Reforming the fertilizer sector

Context: In order to address the multiple goals of fertilizer policy, India needs to work on certain areas.

Issue associated with fertilizer sector

• Unsustainable fertilizer subsidy bill: From last 20 years, taxpayers bear 78% of the cost of urea and farmers pay only 22%. 
  • In the last 20 years, the price of urea has increased to ?5.36 per kg in 2021 from ?4.60 in 2001.
  • In the same period, the Minimum Support Price of paddy increased by 280% and that of wheat by 230%. 
  • In 2001, 37.7 kg of wheat was required to buy one bag of urea (50 kg), which has now reduced to 13.3 kg. 
  • At current prices, farmers pay about ?268 per bag of urea and the Government of India pays an average subsidy of about ?930 per bag. 
• Indiscriminate, inefficient and imbalanced use of N, P and K (nitrogen, phosphorus and potassium): Relative prices of various fertilizers and resulted in a big shift in the composition of fertilizers used in the country in favour of urea and thus N. 
  • The ratio of use of N:P:K increased from 5.9:2.4:1 in 1991-92 to 9.7:2.9:1 in 1993-94.
• Faulty government policy: Nutrient Based Subsidy (NBS) by government skewed towards urea (N).Only non-nitrogenous fertilizers (P and K) moved to NBS; urea was left out.
• Environmental concerns like water and air pollution due to chemical fertilizers: Leading to concern among some sections of society and they suggest the use of organic fertilizers and biofertilizers instead.
  • Fiscal challenges due to import of fertilizers: Total demand for urea and  Diammonium Phosphate (DAP) is 34-35 million tonnes (mln t) and  12 mln t whereas the domestic production is about 25 mln t and 5 mln t respect. .But, International prices of fertilizers are volatile and almost directly proportional to energy prices and cartels of major global producers have a strong influence on prices.
  • In order to minimise the impact of rise in prices on farmers, the bulk of the price rise is absorbed by the government through enhanced fertilizer subsidy.
• Inter-State disparities in fertilizer subsidy due to high variations in subsidy content, which is highly biased towards urea and thus nitrogen. As a result, the magnitude of fertilizer subsidy among the major States ranges in the ratio of 8:1.
  • In 2019-20, fertilizer use per hectare of cultivated area varied from 70 kg of NPK in Rajasthan to 250 kg in Telangana.
  • Composition of total plant nutrients in terms of the N,P,K ratio deviated considerably from the recommended or optimal NPK mix. It was 33.7:8.0:1 in Punjab and 1.3:0.7:1 in Kerala.

Way forward: 

• Self-reliant and not depend on import of fertilizers:  To escape the vagaries of high volatility in international prices. 
• In this direction, five urea plants at Gorakhpur, Sindri, Barauni, Talcher and Ramagundam are being revived in the public sector.
• Extend the NBS model to urea price rationalisation of urea compared to non-nitrogenous fertilizers and prices of crops. 
• Present system of keeping the price of urea fixed and absorbing all the price increases in subsidy needs to be replaced by distribution of price change over both price as well as subsidy based on some rational formula.
• Develop alternative sources of nutrition for plants: Like use of large biomass of crop that goes waste and enhance the value of livestock by products, develop alternative fertilizers and enrich compost with nitrogen through alternative technology.
• Government policies should be directed towards biofertilizers: As, discussions with farmers and consumers reveal a strong desire to shift towards the use of non-chemical fertilizers as well as a demand for bringing parity in prices and subsidy given to chemical fertilizers with organic and biofertilizers. 
• Improving fertilizer efficiency: Through need-based use rather than broadcasting fertilizer in the field.
• Products like Nano urea by IFFCO Such need to be promoted expeditiously after testing.

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