Repurposing India’s Fertiliser Policy Towards Nutrient Optimisation

[Full Report]

1. Key Findings

·         India is the world's second-largest producer and consumer of fertilisers after China.

·         Fertiliser subsidies have supported agricultural productivity and food security, but the existing policy has created an imbalance in the use of nitrogen (N), phosphorus (P) and potassium (K).

·         The Nutrient Based Subsidy (NBS), introduced in April 2010, covers phosphatic and potassic fertilisers, while urea remains outside the scheme at a government-controlled price.

·         Cheap urea encourages excessive nitrogen application, while relatively expensive phosphorus and potassium fertilisers discourage their adequate use.

·         The report concludes that the imbalance is primarily a relative-price problem rather than a lack of agricultural knowledge among farmers.

2. Fertiliser Consumption and Nutrient Imbalance

·         India's total fertiliser-product consumption reached approximately 71.6 million metric tonnes in 2025–26.

·         Urea accounted for around 55% of total fertiliser consumption.

·         Between TE 2009–10 and TE 2024–25, nitrogen use shifted from 7% below the recommended level to 6% above it.

·         The phosphorus deficit narrowed from 29% to 22%, while the potassium deficit widened from 48% to 72%.

·         India's actual N:P:K ratio reached 10.5:4.1:1, compared with the report's normative ratio of 2.8:1.5:1.

Nutrient

Deviation from recommended use, TE 2024–25

Nitrogen (N)

6% above recommended level

Phosphorus (P)

22% below recommended level

Potassium (K)

72% below recommended level

3. Why the Imbalance Has Increased

·         Urea's maximum retail price (MRP) has remained largely unchanged, at ₹5.8/kg for urea product?

·         The report states that urea's price was ₹11.65/kg in 2024–25 and unchanged since 2020–21.

·         Between 2010–11 and 2024–25, DAP prices increased nearly threefold, while MOP prices increased more than sixfold.

·         Urea remains outside the NBS, whereas prices of phosphatic and potassic fertilisers are more exposed to international market costs.

·         Consequently, farmers have a stronger financial incentive to apply nitrogen-rich fertilisers than to maintain balanced nutrient use.

4. State-wise Findings

·         11 of 20 major states apply more nitrogen than recommended, accounting for 39% of India's gross cropped area.

·         States reporting substantial nitrogen overuse include Jharkhand, Punjab, Andhra Pradesh, Bihar and Odisha.

·         Only three states—Andhra Pradesh, Odisha and Telangana—apply phosphorus above the recommended level.

·         Every state under-applies potassium.

·         Jharkhand and Haryana have particularly severe potassium deficits, at approximately 91% below their respective recommended levels.

·         Punjab and Haryana receive particularly high nitrogen subsidies per hectare, reinforcing existing fertiliser-intensive cropping patterns.

5. Environmental Consequences

·         Excess nitrogen application contributes to ammonia volatilisation, nitrous oxide emissions and nitrate leaching into groundwater.

·         Low soil organic carbon reduces the soil's ability to retain nutrients.

·         Continuous under-application of potassium contributes to the depletion of soil nutrient reserves.

·         The report cites cumulative potassium depletion of approximately 5.27 million metric tonnes in Indian agricultural soils during 1970–2018.

·         Soil Health Card data for 2025–26 showed low nitrogen in 72% of samples and low soil organic carbon in 52%.

·         Nitrate contamination above the permissible limit was detected in groundwater samples across multiple states, creating environmental and public-health concerns.

·         Phosphorus and potassium deficiencies can affect flowering, seed production, water regulation, drought resistance and crop quality.

6. Fiscal Cost of Fertiliser Subsidies

·         The fertiliser subsidy bill peaked at ₹2.51 lakh crore in 2022–23.

·         The Union Budget allocated ₹1.71 lakh crore for fertiliser subsidies in 2026–27.

·         The report estimates that disruptions at the Strait of Hormuz could raise the 2026–27 subsidy bill to ₹2.42–3.32 lakh crore, depending on the severity and duration.

·         Punjab and Haryana receive substantially higher nitrogen subsidies per hectare than several other states.

·         Subsidies, minimum support price (MSP) procurement and subsidised electricity together encourage water-intensive rice-wheat cultivation in Punjab and Haryana.

·         The report argues that fertiliser reform must be coordinated with electricity, irrigation and agricultural procurement policies.

7. Major Policy Recommendations

A. Direct Cash Transfers (DCT)

·         Shift fertiliser subsidies from products to farmers through direct cash transfers.

·         Design assistance to be neutral across nitrogen, phosphorus, potassium and different crops.

·         Give farmers greater freedom to choose fertilisers based on soil conditions, crop requirements and cost-effectiveness.

·         Build a reliable farmer-level database using land records and satellite-based land-use information.

B. Reform the NBS

·         Consider bringing urea under the NBS to reduce its price advantage.

·         Alternatively, introduce quantity-based restrictions linked to landholding, cropping patterns and soil-test results.

·         Ensure that the subsidy system encourages balanced nutrient application rather than excessive use of one fertiliser.

C. Reform PM-PRANAM

·         PM-PRANAM currently rewards states for reducing overall chemical fertiliser consumption.

·         The report notes that no incentive had been disbursed under the scheme during the period discussed.

·         Develop a successor scheme that directly rewards farmers who reduce excessive fertiliser use.

·         Measure reductions product by product so that cutting potassium fertiliser does not earn the same reward as reducing excessive urea use.

D. Promote Fertiliser Innovation

·         Encourage soil-specific and customised fertilisers, biofertilisers, nano-fertilisers and controlled-release formulations.

·         Evaluate the effectiveness of newer products through independent field trials.

·         Promote organic inputs, compost, farmyard manure and green manure to improve soil organic carbon.

·         Explore crop varieties with improved nutrient-use efficiency through conventional breeding and gene-editing research.

E. Improve Fertiliser Application Practices

·         Follow the 4R Nutrient Stewardship framework:

1.    Right source

2.    Right rate

3.    Right time

4.    Right place

·         Expand soil testing and plot-specific nutrient recommendations.

·         Promote fertigation, drip irrigation, split application and site-specific nutrient management.

·         Encourage crop rotation with pulses, which can reduce nitrogen requirements for subsequent cereal crops.

·         Align fertiliser subsidies with water conservation and crop diversification objectives.

8. Overall Conclusion

·         India's fertiliser policy has helped increase agricultural output but has also distorted nutrient choices.

·         The current subsidy structure encourages excessive nitrogen use and inadequate potassium application.

·         The report recommends moving towards farmer-centric, crop-neutral and nutrient-neutral subsidies, supported by improved fertiliser products and application practices.

·         Savings from reduced excessive fertiliser use should be redirected towards fertigation and drip-irrigation infrastructure.

·         The authors emphasise that fertiliser policy alone cannot solve the problem; MSP procurement, electricity subsidies, irrigation and crop choices must also be addressed.