The Vexed Problem of Fertilizer Overuse and Subsidy

UPSC Syllabus: Gs Paper 3- Issues related to direct and indirect farm subsidies and minimum support price

Introduction

India’s fertilizer sector faces a growing challenge of import dependence, rising subsidy costs and inefficient fertilizer use. Geopolitical disruptions have increased the prices of fertilizers, natural gas and other inputs, exposing India’s dependence on external supplies. At the same time, heavily subsidised urea has encouraged its excessive use and created nutrient imbalance, soil degradation and diversion. The challenge is to ensure fertilizer availability and affordability while reducing wasteful consumption and fiscal pressure.

1. Present Status of India’s Fertilizer Sector
2. Large Fertilizer Consumption: India consumes around 70 million tonnes of fertilizers annually.
3. Dominance of Urea: Urea accounts for around 55% of total fertilizer consumption, while annual consumption stands at nearly 40 million tonnes.
4. Heavy Import Dependence: Around 25% of India’s urea requirement, or 10 million tonnes, is imported, mainly from Gulf countries, exposing supplies to external shocks.
5. Dependence on Imported Inputs: Domestic urea production also depends on imported natural gas, while India imports most potash, major phosphatic inputs and ammonia.
6. High Subsidy Support: The Union Budget 2026-27 provided ₹1.71 lakh crore for fertilizer subsidy, while subsidy expenditure has also risen sharply in recent years.
7. Heavy Urea Subsidy: A 45 kg bag of urea costs farmers around ₹270 against an average government cost of nearly ₹2,700, with its price unchanged since 2018.

Major Challenges in the Fertilizer Sector

1. Geopolitical Supply Vulnerability: Conflicts and disruptions in West Asia, including risks around the Strait of Hormuz, have increased uncertainty in fertilizer and natural gas supplies.
2. Rising Import and Transport Costs: Higher prices of urea and natural gas, along with increased shipping and insurance costs, have sharply raised India’s fertilizer import expenditure.
3. Growing Subsidy Burden: Rising global prices increase the gap between the fixed farmer price and actual fertilizer cost, putting greater pressure on government finances.
4. Excessive Urea Use: Cheap urea encourages farmers to apply it in large quantities, creating excessive dependence on nitrogen-based fertilizer.
5. Imbalanced Nutrient Use: The recommended Nitrogen-Phosphorus-Potassium (NPK) ratio is 4:2:1, but actual usage has reached around 11:4:1.
6. Low Nutrient Efficiency: Studies indicate that 40-70% of applied nutrients are lost through leaching, volatilisation and runoff instead of being absorbed by crops.
7. Diversion of Subsidised Urea: Estimates suggest that 20-25% of urea is diverted for non-agricultural uses, including industries such as glass and plywood.
8. Distortions in Fertilizer Distribution: Dealer practices such as tagging can force farmers to purchase other crop nutrients while buying subsidised fertilizers, increasing their costs unnecessarily.

Consequences of the Existing Fertilizer System

1. Pressure on the Import Bill: Higher fertilizer and input prices can sharply increase import expenditure, adding to the economic burden created by rising fuel imports.
2. Stress on Fiscal Consolidation: Additional spending on fertilizer imports and subsidies can increase pressure on the fiscal deficit and affect the government’s fiscal consolidation path.
3. Declining Fertilizer Response: The fertilizer-to-output ratio has reportedly fallen from 1:10 to around 1:2, showing lower returns from fertilizer use.
4. Declining Soil Health: Excessive and imbalanced fertilizer use degrades soil quality, reduces long-term fertility and affects the productive capacity of agricultural land.
5. Groundwater and Environmental Pollution: Nutrient losses through leaching and runoff contribute to groundwater pollution, while excessive urea use also harms the wider environment.
6. Higher Nitrous Oxide Emissions: Overuse of urea contributes to the release of nitrous oxide, adding a climate-related cost to inefficient fertilizer consumption.
7. Reduced Farm Profitability: Nutrient wastage raises input use without matching gains in output, reducing the efficiency and profitability of farming.

Government Initiatives

1. Fertilizer Subsidy System: The government provides heavy subsidies to keep fertilizers affordable, particularly urea, and ensure their availability to farmers.
2. Land Record-Based Distribution: Fertilizer sales are being linked with land records to improve identification of users and reduce diversion for non-agricultural purposes.
3. Aadhaar Verification: Aadhaar verification of purchasers has been used as a measure to check misuse and diversion of urea.
4. State-Wise Fertilizer Allocation: The Union Government allocates fertilizers to States based on factors such as land data and cropping patterns.
5. Farmer Registry Development: Work on a farmer registry is underway to identify which farmer is cultivating which crop and on how much land.
6. Extension Support: Indian Council of Agricultural Research (ICAR), State Agricultural Universities and Krishi Vigyan Kendras (KVKs) can spread knowledge on efficient nutrient management.

Need for a Shift Towards Efficient Nutrient Management

1. Shift to Balanced Nutrient Management: India needs to move from excessive fertilizer application towards balanced nutrient use that improves absorption and reduces wastage.
2. Expand High Nutrient Use Efficiency Fertilizers: High Nutrient Use Efficiency (High NUE) fertilizers are designed to improve nutrient absorption and reduce losses through advanced formulations.
3. Reduce Conventional Fertilizer Requirement: Field evidence suggests balanced nutrition using High NUE products can reduce conventional fertilizer needs by 25-50% in select crops.
4. Improve Crop Productivity: Controlled trials have shown yield increases of 15-40% in select crops, along with improvements in soil microbial activity and nutrient density.
5. Promote Alternative Nutrient Sources: Greater use of bio-fertilizers, micronutrients and other specialised fertilizers can support balanced nutrition and reduce excessive dependence on conventional fertilizers.
6. Strengthen Domestic Manufacturing: Expanding indigenous High NUE and specialty fertilizer production can reduce dependence on imported ammonia, potash, phosphates and other inputs.
7. Rationalise Subsidies Across Fertilizers: Subsidy levels should be adjusted to reduce the present bias towards urea and encourage balanced use of different plant nutrients.

Way Forward

1. Coordinate Union and State Action: States can complement Union-level allocation by planning fertilizer distribution at the block and village levels according to local requirements.
2. Fix User-Based Fertilizer Requirements: Farmer registries, land data and cropping patterns can help determine an appropriate quantity of urea for each actual fertilizer user.
3. Include Tenant Farmers: A suitable system, including self-declaration verified by landowners or local authorities, is needed for cultivators without formal land records.
4. Move Towards Direct Subsidy Transfer: Subsidies can be credited directly to eligible fertilizer users while fertilizers are sold at market rates, reducing misuse and excessive consumption.
5. Link Subsidy with Actual Cultivation: GPS-based field pictures can help verify that farmers have actually cultivated crops and used fertilizers before releasing subsidies.
6. Address Unlawful Stocking: Stronger monitoring and the suggested recognition of “unlawful stock” can help address diversion and other irregularities in fertilizer distribution.
7. Encourage Crop Diversification: Incentives can support a shift from paddy towards pulses and oilseeds, reducing dependence on fertilizer, water and related subsidies.
8. Reduce Multiple Import Dependencies: Crop diversification can simultaneously lower imports of fertilizers, oilseeds and pulses and reduce exposure to geopolitical supply shocks.
9. Build Farmer Awareness and Consent: Mass communication, farmer dialogues and agricultural extension should explain the economic and environmental costs of excessive urea use.
10. Strengthen Policy Support and Innovation: Coordinated policy, institutional adoption, industry-guided research and domestic innovation are needed to expand sustainable fertilizer alternatives.

Conclusion

India must move from subsidy-driven fertilizer consumption to efficient nutrient management. Better targeting of subsidies, balanced fertilizer use, High NUE products, stronger distribution systems and crop diversification can reduce imports and fiscal pressure. Farmer participation and pilot-based reforms are essential to improve soil health, productivity and long-term fertilizer security.

Question for practice:

Examine the challenges posed by fertilizer overuse and subsidies in India, and suggest measures to promote efficient and sustainable fertilizer use.

Source: Businessline