ICRIER Paper: Use West Asia Crisis to Push Fertiliser Reforms in India

Context:

A new policy paper by the Indian Council for Research on International Economic Relations (ICRIER) argues that India should use the current geopolitical disruptions in West Asia as an opportunity to reform its fertiliser subsidy and supply system.

The paper titled “De-risking Fertiliser Supplies for India Amid Rising Geopolitical Risks” highlights the country’s heavy import dependence and fiscal burden from fertiliser subsidies.

Key Concern: High Import Dependence

The report notes that 68.6% of India’s fertiliser value chain depends on imports, making the sector vulnerable to geopolitical shocks.

Break-up of dependence:

• 44.5% – Imported feedstock (mainly natural gas and raw materials)
• 24.1% – Imported finished fertilisers
• 5.8% – Domestic feedstock
• 25.6% – Domestic processing and manufacturing

This means India’s fertiliser security is highly exposed to global conflicts and supply disruptions, especially in energy-producing regions.

Major Reform Recommendations

The ICRIER paper suggests several structural reforms.

1. Direct Benefit Transfer (DBT) to Farmers

Instead of subsidising fertiliser products, the government should transfer subsidies directly to farmers.

Benefits:

• Reduces leakages (estimated around 20%)
• Promotes balanced fertiliser use
• Improves fiscal efficiency

2. Gradual Price Deregulation

The report recommends gradually deregulating fertiliser prices, especially for macronutrients.

This would:

• Allow market-based pricing
• Encourage efficient use of fertilisers
• Reduce government subsidy burden

3. Bring Urea Under Nutrient-Based Subsidy (NBS)

Currently:

• Urea is highly subsidised and price-controlled

The report proposes bringing urea under the
Nutrient Based Subsidy Scheme.

This would:

• Promote balanced nutrient usage
• Reduce excessive nitrogen consumption
• Improve soil health.

4. Use AgriStack for Fertiliser Targeting

If direct reforms are difficult initially, the paper suggests restricting fertiliser sales based on farm size and crop patterns.

This could be implemented using the government’s
AgriStack digital agriculture platform.

The restrictions could be based on:

• Farm size
• Crop type
• Recommended nutrient doses from State Agricultural Universities (SAUs)

Supply-Side Recommendations

The report also calls for reducing import risks through diversification.

Measures suggested:

• Diversify fertiliser import sources
• Encourage overseas investments in fertiliser assets
• Accelerate domestic exploration of feedstock
• Simplify regulatory frameworks to improve efficiency