[Answered] India’s fertilizer subsidy bill has been rising continuously due to a variety of reasons. What are the issues with India’s fertilizer subsidy regime? What reforms, in your opinion, can be undertaken to counter the ill effects arising due to it?

The rising fertilizer subsidy bill which has increased from Rs 81,124 crore in 2019-20, to Rs 1,53,758 crore in 2021-22, Rs 2,51,339 crore in 2022-23, and a budgeted Rs 1,75,100 crore this year has raised concern for the Government as it impacts the finances and farmers directly.

Issues with India’s fertiliser subsidy regime

• Skewed NPK Ratio: The overemphasis on urea and DAP, which are nitrogen and phosphorus-rich fertilizers, has led to an imbalanced Nitrogen-Phosphorus-Potassium (NPK) ratio in the soil. The ideal ratio for healthy plant growth is approximately 4:2:1 (N:P: K).
• Soil Health and Crop Productivity: Imbalanced nutrient ratios can result in nutrient deficiencies or excesses, affecting the overall health of the soil. This, in turn, can lead to reduced crop productivity, poor crop quality, and increased susceptibility to pests and diseases.
• Groundwater and Surface Water Pollution: Overuse of fertilizers can lead to the leaching of excess nutrients, such as nitrogen compounds, into groundwater. This contamination can also find its way into surface water bodies through runoff. The pollution of water sources with nitrates can have detrimental effects on aquatic ecosystems.
• Health Impacts: High levels of nitrates in drinking water, which can result from the overuse of nitrogen-based fertilizers, pose health risks. Infants who consume water or foods with elevated nitrate levels may be at risk of developing methemoglobinemia, commonly known as Blue-Baby Syndrome.

Potential Reforms for the Subsidy Regime

• Nutrient-Based Subsidy (NBS) System: The government should swiftly bring urea under the nutrient-based subsidy regime, deregulate its Maximum Retail Price (MRP), and extend this decontrol to other fertilizers. By providing a per-tonne subsidy linked to nutrient content, farmers would be incentivized to consider alternatives to urea, fostering a more diversified and balanced use of fertilizers.
• Extend the subsidy on a per-hectare basis: The next measure involves extending the subsidy on a per-hectare basis. The government should permit farmers to purchase any fertilizer using this subsidy. This approach will compel companies to introduce innovative, cost-effective fertilizer products tailored to specific crops, soils, and agro-climatic regions.
• Direct Benefit Transfer (DBT): Implementing a system of direct benefit transfer to farmers can help target subsidies more effectively, ensuring that the intended beneficiaries receive the support.
• Promoting Organic Farming: Encouraging and incentivizing organic farming practices can reduce the dependency on chemical fertilizers and promote sustainable agriculture.

Conclusion

Union Government should engage stakeholders, including farmers, state government, and fertilizer companies in the reform process for the success and sustainability of any changes to the fertilizer subsidy regime.