Chemical Fertilizer Subsidies: ₹Thousands Cr Annual Cost, Soil Health Declining, Study Calls for Organic Farming Support

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A study by Climate Trends, titled 'The Economics of Cultivation', has found that India's policy of keeping urea artificially cheap has led to imbalanced fertiliser use, severe soil degradation and hidden environmental costs. The total cost of dependence on chemical fertilisers far exceeds the direct subsidy bill. The study, led by Dr Palak Balyan, analysed wheat and paddy cultivation in eight states and concluded that when environmental damage and government expenditure are added, the net social benefit of wheat farming is 36% to 182% lower than the farmer's direct financial gain.

The study highlights a sharp decline in fertiliser use efficiency: in 1970, one kilogram of fertiliser produced 13.4 kilograms of grain; by 2015, that had fallen to just 2.7 kilograms. Nationwide soil tests showed that 97% of samples were deficient in nitrogen and 85% were deficient in organic carbon, even as farmers overuse nitrogenous fertilisers. Groundwater nitrate levels in Punjab, Haryana, Rajasthan, Uttar Pradesh and Tamil Nadu have already crossed the BIS drinking water limit. The study calls for the government to provide financial and institutional support to farmers during the initial years of a transition to organic and natural farming.

What is the Nutrient Based Subsidy policy?

India's fertiliser subsidy regime has long been governed by the Essential Commodities Act, 1955, under which the central government controls the price and distribution of urea. The Nutrient Based Subsidy policy was introduced in 2010 for phosphatic and potassic fertilisers, but urea was kept outside its ambit and continues to be priced under a separate regime. The Fertiliser Control Order, 1985, issued under the Essential Commodities Act, regulates the quality and composition of fertilisers sold in the country. The Bureau of Indian Standards sets the drinking water specification for nitrate, which is 45 milligrams per litre, the limit the study says has been crossed in five states. The Soil Health Card scheme was launched in 2015 to give farmers information on the nutrient status of their soil, but the study's findings suggest that soil degradation has continued despite such initiatives.

How did the subsidy policy create the problem?

India's fertiliser subsidy policy has long kept urea artificially cheap to insulate farmers from price volatility. This price distortion has encouraged farmers to overuse urea relative to other nutrients such as phosphorus and potash, leading to imbalanced fertilisation. The result is declining soil health and a falling crop response to fertilisers, as the study's data on fertiliser use efficiency shows.

What has the study found about costs and soil health?

The study quantifies the hidden costs of the current policy: when environmental damage such as soil erosion and groundwater nitrate contamination, along with government expenditure, are added, the net social benefit of wheat farming is 36% to 182% lower than the farmer's direct profit. Despite heavy nitrogen application, 97% of soil samples are nitrogen-deficient, indicating that the deficiency persists despite fertiliser application. The study also notes that groundwater nitrate levels in five states have exceeded the BIS drinking water limit.