Indian Agricultural Evolution: From Neem-Coated Urea to PM Pranam

Yuvaraj Mandal


This article sheds light on the detrimental impact of fertilisers on Indian agriculture, examining the escalating consumption and burgeoning government subsidies that strain the national exchequer. The role of the Nutrient Based Subsidy (NBS) Scheme in promoting the indiscriminate use of chemical fertilisers is explored.

To improve soil productivity and reduce the subsidy burden, the government has taken proactive measures to reform fertiliser production practices, as detailed in the article. Emphasising sustainability and environmental consciousness, the text also showcases the transformative potential of the PM Pranam scheme, which advocates for organic farming.


The extensive use of chemical fertilisers in Indian agriculture has raised significant concerns about soil fertility and long-term sustainability. While these fertilisers have increased crop yields since the green revolution, their overuse has resulted in unintended consequences for soil health, especially in states like Punjab and Haryana.

Consumption and Subsidy of Fertilisers over the years

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Note: Units are in ‘000 tonnes

The above figure clearly shows that fertiliser consumption has increased over the years, apart from the stagnant growth seen in 2012-18. This was partly due to the introduction of neem-coated urea, which made it unsuitable for diversion to non-agricultural uses. 

India primarily uses Urea, Di-ammonium Phosphate and Potash (MoP) for Nitrogen (N), Phosphorus (P) and Potassium (K) respectively. However, despite the high demand for fertilisers, India remains dependent on imports to fulfil its needs. The graph below depicts it:

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Although the Indian government has taken steps to address this shortcoming (which will be explained later), this makes India vulnerable to the international prices of fertilisers, especially in the backdrop of the Russia-Ukraine war. This has led to a surge in the subsidy which the government provides under the Nutrient Based Subsidy (NBS) Scheme. The figure below showcases this.


What is the Nutrient-Based Subsidy Scheme?

Since urea remains excluded from the NBS scheme which results in price controls, and other fertilisers are decontrolled, high prices of other fertilisers lead farmers to use more urea, exacerbating the fertiliser imbalance. The current MRP for urea compared to the prices of other fertilisers is not in line with the ideal 4:2:1 NPK use ratio generally considered suitable for Indian soils.

Changes introduced in the chemical fertiliser industry

Keeping in mind the subsidy burden, the government introduced mandatory neem coating of urea in 2015, with the expectation to yield significant savings of approximately Rs 10,000 crore by curbing its usage diversion for industrial purposes. After all, urea subsidised for farmers’ use at Rs 5,360 per tonne, will no longer be fit for diversion to industries such as paints and plywood, where industrial-grade urea was priced much higher at Rs 22,000-23,000 per tonne.

What is the One Nation One Fertiliser Scheme?

PM PRANAM: A Way Towards Organic Farming in India

In 2023, the government launched the PM PRANAM (Programme for Restoration, Awareness, Nourishment, and Amelioration of Mother Earth) Yojana which aims to encourage states and union territories to promote the balanced use of chemical fertilisers and alternative fertilisers while reducing the dependency on chemical fertilisers. The scheme will be funded through the savings of existing fertiliser subsidies run by the Department of Fertilisers.

Furthermore, the remaining 30% of the grant can be used to incentivize farmers, panchayats, farmer-producer organisations, and self-help groups actively engaged in reducing fertiliser usage and raising awareness about sustainable agricultural practices.


Although moving towards organic and natural farming is imperative towards leading a healthier lifestyle, any sudden transition can lead to a Sri-Lanka type food crisis. Hence, as per the government, the short-term goal is to eliminate the dependence on urea imports by the year 2025 and replace it with other alternative forms of urea. Lately, Rs 3,68,676 crores have been allocated for urea subsidy from 2022-23 to 2024-25. This depicts the government’s continuing support for chemical fertilisers for at least the next few years and a planned systematic shift towards organic farming. 


Yuvaraj Mandal is an intern at IMPRI. He is studying economics and finance at Ashoka University.



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