Apart from the fact that the fertiliser subsidy has crossed R1 lakh crore and, like other subsidies, is mostly used by the rich, there is another serious concern—over-use of ultra-subsidised urea has hurt the health of the soil. A new ICRIER study by Ashok Gulati and Pritha Banerjee points out that the compounded annual growth rate of foodgrain production for the 1960s, 1970s and 1980s were 2.2%, 2.8%, and 3.1%, but it dropped to 1.9% and 1.1% for 1990s and 2000s, respectively—and the main reason for this is likely the imbalanced use of nutrients. Thanks to the fertiliser policy which has kept urea (N) prices controlled—while decontrolling the phosphate (P) and potassium (K)—India uses 9.9 units of N versus 3.3 of P and 1 of K compared to the ideal level of 4:2:1. And that is at the national level. In major foodgrain-producing states of Haryana and Punjab, it is 61.4:18.7:1and 61.7:19.2:1 respectively. After the introduction of the nutrient-based subsidy (NBS) regime for P and K fertilisers in 2010, the price of the phosphate fertiliser DAP increased by over 153% in FY14, and that of the potassic fertiliser MOP by 255%, whereas urea price remained at the same level—this also results in smuggling of urea to neighbouring countries and in a lack of investment in the domestic fertiliser sector.
Gulati and Banerjee have suggested shifting to direct cash transfers to farmers—they argue that giving farmers Rs 6,000-7,500 per hectare—will take care of the imbalance in the fertiliser usage over a period of time if it is supported by freeing up of urea imports. If the soil health card scheme of prime minister Narendra Modi is linked to the cash transfer of fertiliser subsidy through the Jan Dhan platform, the chances of the scheme getting a quick all-India footprint will grow manifold. The government would also do well to encourage Indian firms to invest in the production of nitrogenous fertilisers in Gulf nations where gas prices are substantially lower at less than $3 per mmBtu as compared to the Indian pooled price of $10.5 per mmBtu—cheaper fertiliser could then be imported from the Gulf region.