[Answered] Critically analyze the ecological and fiscal challenges of India’s fertilizer subsidy regime. Evaluate measures required to enhance nutrient use efficiency.

Introduction

Economic Survey 2025-26 and Budget 2026-27 underline sustainable agriculture as central to Viksit Bharat. Yet India’s ₹2 lakh crore fertilizer subsidy regime increasingly generates ecological degradation, fiscal stress, and declining nutrient-use efficiency (NUE).

Ecological Challenges of the Subsidy Regime

1. Distorted NPK Ratios: Government-controlled low price urea and decontrolled phosphatic and potassic fertilizers under the Nutrient-Based Subsidy (NBS) has distorted the NPK ratio to 10:4:1 against the ideal 4:2:1. Example: Punjab.
2. Soil Degradation and Declining Productivity: Excessive chemical application depletes beneficial microflora, burning out soil organic carbon and reducing the soil’s natural capacity to hold water and nutrients. Fertilizer response ratio declined from nearly during the Green Revolution to about . Soil Health Card data reveals zinc, sulfur, and iron deficiencies across major agricultural regions. Example: Indo-Gangetic plains.
3. Environmental and Climate Costs: Unused fertilizer nutrients create severe externalities:

Nitrous oxide emissions accelerate global warming.

Nitrate leaching contaminates groundwater, causing health hazards like Blue Baby Syndrome.

Runoff triggers eutrophication in rivers and lakes. Example: Yamuna pollution.

4. Cropping Pattern Distortions: MSP-backed rice-wheat cultivation encourages excessive fertilizer dependence, undermining pulse-based crop rotations that naturally fix nitrogen. India simultaneously imports pulses despite cereal surplus. Example: Cobweb phenomenon.

Fiscal Challenges of the Subsidy Regime

1. Unsustainable Fiscal Burden: Fertilizer subsidy expenditure crossed nearly ₹2 lakh crore during global commodity shocks. Budget volatility rises with LNG and phosphate import dependence. Subsidies crowd out productive agricultural investments like irrigation and R&D. Example: Capital expenditure squeeze.
2. Regressive Subsidy Distribution: Large farmers consume more fertilizers and corner a disproportionate subsidy share. Studies estimate only about one-third of benefits effectively reach small farmers. Example: Landholding disparity.
3. Leakage and Diversion: Cheap urea encourages diversion toward industries such as plywood, textiles, and illegal cross-border trade. Subsidizing products instead of farmers creates systemic leakages. Example: Industrial diversion.
4. Import Vulnerability and Geopolitical Risks: India remains heavily dependent on imported phosphatic fertilizers and natural gas. Russia-Ukraine and West Asia conflicts exposed fertilizer supply-chain fragility. Example: LNG shock.

Nutrient Use Efficiency (NUE) Crisis

Current NUE remains low at 35-40%, resulting in massive resource wastage.

1. Pricing asymmetry encourages urea overuse while discouraging balanced fertilisation. Example: NBS exclusion of urea.
2. Poor extension services lead to blanket applications instead of precision use. Example: Ignored Soil Health Cards.

Measures to Enhance Nutrient Use Efficiency (NUE)

1. Rationalizing Subsidy Architecture: Bring urea under the NBS regime gradually. Shift toward Direct Benefit Transfer (DBT) directly to farmers instead of manufacturers. Promote per-acre nutrient support rather than per-bag subsidy. Example: Targeted DBT.
2. Precision and Technology-Driven Farming: Scale Nano Urea and Nano DAP with higher absorption efficiency. Expand fertigation through micro-irrigation under PMKSY. Use AI-based precision agriculture linked to Soil Health Cards. Example: Precision farming.
3. Reviving Sustainable Cropping Systems: Incentivize pulse-cereal rotations and green manuring. Align MSP procurement beyond rice and wheat. Promote biofertilizers, compost, and biochar integration. Example: Legume rotation.
4. Institutional and Governance Reforms: Revive the Interministerial National Nitrogen Steering Committee. Strengthen agricultural extension services and farmer training. Integrate climate goals with fertilizer policy under India’s net-zero commitments. Example: Mission LiFE.

Conclusion

Echoing Dr. M.S. Swaminathan’s vision of an evergreen revolution, India must reform fertilizer subsidies toward efficiency, sustainability, and equity to secure food security without sacrificing fiscal stability or ecological balance.