Fertilizer reform: Strike while the prices are hot

As urea and gas get dearer, relief from the fiscal cost of an outdated subsidy regime is one reason to adopt direct transfers instead. Climate and farm output benefits are another

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On 7 January, Mint made a case for reforming India's highly inefficient regime of fertilizer production, pricing and distribution, and for switching over from product subsidization to income support for farmers.

This imperative has since been sprung center-stage by a war in West Asia that has disrupted our imports of urea and its feedstock gas, both of which form large shares of domestic usage and have seen global prices flare up. The fiscal burden that this imposes on the government should be enough to trigger action. The longer we retain the status quo, the worse this war's likely impact will be through inflated import bills, which look poised to enlarge rapidly if peace proves elusive. In general, India privileges the fertilizer industry for allocations of natural gas, but right now, its allotment has been slashed by 30%, while prices have been held firm, as the Centre prioritizes piped natural gas supply to homes for cooking and the compressed kind used by vehicles as a fuel.