Reforming fertiliser subsidy

WITH PRECISION FARMING AND BALANCED NUTRIENT USE, THE SAME LAND CAN GENERATE FAR HIGHER OUTPUT

- ASHOK GULATI RITIKA JUNEJA Respectively Distinguished Professor and Research Fellow at ICRIER

PRIME MINISTER NARENDRA Modi has set a national wide-ranging reform drive in motion. From income tax, goods and services tax (GST) to labour laws, insurance, free trade agreements, and now even the employment scheme-everything is under a churn. The idea is to sustain GDP growth above 7% amid intensifying geopolitical risks, including Donald Trump's tariff pressures. Yet, one crucial sector that has largely escaped reform is agriculture. Perhaps it is still constrained by the political aftershocks of the earlier farm laws. But the exploding fertiliser subsidy, expected to touch ₹2 lakh crore against a Union Budget of ₹51 lakh crore in FY26, demands urgent attention. This is not a call to withdraw support, but to reorient it so that it gives the biggest bang for the buck.

Fertiliser subsidy is the second-largest item in the Union Budget (next only to food subsidy) and larger than the entire allocation for the ministry of agriculture and farmers' welfare (₹1.37 lakh crore in FY26). Its rapid increase reflects rising fertiliser consumption and escalating input costs, amplified by India's heavy import dependence-around 78% of natural gas going for urea production, nearly 90% for phosphatic fertilisers (raw materials or finished products), and total reliance on imports for potash. Given the volatility in energy prices and commodity markets, this makes the subsidy fiscally precarious and geopolitically vulnerable.