Need for Fertilizer Subsidy Reforms in India

March 25, 2025

The Indian parliamentary Standing Committee on Chemicals and Fertilizers has raised concerns regarding the fertiliser subsidy system. The committee, led by MP Kirti Azad, has recommended that the Union Fertilizers Ministry secure additional funding to support farmers. This comes in light of a recent report detailing the challenges faced in the fertiliser sector, particularly with the production and subsidy of nano urea and nano diammonium phosphate (DAP).

Current Context of Fertilizer Subsidies

The Government of India allocates funds for fertiliser subsidies. However, the Ministry of Finance has reduced the budget for the Nutrient-Based Subsidy (NBS) Scheme and Urea Subsidy Scheme by 7.38%. This reduction threatens the implementation of subsidy schemes essential for farmers. The committee emphasises the need for increased production capacity of nano fertilisers and better funding strategies.

NBS Regime

The Nutrient-Based Subsidy regime offers fertilisers at subsidised rates based on their nutrient content. It aims to promote balanced fertilisation and improve soil health. The regime also helps in directing subsidies to the farmers who need them most, thus enhancing agricultural productivity and food security.

Issues with the NBS Regime

While the NBS regime is beneficial, it faces several challenges. These include economic burdens due to high subsidy costs, black marketing, and regional disparities in fertiliser application. The effectiveness of the subsidy system is undermined by leakage and misuse, preventing genuine farmers from accessing affordable fertilisers.

Nano Fertilisers

Nano fertilisers, such as nano urea and nano DAP, have shown potential in enhancing crop yields. Field trials indicate that combining nano urea with traditional urea can improve yields in crops like peas. The committee suggests expanding production and promoting these innovative fertilisers to farmers for better agricultural outcomes.

Challenges in Raw Material Supply

The committee identified a lack of agreements for mining leases critical for securing raw materials for fertiliser production. It urged the government to establish such agreements to enhance domestic supply. This is essential for achieving self-sufficiency in fertiliser production.

Utilisation of Allocated Funds

The report brought into light underutilisation of funds in various categories of fertilisers during the 2024-25 fiscal year. For instance, 20% of the budget for indigenous phosphorus and potassium fertilisers went unused. The committee recommends better planning and execution to ensure full utilisation of funds across all categories.

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