[Answered] Excessive controls stifle the fertiliser industry, hurting farmers. Critically analyse the case for decontrol, balancing the need for market efficiency with ensuring farmer welfare and food security.

Introduction

Fertiliser is the backbone of Indian agriculture, yet excessive price controls, import restrictions, and subsidies create inefficiencies. Balancing market freedom with farmer support is crucial for sustainable food security.

Why fertiliser controls are problematic

1. Price rigidity: Urea retail price fixed at ₹266.5/bag since 2012; DAP capped at ₹1,350/bag. Costs have risen, discouraging investment and innovation.
2. Import dependency and vulnerability: China supplied 22.9 lt DAP and 21.5 lt urea in 2023-24; in 2024-25 imports plunged, causing shortages. Over 30% of urea and 90% of phosphates are imported.
3. Supply bottlenecks: Imports are canalised through state trading enterprises, limiting private sourcing from West Asia, Russia, Nigeria, Morocco. Poor demand assessment worsened shortages in a good monsoon year.
4. Leakages and misuse: Cheap urea leads to diversion for non-agriculture use and black marketing; nutrient imbalance (urea overuse) depletes soil health.
5. Fiscal burden: Fertiliser subsidy bill exceeds ₹2.5 lakh crore (2023-24), crowding out public investment in irrigation and R&D.

The case for decontrol

1. Market efficiency and availability: Decontrol can incentivise companies to import, produce, and distribute more; free pricing ensures better allocation and prevents queues/shortages.
2. Encouraging balanced use: Higher urea price relative to phosphates/potash could reduce nitrogen overuse and promote balanced NPK application, improving yields and sustainability.
3. Boosting domestic production and innovation: Liberalisation may attract private and foreign investment in new plants, green ammonia, nano-fertilisers, and biofertilisers.
4. Lessons from past reforms: Decontrol of P&K fertilisers (nutrient-based subsidy, 2010) improved availability, though prices rose moderately.

Caveats and risks

1. Farmer vulnerability: Sudden price hikes could hurt small and marginal farmers, who constitute 86% of holdings.
2. Food security concerns: High fertiliser prices may reduce usage, affecting yields of rice, wheat, and maize.
3. Global volatility: Prices of phosphates, potash fluctuate with energy costs and geopolitics (Russia-Ukraine war, Chinese export curbs).

Balancing reforms with welfare

1. Gradual decontrol: Phase-wise price rationalisation with direct benefit transfer (DBT) to farmers’ accounts, replacing blanket subsidies.
2. Buffer stocks and market oversight: Maintain strategic reserves of urea, DAP for market intervention.
3. Diversification and sustainability: Promote organic, nano, biofertilisers and soil health cards to reduce chemical dependence.
4. Targeted support: Protect vulnerable farmers through PM-Kisan-type cash support, rather than subsidising consumption.
5. Digital tracking and reforms: Revamp nutrient-based subsidy (NBS) to cover urea; allow private imports with transparency.

Conclusion

Fertiliser decontrol is inevitable for efficiency and innovation. But reforms must be calibrated with DBT, buffer stocks, and soil sustainability to ensure farmers thrive without compromising food security.