Fertiliser crisis | India must rethink its agrifood support policy

If rice procurement is assured, electricity subsidised, and urea is cheap, farmers will continue cultivating input-intensive crops. If India wants diversification and resource efficiency, incentives must change

Prime Minister Narendra Modi’s recent appeal asking farmers to reduce the use of chemical fertilisers by 25–50 per cent was framed as a call to protect soil health and promote natural farming.

But beneath the environmental messaging lies a far more pressing strategic concern: India’s increasing exposure to the global fertiliser-geopolitics trap.

The prime minister reminded farmers that while a bag of urea sells for nearly Rs 3,000 in international markets, Indian farmers receive it for less than Rs 300 because of extensive government subsidies. The statement was as much about fiscal and geopolitical vulnerability as it was about sustainability.

Yet, appeals alone rarely alter agricultural behaviour. Farmers respond to incentives created by policies, prices, and public expenditure. If urea remains heavily subsidised while bio-fertilisers, balanced nutrient management, and sustainable farming systems receive limited institutional support, excessive chemical use will continue.

India’s fertiliser challenge, therefore, is not merely a question of farmer awareness. It is fundamentally a question of policy design.

Ironically, India’s fertiliser subsidy regime itself emerged from an earlier global crisis. Before 1977, fertilisers were not subsidised. It was the oil shock of 1973 that sharply increased global fertiliser prices, reduced consumption, and triggered concerns over food production and inflation.

In response, the government introduced the Retention Price Scheme (RPS) in 1977 to keep fertilisers affordable and ensure uninterrupted agricultural production.

At the time, the policy was justified. India was still battling food insecurity and prioritising self-sufficiency after the Green Revolution. What began as a crisis-response mechanism, however, gradually became embedded within India’s agricultural policy architecture.

Over time, fertiliser subsidies evolved into one of the largest components of agrifood support, second only to food subsidy. The underlying rationale of the policy remained unchanged even as the context changed dramatically.

Today, India is no longer a food-deficit country and is the world’s top producer of rice, wheat, milk, and the second-largest producer of fruits and vegetables. But the agricultural system has simultaneously become highly input-intensive, ecologically stressed, and dependent on volatile global supply chains.

The current geopolitical environment has exposed these vulnerabilities once again. The Russia-Ukraine conflict disrupted global fertiliser and energy markets.

Tensions in West Asia and disruptions in shipping routes have further amplified supply uncertainties and price volatility. India imports a substantial share of its fertiliser requirements — including phosphatic fertilisers, potash, and feedstock for urea production. Every geopolitical shock now directly impacts India’s subsidy burden, fiscal stability, and food security.

This moment resembles the 1970s in one critical sense: another global crisis is forcing India to rethink the foundations of its agricultural support system. The oil crisis led to the birth of fertiliser subsidies. The current fertiliser crisis should become the starting point for repurposing them.

The scale of current agrifood spending explains why this debate can no longer be postponed. Estimates from the ICRIER-UNDP-BIOFIN report show that of India’s agrifood budgetary support of Rs 7.08 lakh-crore in the total expenditure in 2024, nearly 28 per cent— Rs 1.98 lakh-crore — went to fertiliser subsidies, considered harmful to biodiversity. Another 38 per cent flowed to irrigation and procurement-linked food subsidies, reinforcing water-intensive monocropping of rice and wheat.

By contrast, only 21 per cent supported research, extension, infrastructure, and innovation — measures that are more sustainable. Income support schemes like PM-KISAN and crop insurance accounted for 13 per cent and were broadly neutral environmentally.

The imbalance is stark. Current policies incentivise groundwater depletion, soil degradation, excessive nutrient use and greenhouse gas emissions, even as public discourse promotes sustainability.

Farmers are responding rationally: if rice procurement is assured, electricity subsidised, and urea is cheap, they will continue cultivating input-intensive crops. If India wants diversification and resource efficiency, incentives must change.

India does not need an abrupt abandonment of chemical fertilisers, which could hurt yields. But it urgently requires a calibrated transition away from inefficient dependence.

Repurposing agrifood policies offers a way forward. The aim is not to withdraw support but to redesign incentives so that expenditure rewards sustainability alongside production. Fertiliser subsidies should promote nutrient-use efficiency rather than indiscriminate nitrogen application, with support gradually shifting to bio-fertilisers, precision farming, and soil restoration.

A per-hectare direct benefit transfer could give farmers flexibility to choose inputs based on crop and soil needs.

Procurement policies must diversify beyond rice and wheat, expanding assured procurement for pulses, oilseeds and millets to strengthen biodiversity, nutrition security and import resilience.

Irrigation and electricity subsidies should encourage water-efficient technologies and crop diversification, especially in stressed regions. Farmers must remain central to the transition through stronger extension services, climate insurance, rural infrastructure, and stable markets.

India’s first Green Revolution solved scarcity. The next agricultural transformation must solve vulnerability. Global uncertainty offers a rare opportunity to rethink agrifood policies before the next crisis becomes unmanageable.

The author is a Senior Fellow at ICRIER.

(Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH).