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FERTILIZER SECTOR: CHALLENGES AND WAY FORWARD

India's fertilizer sector faces challenges like heavy subsidy burden, high import dependency, and soil imbalance. Overuse of urea and skewed policies have degraded soil health and caused environmental damage. Initiatives like PM-PRANAM and 'One Nation, One Fertilizer' aim to reduce chemical fertilizer consumption. Future solutions include rationalizing subsidies, increasing domestic production of alternatives, and adopting sustainable practices.

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Picture Courtesy:  TOPRAQ 

Context

Prime Minister stressed the need for India to achieve self-reliance in the fertilizer sector, urging citizens to unite, boost domestic production, innovate, and use fertilizers judiciously to reduce import dependence and protect soil health. 

What are Fertilizers?

Fertilizers are concentrated nutrient sources, both mineral and organic. They replenish the soil with primary macronutrients—Nitrogen (N), Phosphorus (P), and Potassium (K)—crucial for crop growth, quality, and yield.

Different Types of Fertilizers

Organic fertilizers: Derive from natural sources like compost, animal manure, bone meal, and plant residues.  

Inorganic fertilizers (mineral or synthetic): Commercially produced chemical compounds. Examples include urea, ammonium nitrate, and superphosphate. 

Biofertilizers: Contain living microorganisms that enhance nutrient availability through natural processes like nitrogen fixation and phosphorus solubilization. For e.g. Rhizobium forms symbiotic relationships with leguminous plants, fixing atmospheric nitrogen for plant use.

Nanofertilizers: Leverage nanotechnology to enhance nutrient delivery and uptake. Particles at the nanometer scale improve absorption and reduce the overall quantity of fertilizer required, lowering environmental impact. 

Nutrient Solutions: Specifically formulated liquid fertilizers provide essential nutrients directly to plants, used in hydroponic systems.  

Fertilizer Sector in India

Green Revolution Era (1960s - 1990s): Introduction of High-Yielding Variety (HYV) seeds during the Green Revolution created an demand for chemical fertilizers.

  • Government established large public-sector manufacturing plants and implemented the Retention Price Scheme (RPS) to provide farmers with subsidized fertilizers.
  • Rapid increase in domestic production and consumption, making fertilizers a central component of agricultural strategy.

Era of Reforms and Imbalance (1991 - 2010s): In 1991, the government decontrolled the pricing of Phosphatic (P) and Potassic (K) fertilizers, led to a sharp rise in their prices, while urea remained heavily subsidized.

  • The policy pushed farmers to overuse urea, leading to nutrient imbalance in the soil. 

Self-Reliance and Sustainability (2015 - Present): India is the second-largest user and the third-largest producer of fertilizers globally. India has achieved near self-sufficiency in Fertilizers:

Government Initiatives to reform Fertilizer sector

Fixed Pricing for Urea: Urea, the most used fertilizer, is sold at a statutorily fixed price of ₹242 for a 45 kg bag. The actual cost to produce or import this bag can be as high as ₹2,700, with the government subsidy covering over 90% of the price.

Nutrient Based Subsidy (NBS): Introduced in 2010, for phosphatic and potassic (P&K) fertilizers. Under this scheme, a fixed subsidy is provided for subsidized P and K Fertilizers.

  • The subsidy rates are decided on an annual or bi-annual basis. For the 2025 Kharif season, a ₹37,216.15 crore subsidy was allocated.  

Plant Revival Mission: Government initiated the revival of five major closed urea plants (in Gorakhpur, Sindri, Barauni, Ramagundam, and Talcher). As of 2025, these plants are operational or nearing completion, adding over 6 million tonnes of annual capacity, making India self-sufficient in urea production by the end of 2025.

Nano Fertilizer Revolution: Government increasing production of Nano Urea and Nano DAP, they deliver nutrients with over 80% efficiency, and reducing the volume of fertilizer required. This cuts logistics costs, prevents soil contamination, and enhances crop uptake.

Neem Coated Urea: Government mandated 100% neem coating on all subsidized agricultural-grade urea in 2015. Neem coating slows nitrogen release, improving nutrient efficiency, reducing nitrogen loss, decreasing diversion for non-agricultural uses, and improving soil health.

PM-PRANAM Scheme: Approved in 2023, the PM Programme for Restoration, Awareness Generation, Nourishment, and Amelioration of Mother-Earth (PM-PRANAM) provide financial incentives for states to reduce chemical fertilizer use by linking grants to subsidy savings.   

Soil Health Cards: Launched in 2015, provides farmers with a detailed "report card" on their soil's nutrient status and customized recommendations for fertilizer use and soil amendments.  

  • This promotes a shift from blanket application to science-based, precise farming, helping farmers optimize input costs and improve soil fertility.

Pradhan Mantri Kisan Samridhi Kendras (PMKSKs): Over 75,000 fertilizer retail shops are converted into one-stop centers. These PMKSKs sell 'Bharat' brand fertilizers, offer soil testing, farm equipment rentals, and advisory services, acting as a direct link between policy and the farmer.

Namo Drone Didi Programme: Empowering 15,000 women's Self-Help Groups with agricultural drones, provide on-demand services for spraying liquid nano fertilizers and pesticides, bringing high-tech, precision application to the village level.

Technological and Digital Interventions

  • iFMS (Integrated Fertilizer Management System) system tracks the entire Fertilizer supply—from production to retailer.
  • Mobile Fertilizer Management System (mFMS), a digital platform improves Fertilizer distribution by offering online services such as dealer registration, real-time stock tracking, and access to MIS (Management Information System) and DBT (Direct benefit Transfer) reports.

Strategic Sourcing & Fertilizer Diplomacy

  • Long-Term Supply Deals: In July 2025, India locked in a five-year agreement with Saudi Arabia's Maaden to secure 3.1 million metric tonnes of DAP annually.
  • Investing Abroad: India is exploring joint ventures and investment opportunities overseas. A proposal by a public sector unit to set up a phosphate fertilizer plant in Sri Lanka is an example of securing raw material sources at their origin.

What are the Challenges in the Fertilizer Sector?

High Import Dependence: India depends heavily on imports, particularly for potash (100%), DAP (60%), exposes to extreme price volatility and supply chain shocks.

Global Price Volatility: Geopolitical conflicts, such as the Ukraine-Russia and Gaza wars, disrupt global fertilizer and raw material markets, increased import costs and pressure on the government's subsidy budget.

Heavy Subsidy Burden: Government's fertilizer subsidy budget for 2025-26 is projected at around Rs 1.67-1.7 lakh crore, limiting developmental spending.

Nutrient Imbalance: Over-reliance on nitrogen fertilizers, particularly urea, skews the NPK ratio in soils. The current NPK ratio of 7.7:3.1:1 deviates from the recommended 4:2:1, impacting soil health and reducing agricultural productivity.

  • In Punjab, nitrogen use is 61% higher than recommended, but under uses potash by 89% and phosphate by 8%.

Environmental Degradation: Fertilizer runoff contaminates groundwater with nitrates, posing public health risks. It releases nitrous oxide (Nâ‚‚O), a greenhouse gas 300 times more potent than COâ‚‚, and creates "dead zones" in rivers and lakes.

  • The 2024 Annual Groundwater Quality Report found that over 20% of samples from 440 districts were contaminated with nitrates.

Infrastructure Bottlenecks: Inefficient infrastructure, including insufficient storage facilities and inadequate transportation networks, leads to delays and distribution issues, especially during critical planting seasons.  

Supply Chain Leakage & Diversion: Inefficient logistics inflate costs. The huge price gap between subsidized and industrial urea fuels a black market, leading to the illegal diversion of subsidized fertilizers for industrial use.

Raw Material Security: India lacks sufficient domestic reserves of key raw materials like rock phosphate and natural gas, crucial inputs for fertilizer production, limits self-sufficiency in fertilizer manufacturing.

Technological Upgradation: Many fertilizer production units utilize older technologies, which impact production efficiency and competitiveness.   

Farmer Awareness and Adoption: Many farmers lack sufficient knowledge of balanced fertilizer application and sustainable practices. Adoption rates for alternatives like bio-fertilizers and nano-fertilizers remain low due to limited awareness, distribution, and training.

Climate Change Pressure: The sector faces a dual climate challenge.

  • Nitrogen fertilizer production is energy-intensive with a large carbon footprint.  
  • Unpredictable weather patterns like droughts and intense rainfall reduce the efficiency of fertilizer uptake by crops, also result to economic losses and increased environmental pollution.

Way Forward to reform Fertilizer Sector

Comprehensive subsidy reform: Phase out urea's fixed pricing, integrating it into the Nutrient Based Subsidy (NBS) scheme, to balances nutrient use and reduces distortions created by current pricing.  

  • Shift to a full Direct Cash Transfer (DCT) system, paying subsidies directly to farmers' bank accounts, to empowers farmers with choice and promotes need-based application.  

Investing in green technology: Decarbonize the fertilizer industry by focusing on Green Ammonia production using renewable energy, to reduces the sector's carbon footprint.

Diversifying raw material sourcing: Diversify supply chains by developing long-term diplomatic and commercial agreements with resource-rich nations. This includes joint ventures in mining and production of critical materials like rock phosphate and potash.

Building a bio-fertilizer ecosystem: Scale up initiatives like Paramparagat Krishi Vikas Yojana (PKVY), investing in R&D, quality control, to create a robust market for bio-fertilizers, organic manure, and soil health amendments. 

  • Promote Integrated Nutrient Management (INM) to improve soil health and reducing reliance on synthetic inputs.
  • Offer Market Development Assistance to promote organic fertilizers produced under the GOBARdhan initiative.

Embracing agri-tech for precision farming: Promote widespread adoption of precision agriculture tools like drone-based spraying for nutrient application. Drones offer faster application (5-30 times faster) and reduce input costs (20-35%). 

  • Utilize IoT sensors for real-time soil moisture monitoring and AI-powered advisory services to optimize fertilizer use and reducing wastage.

Strengthening research and development (R&D) and innovation: Establish Centre of Excellence on Fertilizers (CoEF) in a public-private-producer partnership model (4P) to encourage innovation in fertilizer technologies and skill development.

  • Encourage partnerships with global fertilizer producers and research institutions to integrate advanced technology and best practices. 

Revitalizing the domestic industry: Provide incentives and policy reforms to attract public, cooperative, and private participation in fertilizer production, including subsidies, tax relief, and funding support. 

Farmer education and awareness: Utilize digital platforms/apps to spread information and advisories in local languages about balanced fertilizer use, sustainable practices, soil health management, and the benefits of organic and bio-fertilizers.

Climate-resilient agriculture: Develop and promote climate-smart fertilizers and practices that enhance crop resilience to extreme weather and improve soil carbon sequestration.

Conclusion

The fertilizer sector, vital for food security, faces challenges from import dependence, subsidy burdens, environmental impact and farmer awareness, necessitating reforms like phased urea decontrol, green technology adoption, diversified sourcing, and promoting sustainable practices to ensure a resilient and self-reliant agricultural future. 

Source: PIB

PRACTICE QUESTION

Q. Government initiatives like the 'One Nation, One Fertilizer' scheme aim to streamline the fertilizer market, however they do not address the root cause of the problem. Critically analyze. 250 words

Frequently Asked Questions (FAQs)

The PM-PRANAM scheme, launched in June 2023, incentivizes states to reduce chemical fertilizer use by offering grants based on subsidy savings, promoting sustainable agriculture, and improving soil health.

A Soil Health Card is a printed report given to farmers for each of their land holdings. It shows the condition of the soil by testing 12 key parameters, namely Nitrogen, Phosphorus, Potassium, pH (Acidic or Basic), EC (Electrical Conductivity), Organic Carbon, Sulphur, Zinc, Boron, Iron, Manganese and Copper.

The Nutrient Based Subsidy (NBS) scheme provides a fixed subsidy on Phosphatic & Potassic (P&K) fertilizers (excluding urea) based on their nutrient content, allowing companies to set market prices within reasonable limits monitored by the government.

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