Need to reform Fertiliser Policy

Why in News?

Rising global geopolitical instability (E.g., tensions in West Asia, Russia-Ukraine War) has disrupted fertiliser and energy markets. This has exposed India’s heavy import dependence and inefficiencies in fertiliser subsidies. This necessitates urgent reforms to ensure food security and fiscal sustainability.

Present Status of Fertilisers in India:

• India is the second-largest consumer of fertilisers globally (after China). Total fertiliser consumption has increased from ~1.1 million tonnes (1966-67) to about ~32–33 million tonnes (2023-24). 
• India has limited domestic reserves of rock phosphate and potash, and is mainly dependent on imports for these. Import dependence:
  • Urea: ~20–25%. Even 85% of domestic urea production depends on imported gas.  
  • Phosphatic fertilisers (DAP & raw materials): ~60-70%
  • Potassic fertilisers: ~100% (mainly from Russia, Belarus, Canada)
• Supply-Side Constraints:
  • Global price volatility (fertilisers + LNG).
  • Geopolitical risks in: Gulf region (phosphates) & Russia-Belarus (potash)
  • China’s export restrictions on phosphates intermittently impact India. 

Key Challenges in the Fertiliser Sector: 

• Unsustainable subsidy burden: Fertiliser subsidy peaked at ₹2.25 lakh crore (2022-23). Urea subsidy is based on the cost-plus method, which encourages inefficient fertiliser manufacturers.
  • The subsidy amount paid by the Government to the fertiliser companies is the difference between the cost of manufacturing and the market price. The firm receives the subsidy based on its cost of production. Thus, the greater the cost of production, the larger the subsidy amount.
• Overuse of urea by farmers: As Urea (source of N) is cheaper compared to P&K fertilisers, it has led to overuse of Urea. This has led to an imbalanced fertiliser ratio of N:P:K (7:3:1) against the ideal ratio 4:2:1 for N: P: K.
• Irrational urea pricing policy (Efficient fertilisers not equally incentivised): Granular urea has a very low Nutrient Use Efficiency (NUE), roughly 35 to 40%. Whereas the liquid urea (N) has an NUE of almost 90% through drip irrigation (fertigation). Ironically, the highly irrational urea pricing policy does not subsidise Liquid urea (N). 
• Diversion and black marketing: Urea is used both as a fertiliser in agriculture and as a raw material in the chemical industry, explosives, etc. The cheaper urea available as a fertiliser (subsidised) is diverted towards industries or is smuggled across borders. 
• Slow innovation & regulatory bottlenecks: As per a World Bank 2019 report, registering a new fertiliser product takes over 800 days in India, against 270 days in China. The time taken (filing application, field-testing at multiple locations, state-level approvals) hinders the introduction of new nutrient products into the country. 

Excessive use of fertilisers leads to negative externalities like declining soil fertility, water pollution, etc.

Government Initiatives: 

• Neem-coating of urea so that it becomes unusable for industrial purposes and hence, diversion would be curbed.
• Use of Nano Urea and Nano DAP in agriculture. 
• Introduction of Sulphur-coated Urea (Urea Gold) to address Sulphur deficiency.
• Aadhaar-authenticated invoice: Sale of all subsidised fertilisers to farmers/buyers is made through Point of Sale (PoS) devices installed at each retailer shop, and the beneficiaries are identified through Aadhaar Card, KCC, Voter Identity Card, etc. The manufacturers only get a subsidy on submission of electronic proof of sale. 
• PM-PRANAM scheme to reduce synthetic fertiliser usage. It incentivises states to adopt alternative fertilisers (organic/bio-fertilisers) and natural farming, with 50% of subsidy savings given back to states as grants.

Way Forward:

• Farmer ID-Based Distribution: Digitised farmer database (fertiliser distribution model pilot in Madhya Pradesh) ensures farmers receive fertilisers based on their land and crop requirements. Tenant farmers will also be able to access fertilisers and other benefits through Farmer ID with the consent of the landowner.
• Direct Benefit Transfer (DBT) to Farmers: Shift from product subsidy to income support per acre. Clubbing the fertiliser subsidy with PM-KISAN can promote rational fertiliser use and reduce diversion. 
• Quantitative Rationing of Urea: Under the Essential Commodities Act, allocate limited quantities to states based on land records, crop patterns, previous sales, and recommended doses by their state agriculture universities. 
• Promote Efficient Fertiliser Use: Shift to Nano urea & Liquid fertilisers (fertigation). 
• Rebalancing Nutrient Mix: Reducing nitrogen bias and promoting phosphatic fertilisers. E.g., Replace DAP with Triple Super Phosphate (TSP). Encourage domestic production and global partnerships.
• Strengthening Domestic Production: Diversify import sources. Invest in Green Ammonia, Biofertilisers, and Alternative fertiliser technologies. 
• Improving Governance & Monitoring: Using GPS-based tracking to prevent diversion and leakages. 
• Promote judicious use of fertilisers through the Soil Health card and the PM-PRANAM Scheme.

The government needs to secure its fertiliser supplies to ensure food security. The efforts to promote natural farming can not really scale up unless fertiliser pricing or quantities are rationalised. 

Mains Practice Question

Q. India’s high dependence on fertiliser imports makes the agriculture sector vulnerable to global geopolitical disruptions. Critically examine. Suggest a long-term strategy to ensure fertiliser security in India. (250 words)

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