[Answered] Evaluate the integration of fertilizer subsidies with PM-KISAN through direct transfers. Analyze its efficacy in ensuring food security and curbing resource diversion.

Introduction

The Economic Survey of India 2025–26 flags India’s fertiliser subsidy exceeding ₹2.5 lakh crore, urging efficiency. Integrating subsidies with PM-KISAN via DBT is debated to curb leakages and ensure food security.

From Input Support to Income Support

The proposal to club fertilizer subsidy funds with PM-KISAN into a single per-acre cash transfer represents a paradigm shift from subsidizing inputs to directly supporting farmer incomes.

Potential Benefits

1. Price Signal Correction: Freeing fertilizer prices would allow farmers to respond to market signals. NITI Aayog advocates that farmers paying full urea price (₹1,100/bag) would receive higher MSP, as the cost-plus formula (C2+50%) would increase procurement prices.
2. Fiscal Savings for Reinvestment: The OECD estimates India has the most negative Producer Support Estimate (-14.5% of gross farm receipts) among monitored countries, implying domestic producers are implicitly taxed. Savings from rationalized subsidy (estimated ₹30,000-40,000 crore annually) could fund agricultural R&D, which saw its budget cut 4.8% in 2026-27.
3. Environmental Co-Benefits: Current imbalanced use (N:P:K at 10.9:4.1:1) contributes to soil degradation, nitrate leaching, and nitrous oxide emissions (273x CO2). Direct transfers would incentivize balanced nutrient application and promote alternatives like Nano-Urea (90% Nutrient Use Efficiency).

Critical Risks:

1. Price Volatility Exposure: Global urea prices surged 65% in 40 days during recent conflicts (from $482 to $795/tonne). Without price caps, small and marginal farmers (86% of landholdings) could face unaffordable inputs during geopolitical shocks.
2. Tenant Identification: Inadequate land records risk benefits going to absentee landlords rather than actual cultivators.

3. Price Volatility Exposure: Global shocks could make fertilisers unaffordable even with cash transfers. Example: 2026 West Asia crisis pushing urea prices to $795/tonne.
4. Behavioural Factors: Cash may be diverted to non-agricultural needs, especially among indebted farmers.transfers.

Efficacy in Curbing Resource Diversion

1. The current regime’s low administered price (₹242 per 45-kg bag) creates huge arbitrage, leading to industrial diversion and smuggling.
2. DBT removes this incentive by delinking subsidy from product purchase. However, success depends on robust Aadhaar-linked land records and grievance mechanisms. Without these, diversion may shift from fertiliser to cash itself.
3. The Economic Survey 2025-26 has explicitly recommended a modest increase in urea prices coupled with direct income transfers to farmers on a per-acre basis. The Survey further recommends zone-specific transfers indexed to cropping patterns, leveraging Aadhaar-linked fertilizer sales data and the PM-KISAN platform

Way Forward

1. Phased DBT Implementation: Pilot DBT integration in selected states before nationwide rollout. Example: District-level pilots with real-time monitoring.
2. Dynamic Subsidy Indexation: Link cash transfers to global fertiliser price indices to protect farmers from volatility.
3. Strengthening Land Records: Accelerate digitisation under Digital India Land Records Modernization Programme (DILRMP).
4. Promoting Balanced Nutrient Use: Incentivise P & K fertilisers and discourage excessive nitrogen use. Example: Triple Super Phosphate (TSP).
5. Enhancing Extension Services: Use Soil Health Cards and agri-extension to guide optimal fertiliser usage.
6. Boosting Domestic Production: Encourage green ammonia, nano-urea, and indigenous fertiliser manufacturing.

Conclusion

Sustainable agriculture needs efficiency and innovation; integrating subsidies with DBT must balance farmer welfare, productivity, and national food security imperatives.