Source: IE
Why in News?
An analysis explains why India’s fertiliser industry operates under extensive state control and examines the economic, fiscal and environmental consequences of this regulatory structure.
Core Theme
India’s fertiliser sector is one of the most heavily regulated industries due to its central role in:
- Food security
- Farmer welfare
- Agricultural productivity
- Political economy of subsidies
Government control ensures affordability but creates market distortions and long-term sustainability challenges.
Nature of Government Control
1. Price Control (Especially Urea)
- Urea price is fully controlled and highly subsidised.
- Other fertilisers receive subsidy under the Nutrient-Based Subsidy (NBS) regime.
- Retail prices do not reflect actual production or import costs.
2. Subsidy-Driven Market Structure
- Government reimburses manufacturers for cost differences.
- Fertiliser demand becomes subsidy-driven rather than agronomy-driven.
3. Administrative Control of Supply
- Allocation of fertilisers across states and districts is regulated.
- Production, imports and distribution closely monitored.
- Companies cannot freely decide supply based on market demand.
4. Regulatory Oversight of Sales and Products
- Intervention even in non-subsidised fertiliser segments.
- Tight quality and distribution regulation under the Fertiliser Control Order (FCO).
