A new study has recommended direct cash transfer of amounts matching the current fertiliser subsidy levels to farmers’ bank accounts with seasonal adjustments.
Such a policy will help address the persisting imbalance in use of fertilisers due to a skewed subsidy regime, and put a lid on the steady growth in the government’s subsidy expenditure, according to the study titled ‘healing soils in India’ by ICRIER.
It suggested deregulating prices which would reduce the over attractiveness of urea due to its relatively low price and curb diversion of subsidized urea to non-agricultural uses or across borders, freeing up government savings.
Holistic Nutrient Use
“This will allow farmers to choose balanced fertilisers while enabling them to apply phosphatic (P) and potassic (K) primary nutrients in high demand crops, micronutrients, biofertilizers, and soil-specific formulations, reducing dependency on urea (nitrogen) and improving a holistic nutrient use,” the study stated.
However, it acknowledged that a key challenge in operationalising Direct Benefit Transfer (DBT) would be accurately identifying tenant farmers, many of whom are not captured in formal land records. According to estimates over 40% of around 140 million farmers carry out tenancy farming.
While stating that existing fertilizer subsidy policy distorts markets as well as soil, the study has noted “rationalising the subsidy by lowering support for N (urea) while increasing it for P and K, without increasing the overall subsidy burden would help restore correct price signals.”
At present, urea, is provided to the farmers through 3 lakh retail outlets of the companies at a notified maximum retail price of Rs 242 a 45 kg bag since March 2018, while the subsidy incurred by the government is around 85-90%. Similarly, retail prices of phosphatic and potassic (P&K) fertilisers, including Di-ammonium Phosphate (DAP) were ‘decontrolled’ in 2010 with the introduction of a ‘fixed-subsidy’ regime as part of nutrient based subsidy (NBS) mechanism.
Rising Fiscal Burden
The government fertiliser subsidy is projected at Rs 1.95 lakh crore in FY26, on higher demand for the soil nutrients. In 2024-25, the government had provided subsidies for soil nutrients at Rs 1.91 lakh crore (Rs 1.18 lakh crore for urea and Rs 49,000 crore for NBS).
Data-Driven Beneficiary IdentiFor identifying genuine beneficiaries under the DBT, the study has suggested using multiple agricultural data sources—such as official land records, PM-KISAN beneficiary lists, fertiliser sales data, crop sowing information, satellite imagery, and government procurement records—to build a more complete picture of actual land use and tenancy.
Meanwhile, the fertilizer ministry is aiming to curb excessive use of urea through mapping of land holdings with crops grown by farmers using agriculture ministry’s Agristack, under the digital agriculture mission to create a digital foundation for farmers, including a unique farmer ID which is linked to Aadhaar, verified land records, and crop data.
Savings on account of rational use of fertilizers could then support sustainable practices like fertigation through drip irrigation, organic manuring and rewarding systems for lowered carbon footprint in agricultural systems, it stated.
Ramesh Chand, member, Niti Aayog has stated that there is a need to relook at the ideal NPK ratio, which is 4:2:1, as crop yields have grown manifold since the time these ratios were fixed.