India should use the current crisis in the fertiliser sector due to the West Asia war to usher in some much-needed policy reforms such as the direct transfer of fertiliser subsidies to farmers and gradual price deregulation of macro-nutrients that will not only promote balanced fertiliser use but will also ease fiscal pressure and plug leakages, which are estimated to be around 20 per cent, a new paper titled ‘De-risking Fertiliser Supplies for India Amid Rising Geopolitical Risks’, released by the Indian Council for Research on International Economic Relations (ICRIER), showed.
The paper, which was released today, said if the above-mentioned reforms sound too bold, then in the short run an alternative would be to put quantitative restrictions on sales based on farm size, cropping patterns, and recommended nutrient doses issued by State Agricultural Universities (SAU).
“This can be done with the help of AgriStack that the government has been building for quite some time,” the paper said. The paper has been written by Ritika Juneja, Sachchida Nand, Emil Thomas Johny and Ashok Gulati.
It said if the first two options don’t seem feasible, then a third option could be to at least bring urea under the Nutrient-Based Subsidy (NBS) scheme.
The paper said that while diversification of import sources and products is essential to reduce excessive dependence on a limited set of countries, particularly in geopolitically volatile regions, complementary measures like encouraging overseas investments in fertiliser minerals and production assets, accelerating domestic exploration of fertiliser resources, and rationalising regulatory and pricing frameworks to improve efficiency in nutrient use are also essential.
“So, in brief, either carry out full-fledged price reforms ensuring in advance DBT to farmers, or put quantitative restrictions in accordance with SAU recommendations, or bring urea also under NBS as, together, these measures can enhance the resilience of India’s fertiliser supply chains and safeguard the stability of its food production system in an increasingly uncertain geopolitical environment,” the paper said.
The paper said the reforms are extremely essential as more than 68.6 per cent of India’s fertiliser value chain (44.5 per cent of feedstocks that go into making fertilisers in India and 24.1 per cent of finished products) is imported, which is getting frequently exposed to geopolitical tensions.
Furthermore, only about 5.8 per cent comes from domestic feedstocks, and around 25.6 per cent is domestic value addition (processing and manufacturing).
When all factors are combined, India’s effective self-sufficiency in this segment is only 31.4 per cent.
“Overall, all these dependencies mean that India’s fertiliser security is not insulated from external shocks and market instability,” the paper argued and underscored the need for policies that diversify import sources, develop strategic reserves, encourage overseas investments in feedstock assets, and strengthen domestic processing capabilities to buffer against global price and supply chain fluctuations.
