Parliamentary Panel Calls for Upfront Fertiliser Subsidy Funding to Align with Actual Needs
A parliamentary committee has strongly recommended that the finance ministry allocate funds for fertiliser subsidies at the budget estimate (BE) stage. This move aims to ensure that financial allocations closely match the actual requirements, thereby preventing distortions in government expenditure reporting.
Addressing Subsidy Allocation and Import Dependency
The standing committee on fertiliser, in a report submitted to Parliament on Friday, highlighted that the current practice of deferring subsidy liabilities to subsequent years obscures the true picture of the government's subsidy outgo. The panel emphasized the need for realistic and upfront budgetary allocations to enhance transparency and fiscal planning.
In the fiscal year 2024, the budget estimate for fertiliser subsidy was set at Rs 1.8 lakh crore, but this was later revised upward to nearly Rs 2 lakh crore. Similarly, for FY26, the initial BE of Rs 1.8 lakh crore was adjusted to Rs 2.2 lakh crore, underscoring the gap between projected and actual needs.
Higher Costs of Imported Fertilisers Drive Recommendations
The committee pointed out a significant disparity in subsidy burdens between imported and domestically produced fertilisers. For imported urea, the subsidy per 45-kg bag is approximately Rs 2,100, compared to Rs 1,397 for domestically produced urea. This difference stems from volatile international prices, freight and insurance costs, port handling charges, and exchange rate fluctuations.
Similarly, for phosphatic and potassic fertilisers (NPK), the subsidy outgo for imported varieties exceeds that for domestically produced nutrients. In response, the panel has advocated for ramping up domestic production to reduce reliance on imports and mitigate these higher costs.
Surge in Fertiliser Imports from Key Countries
Recent data from the fertiliser department, presented in Lok Sabha on Friday, reveals a sharp increase in imports. Urea imports from Russia rose from 9.2 lakh tonnes in 2024-25 to 14 lakh tonnes by February, while imports from China surged from 1 lakh tonnes to 21.2 lakh tonnes. NPK fertiliser imports from China also escalated from less than 1 lakh tonnes in 2024-25 to 9.6 lakh tonnes in the current financial year.
This trend highlights the growing dependency on foreign sources, which the committee seeks to address through enhanced domestic manufacturing capabilities.
Strategic Implications for Agricultural Policy
The panel's recommendations are poised to influence broader agricultural and economic policies. By advocating for upfront subsidy allocations and increased domestic production, the committee aims to stabilise fertiliser costs, support farmers, and improve fiscal management. These measures could lead to more sustainable farming practices and reduced vulnerability to global market fluctuations.
As the government considers these proposals, stakeholders in the agricultural sector await potential reforms that could reshape fertiliser subsidy frameworks and bolster India's self-sufficiency in nutrient production.
