, and ultimately contributes to long-term agricultural prosperity and food security.
| Read more- Indian Express, Wikipedia UPSC Syllabus- GS 3- Agriculture |
