Pointing out that yield response to fertilizer has plateaued or declined in India, even as application rates have increased in several irrigated belts, the government has been advised to ‘modestly’ increase the retail price of urea and transfer the subsidy directly to farmers.
Urea is sold much cheaper in India compared to DAP and MOP due to government directives. The government has fixed urea’s maximum retail price (MRP) at ₹267/per bag (of 45 kg) while directing companies not to raise DAP rate beyond ₹1,350/bag and MOP above ₹1,600/bag (both of 50 kg each).
Currently, the Centre pays a subsidy of ₹43.02 per kg for nitrogen (N), ₹47.96 per kg for phosphorous (P), ₹2.38 per kg for potash (K) and ₹2.87 per kg for sulphur (S) to fertilizer companies based on actual sales and the subsidy is revised twice every year, before Rabi and Kharif seasons.
NITI Aayog Member Ramesh Chand earlier this week said that there are several challenges that need to be addressed to roll out direct transfer of fertilizer subsidy and Fertilizer Secretary Rajat Kumar Mishra had said that the first priority is distribution of exact required quantity, though pricing issue would also have to be addressed later.
Fertilizer subsidy
Chand had said that though he had been pushing for direct benefit transfer (DBT) of fertilizer subsidy from time to time, the issue is much complex and there is no one particular solution. “When I told a group of farmer leaders that DBT is implemented farmers will have to pay more than ₹2,000 to buy a bag of urea, they never demanded it after that.”
But the Survey has argued that India’s digital agriculture infrastructure makes such a reform operationally feasible.
“Aadhaar-linked fertilizer sales at the point of purchase, combined with real-time tracking through iFMS, provide a detailed map of nutrient use across districts and seasons. PM-Kisan offers a ready platform for calibrated, timely per-acre transfers. Aligning transfers with planting seasons ensures that liquidity reaches farmers before fertilizer is purchased.
“One design issue concerns tenancy as a portion of the land is cultivated by renters while transfers may accrue to owners. Over time, this is expected to adjust through the rental market, but designs can incorporate tenancy-heavy districts to refine mechanisms before a wider rollout,” it said.
Rolling out this approach across a limited number of agro-climatic regions — covering irrigated, rain-fed and mixed systems — would allow for careful calibration of crop- and zone- specific benchmarks. Data from these pilots would inform refinements to transfer levels, soil response and nutrient shifts before national expansion, it said.
Retail price
“A practical approach is to modestly increase the retail price of urea while transferring an equivalent amount directly to cultivators on a per-acre basis. Farmers receive the same overall purchasing power, but the relative price of nitrogen moves closer to its agronomic cost. This changes behaviour in a predictable way. Farmers who already apply nitrogen efficiently gain because they receive the full transfer while spending less at the counter.
“Farmers who over-apply face a clear incentive to shift towards balanced fertilization, soil testing, nano-urea, liquid fertilizers and organic amendments. Low-input farmers, particularly those growing pulses and oilseeds in rain-fed regions, experience a net income gain. The adjustment is therefore both progressive and efficiency-enhancing,” it said.
The survey has also said that the transfer must be indexed to agro-climatic zones and cropping patterns as fertilizer needs vary sharply by crop, soil and irrigation. For instance, rice–wheat belts, sugarcane tracts and other high-yield systems use more nitrogen than rain-fed coarse cereals or pulses, which is legitimate.
Artificially cheap
When nitrogen (urea has 46 per cent N) is no longer artificially cheap, farmers begin to substitute towards phosphorus, potassium and organic matter, restoring nutrient balance. It will help improve soil carbon levels and microbial activities as well as crops’ water retention capacity and heat-stress resilience.
Mentioning that successive Economic Surveys have highlighted how the ratio of nitrogen (N), phosphorus (P) and potassium (K) has drifted far from agronomic norms, it said continued divergence between N and other nutrients has now begun to undermine soil quality, crop response and environmental stability.
In 2009-10, the N:P:K ratio was 4:3.2:1, close to recommended level of 4:2:1 for most Indian soils, it deteriorated to 7:2.8:1 by 2019-20 and further worsened to 10.9:4.1:1 by 2023-24, the Survey said holding excess use of urea responsible for the imbalance.
However, Chand recently questioned the 4:2:1 ratio as ideal and sought its review as application of NPK varies according to soil health and crops taken whereas it was fixed in late 1950s.
Published on January 29, 2026
