Fertiliser Ministry Seeks Rs 2.81 Lakh Crore Additional Funds for FY26 Subsidies

The Rs 2.81 lakh crore represents the additional funds the Fertiliser Ministry is seeking for the fiscal year 2025-26 (FY26) to cover higher-than-anticipated fertiliser subsidies. The initial budget estimate for fertiliser subsidies for FY26 was Rs 1.75 lakh crore. Therefore, with this additional request, the total projected fertiliser subsidy bill for FY26 would amount to approximately Rs 4.56 lakh crore (Rs 1.75 lakh crore + Rs 2.81 lakh crore).

The primary reason for seeking such a large additional sum is the higher-than-anticipated fertiliser subsidies, driven by several factors. Globally, fertiliser prices have been volatile due to geopolitical events, supply chain disruptions, and increased energy costs. India, being a significant importer of fertilisers, is directly impacted by these international price fluctuations, leading to a higher import bill and consequently a larger subsidy burden. While schemes like PM-PRANAM aim to promote balanced use and alternative fertilisers to reduce the long-term burden, their impact on immediate, short-term price volatility and import costs is limited.

These measures collectively ensure food security and farmer welfare through multiple channels.

• •Fertiliser Subsidies: By making essential nutrients like Urea, DAP, and MOP available at affordable prices, subsidies reduce farmers' input costs, encouraging optimal fertiliser use, which in turn boosts agricultural productivity and ensures a stable food supply.
• •Neem Coated Urea: This initiative improves nutrient use efficiency by slowing down the nitrification process, making nitrogen available to plants for a longer duration. It also prevents the diversion of urea for non-agricultural uses, ensuring that the subsidised fertiliser reaches genuine farmers and is utilized effectively for crop growth.
• •PM-PRANAM Scheme: This scheme promotes the balanced use of fertilisers and encourages the use of alternative fertilisers. By reducing over-reliance on chemical fertilisers and promoting sustainable practices, it aims to improve soil health, reduce environmental impact, and eventually lower the overall subsidy burden while maintaining agricultural output.

The increasing fertiliser subsidy burden, while crucial for agriculture, poses several significant fiscal implications for the national budget.

• •Increased Fiscal Deficit: A substantial increase in subsidies directly adds to government expenditure, potentially widening the fiscal deficit, which can lead to higher borrowing and inflation.
• •Opportunity Cost: Funds allocated to subsidies could otherwise be invested in other critical sectors like infrastructure, education, or healthcare, leading to an opportunity cost for national development.
• •Market Distortions: Heavy subsidies can distort market prices, potentially discouraging private investment in the fertiliser sector and creating inefficiencies in resource allocation.
• •Sustainability Concerns: The continuous reliance on large subsidies, especially when driven by volatile global prices, raises questions about the long-term fiscal sustainability of the policy without structural reforms.

While both initiatives aim to improve fertiliser use, their primary objectives differ. Neem Coated Urea (NCU) specifically focuses on enhancing the efficiency of urea by slowing down its dissolution, thereby making nitrogen available to crops for a longer period and preventing its diversion for industrial or other non-agricultural uses. The PM-PRANAM Scheme, on the other hand, has a broader objective: to promote the balanced use of all fertilisers and encourage the adoption of alternative fertilisers to reduce the overall chemical fertiliser consumption and the associated subsidy burden on the government.

The continuous fiscal burden of fertiliser subsidies stems from India's significant import dependence for key fertilisers and raw materials, coupled with global price volatility influenced by geopolitical events and energy costs. Balancing farmer welfare and food security with fiscal prudence remains a persistent challenge. Aspirants should watch for policy shifts towards:

• •Increased Indigenous Production: Efforts to boost domestic manufacturing of fertilisers and raw materials to reduce import reliance.
• •Promotion of Alternative Nutrients: Further initiatives to popularize bio-fertilisers, organic farming, and nutrient-based subsidy (NBS) reforms to encourage efficient and balanced nutrient use.
• •Direct Benefit Transfer (DBT): Potential reforms to move towards a more targeted subsidy mechanism, possibly through direct cash transfers to farmers, to reduce leakages and ensure efficient delivery.
• •Global Price Trends: Continued monitoring of international crude oil and natural gas prices, as they significantly impact fertiliser production costs.