Yuvaraj Mandal
Abstract
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.
Introduction
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.
Excessive or improper usage of fertiliser nutrients and negligence in applying secondary and micronutrients actively contribute to the suboptimal utilisation of applied nutrients. Research indicates that in the 1960s, the application of 1 kg each of N (nitrogen), P (phosphorus), and K (potassium) resulted in a yield of 12 kg or more of cereal grains. However, in recent times, this yield has decreased to only 5 kg. This has resulted in the build-up of fertiliser nutrients in the soil and potential leakage into the environment.
Certain regions in Punjab, Haryana, and western Uttar Pradesh experience nitrate (NO3) concentrations in dug and shallow bore wells that far exceed the limits set by the World Health Organization (WHO). Chemical fertilisers are the primary contributors to the emission of nitrous oxide gas (N2O), a potent greenhouse gas and ozone-depleting substance.
Moreover, the unbalanced application of nitrogen-based fertilisers, particularly urea, has disturbed the natural nutrient ratio in the soil. Although the recommended N-P-K ratio in India is 4:2:1, in Punjab it stands imbalanced at 31.4:8:1. Even the all-India NPK use ratio worsened from 6.5:2.8:1 in 2020-21 to 7.7:3.1:1 in 2021-22. Hence, this article deals with critically analysing agriculture policies in India.
Consumption and Subsidy of Fertilisers over the years
Source: The Fertiliser Association of India (Graph made by Author)
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:
Source: World Bank
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.
Source: The Fertiliser Association of India, Tribune India, The Hindu (Graph made by Author)
What is the Nutrient-Based Subsidy Scheme?
NBS (Nutrient Based Subsidy) policy, implemented in April 2010, falls under the Department of Fertilisers, Ministry of Chemicals & Fertilisers. Under the NBS policy, farmers receive subsidised fertilisers based on their nutrient content, including N, P, K & S. Fertilisers combined with secondary and micronutrients receive additional subsidies. The government announces a fixed subsidy on P&K fertilisers annually, considering various factors such as international and domestic prices, exchange rates, and inventory levels.
Urea, the most produced, imported, consumed, and tightly regulated fertiliser in India, benefits from significant subsidies. Its consumption has risen considerably, primarily due to its Maximum Retail Price (MRP) being fixed at Rs 5,628 per tonne for the last nine years. The only price revision happened in 2015 when compulsory neem oil coating was imposed on companies, for which they can charge an extra Rs 268 per tonne from farmers (included in Rs 5,628).
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.
Furthermore, to combat high international prices, the government limited the price of DAP to Rs 27,000 per tonne by providing huge subsidies, which increased sales of both urea and DAP during 2022-23.
Hence, the Commission for Agricultural Costs and Prices (CACP) has advised the government to include urea in the NBS regime as a solution to tackle the issue of imbalanced nutrient usage.
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.
As per the ‘benchmark study on the economic impact of Neem Coated Urea on Indian agriculture’, the adoption of neem-coated urea (NCU) has had a positive impact on crop yields, net returns, and cost reduction in terms of lowering urea requirements and other pesticide expenses. Especially, the implementation of NCU has completely put an end to the diversion of urea for other purposes. The government also recently launched sulphur-coated urea to address the deficiency of sulphur in the soil.
Furthermore, the government changed the retail unit of urea from a 50 kg bag to a 45 kg bag to decrease the demand for urea. This resulted in a reduction of urea consumption per hectare by 8%. Without this initiative, urea consumption would have risen by 19% from 2018-19 to 2020-21, instead of the observed 11% increase, as stated in the report. This 11% increase can be attributed to the expansion in the gross cropped area across the country, particularly for crops like paddy and wheat.
Lately, the government has come up with a new product known as nano urea. According to a parliamentary panel, if nano urea replaces approximately 25-50% of conventional urea, it presents an opportunity for the government to save roughly $3 billion in annual subsidy expenditure. A mere 500 ml bottle of nano urea can replace one 45-kilogram bag of conventional urea, offering cost-effective and convenient benefits. Unlike conventional urea, which is only effective in delivering 30-50% of nitrogen to plants, nano urea liquid has been claimed to be over 80% effective.
The reasoning behind this claim is that the nano urea liquid particles are incredibly small, measuring just 30 nanometers. In comparison, conventional granular urea has approximately 10,000 times less surface area to volume size. The size and surface properties of nano urea liquid enable it to be absorbed more efficiently by plants when applied through foliar spraying on their leaves.
Eight Nano urea plants, with a combined production capacity of 44 Crore bottles, equivalent to 195 LMT (Lakh Metric Tonnes) of conventional urea, are scheduled to be operational by 2025-26.
Besides nano-liquid urea, farmers were also provided with micronutrients utilising new technologies like nano copper and nano zinc in 2021. Additionally, a novel nano fertiliser called nano diammonium phosphate (DAP) was launched in March 2023.
However, experts dispute the effectiveness of nano liquids. A conventionally packaged urea contains 46% nitrogen, equating to approximately 20 kg of nitrogen in a 45 kg sack. In contrast, Nano Urea, available in 500 ml bottles, contains a mere 4% nitrogen (around 20 gm). Also, the solubility of urea in water is already high, reaching its lowest concentration upon absorption. The mechanism through which nanoparticles, being even smaller in size, enhance the efficiency of nitrogen uptake remains unclear and poses a challenge to comprehending the effectiveness of Nano Urea.
What is the One Nation One Fertiliser Scheme?
The “One Nation One Fertiliser” scheme states that companies are permitted to showcase their name, brand, logo, and relevant product details on only one-third of their bags. The remaining two-thirds of the bag space must display the “Bharat” brand and the logo of the Pradhanmantri Bharatiya Jan Urvarak Pariyojana, which falls under the fertiliser subsidy scheme known as “Pradhanmantri Bhartiya Janurvarak Pariyojna” (PMBJP). This scheme was announced on August 24 2022.
Apart from providing subsidies to companies for production costs, the government also offers freight subsidies, covering the transportation expenses of ferrying products to the end-users. Thus, introducing single-brand fertilisers can curtail transport subsidies, which are estimated to exceed Rs 6,000 crore annually as the movement of fertilisers to specific areas is influenced by the demand for brand-specific products.
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.
Under this scheme, 50% of the subsidy savings will be provided as a grant to the states that can effectively cut subsidy costs. Out of the total grant allocated to the state, 70% can be utilised for creating assets related to the adoption of alternative fertilisers and establishing production units at the village, block, and district levels.
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.
Conclusion
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.
References
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Yuvaraj Mandal is an intern at IMPRI. He is studying economics and finance at Ashoka University.
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