India's Fertilizer Subsidy Waste: ₹2.17 Trillion and Rising

The Economic Survey for FY26 proposed a calibrated increase in the retail price of urea, paired with an equivalent per-acre direct cash transfer to farmers. The idea is to discourage excessive use without hurting farmers’ purchasing power. The Survey also suggested indexing transfers to agro-climatic zones and cropping patterns, recognizing that fertilizer needs vary by region and crop.

Urea overuse is driven by its status as the cheapest fertilizer, experts said. “Urea is an important source of nitrogen for crops, but its excessive application, disproportionate to other fertilizers, can create an imbalance in soil nutrients,” said Sachchida Nand, former additional director general at the Fertiliser Association of India and visiting professor at Icrier. Overuse reduces nutrient-use efficiency and can affect soil health and crop productivity over time, he added.

DFPCL, one of India’s largest manufacturers of bulk and specialty fertilizers, offers 48 products spanning bulk fertilizers, crop nutrient solutions, water-soluble fertilizers, bio-stimulants, and micro-nutrients. The company provides enhanced-efficiency solutions for crops including cotton, sugarcane, onion, fruits, and vegetables. “India needs to move towards smarter and more efficient fertilizer use, with greater emphasis on crop-specific nutrient management,” Mehta said.

Agriculture contributes about 16% of India’s GDP and employs 46.1% of the workforce, according to the Economic Survey. The proposed reforms would affect the entire fertilizer supply chain: conventional urea producers could face demand erosion if the price increase and cash transfer shift farmer behavior, while companies with nano and specialty products stand to gain. Iffco and DFPCL are positioning for that shift.

The proposed ₹3.54 trillion subsidy for FY27, if approved, would be the largest on record. Whether the government will follow through on the Economic Survey’s urea price reform and cash transfer mechanism remains an open question. The fertilizer ministry has yet to announce a timeline.

For now, the central problem is arithmetic: India spends heavily on fertilizer subsidies, but most of the nutrient never feeds a crop. That inefficiency has environmental and fiscal costs that the government, manufacturers, and farmers are only beginning to address.