India is reassessing its long-standing fertiliser subsidy model amid rising costs, supply disruptions, and environmental concerns, prompting calls for structural reforms in farming support policies.
India’s fertiliser squeeze is forcing a broader reckoning with a subsidy model that helped turn the country from a chronic grain importer into an agricultural powerhouse, Business Standard reported. The current strain has been sharpened by disruption in West Asia, where conflict has pushed up procurement costs, tightened gas supplies and increased pressure on the government’s already heavy support bill.
For decades, cheap urea has been central to India’s farm policy, with the state keeping retail prices far below market levels and absorbing the difference through subsidies. That system, born out of the food shortages of the 1960s and tied to the Green Revolution, helped lift wheat and rice production and cement India’s position as the world’s largest rice exporter. But it also encouraged heavy nitrogen use, and the present shock is reviving criticism that the policy rewards overapplication rather than soil health.
The fiscal strain is now acute. Business Standard reported that India paid close to twice pre-war prices in an April tender as shipping through the Strait of Hormuz was disrupted, while imported gas, which is vital for domestic fertiliser production, also became more expensive. A government official told the paper that the fertiliser subsidy bill could exceed ₹3 trillion, well above the amount budgeted for the current financial year.
Officials are now trying to curb demand without triggering political backlash from farmers, who remain a powerful voting bloc. The Agriculture Ministry has campaigned across the country to warn about the damage caused by excessive fertiliser use, while Prime Minister Narendra Modi has urged growers to cut back. In parallel, a new distribution system is being piloted in 40 districts, under which farmers will pre-book fertiliser according to landholdings and crops sown, a move designed to better match supply with actual need.
The reform debate extends beyond temporary rationing. Commentators in Nature and Mint have argued that simply shifting subsidies from manufacturers to farmers would not, on its own, solve the deeper problem of distorted urea pricing and chronic nitrogen overuse. They say any durable fix would need to change the incentive structure itself, not merely the channel through which support is paid.
That challenge is especially difficult in a country of tiny farms, where the average holding is less than 1 hectare and growers are often reluctant to risk lower yields for longer-term gains. Farmers interviewed by Business Standard described the pressure to protect the next harvest rather than soil quality years ahead, even as officials warned that overuse is degrading fertility, polluting water and adding to greenhouse-gas emissions. With monsoon rainfall also running weak, the immediate danger is not just to the subsidy bill but to output and food inflation.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
