Centre to leverage digital infra to optimise food, fertiliser subsidies

Government plans to use AgriStack and CBDC-based pilots to better target fertiliser and food subsidies, reduce leakages, and improve transparency in welfare delivery systems

The government has embarked on a series of interventions to use the digital architecture already in place to streamline two major subsidies — food and fertiliser — with an eye on plugging leakage and pilferage.

 

Using digital tools to speed up the delivery of public goods and cut out corruption is already a feature of several schemes. Targeting food and fertiliser subsidies is the most recent development in this area.

 

The plan is to use the digital framework of AgriStack, which organises farmer data and connects identity, land and crop information, for fertiliser subsidies, and the network of digitised ration cards for food subsidies.

 

Officials said the Centre has conducted a few pilot runs in some districts of Haryana using the AgriStack platform to better target fertiliser sales. Union fertiliser secretary Rajat Kumar Mishra, addressing a roundtable organised by the Indian Council for Research on International Economic Relations (ICRIER) a few weeks back gave the example of Haryana, where he said an AgriStack experiment to connect land, fertiliser usage and crops has shown remarkable results.

 

Saving urea

 

In less than four months, he said, 102,000 tonnes of urea and over 72,000 tonnes of DAP were saved as compared with the same period last year after pilferage was stopped.

 

Highlighting excess usage of urea, he said that a government analysis in 2024-25 showed that 65 per cent of farmers in India bought 5-7 bags of urea in a year, which he said was “reasonable”, while consumption by the remaining 35 per cent was in excess.

 

Mishra said 163 out of the 730 districts in the country have high fertiliser usage, with an average urea consumption of about 100,000 tonnes each per year. “This means that these districts consume around 2.2 million bags of urea every year, and farmers know that this is unreasonable (excessive),” he said.

 

At a recent meeting with state government representatives, Union agriculture ministry officials floated the idea of integrating the sale of urea with farmer IDs generated as part of AgriStack in a phased manner, beginning with pilot projects in select districts, a source who declined to be named said.

 

Under the first phase, pilot runs were being conducted in seven districts of Haryana where a relatively high number of farmer IDs have already been generated.

 

During this phase, farmer IDs will be used to ensure that fertilisers are sold only to the landowner, the cultivator, or a person authorised by them to make the purchase.

 

Excessive urea usage due to skewed pricing has grossly distorted India’s soil nutrient mix.

 

In the second phase, the ministry plans to expand the integration of urea sales with AgriStack to other states, sources said. This phase could also introduce a limit on fertiliser sales based on dosages recommended by the Indian Council of Agricultural Research (ICAR), taking into account factors such as crops, land size, and irrigation availability.

 

As per official data, as of December 4, 2025, around 76.7 million farmer IDs had been generated as part of the Digital Agriculture Mission. These contain their demographic profile and information on their landholding and cropping patterns. The Centre in September 2024 provided ₹2,817 crore for the Digital Mission. The target is to cover 110 million farmers by FY27.

 

Sources said Union agriculture ministry officials told state government officials during an interaction some weeks back that states should aim at saturation coverage of farmer IDs and complete geo-referencing of agricultural land to strengthen the foundational databases of AgriStack.

 

The ministry said all districts should conduct digital crop surveys by the kharif 2026 season. 

 

In their recent addresses at the Business Standard Manthan 2026 event, both finance minister Nirmala Sitharaman and agriculture minister Shivraj Singh Chouhan said AgriStack would be significant in rationalising urea sales.

 

Chouhan hinted at broad agreement on applying direct benefit transfers (DBT) to fertilisers, as well. “There should be ‘Manthan’ (reflection, brainstorming) on this. I am also asking farmers for their opinion because using technology, the fertiliser subsidy can be transferred directly to the farmer’s account… If you ask me, I would like to say that a lot of fertiliser subsidy goes here and there and it should not. The entire benefit should be given to the farmer,” Chouhan said at the event.

 

In FY26, urea consumption in India is expected to reach an all-time high of almost 40 million tonnes (mt) driven by increased demand due to higher acreage under maize and rice, as well as its rock-bottom price compared with other fertilisers.

 

Recent Budget documents show that the fertiliser subsidy allocation has risen by 11.05 per cent in the current financial year (FY26) to ₹1.86 trillion from the Budget Estimate (BE) of ₹1.67 trillion due to higher sales.

 

The current cost of production of domestically produced urea is close to Rs 32,000-35,000 per tonne while the price of imported urea is around ₹36,000 per tonne (assuming a landed price of $420 per tonne for urea).(Prices have subsequently climbed to almost $600 per tonne now due to the West Asia crisis).

 

However, the fertiliser is available to farmers at a highly subsidised retail rate of ₹5,630 per tonne plus GST, that has remained unchanged over more than a decade. “I am opening this for debate. People should suggest. Let's make a common agreement and then decide which direction to go in,” Chouhan said.

 

Food subsidies

 

The second major subsidy in which the Centre is using digital tools to check pilferage and leakages is food.

 

A few weeks ago, home minister Amit Shah launched a Central Bank Digital Currency (CBDC)-based Digital Food Currency pilot in Gujarat. Under the CBDC framework, digital coupons generated through the Reserve Bank of India will be credited directly to beneficiaries as programmable digital currency (e₹).

 

Beneficiaries can redeem their entitled quantity of foodgrains at ration shops using CBDC coupons or voucher codes.

 

Food minister Pralhad Joshi said the new system will address challenges related to biometric authentication and e-POS operational issues while ensuring secure, traceable and real-time transactions. The pilot will soon be expanded to the Union Territories of Chandigarh, Puducherry, Dadra and Nagar Haveli, and Daman and Diu.

 

As per a concept note, the pilots on e-vouchers have been proposed in collaboration with State Bank of India (SBI) and National Informatics Centre as the technical partner.

 

The concept note said that despite multiple reforms in the public distribution system, such as Aadhaar authentication, electronic Point-of-Sale (ePoS) devices, and the One Nation One Ration Card framework, operational challenges persist, with beneficiaries facing issues of under-weighing and poor-quality of grains, dealer monopolies that limit beneficiary choice, and manual reporting that allows delayed or inflated dealer claims.

 

“To address these issues, the Department of Food and Public Distribution proposes the integration of NPCl's e-RUPI platform into the PDS ecosystem, in collaboration with SBI as the Issuer Bank and NIC as the technical partner,” the note said.

 

The concept note said that for the beneficiaries, e-vouchers will ensure direct control of ration redemption, no manipulation by intermediaries and improved trust and transparency and convenience by application or SMS.

 

For the government, the voucher system ensures tamper-proof and auditable transactions, automated reconciliation and settlement, real-time visibility through dashboards and reduced leakages and grievances.

 

The system will have multiple benefits for partner banks, including strengthened presence in the government digital payments ecosystem, alignment with the Reserve Bank of India’s digital governance initiatives, enhanced partnership and visibility with the government. It can also act as a pilot for future welfare disbursement models.

 

“This collaboration aims to digitally transform the public distribution system through a secure, accountable, and beneficiary-centric model, leveraging India’s own fintech infrastructure,” the concept note said.

 

“By using digital platforms like agristack and CBDC etc, first and foremost, diversions or leakages or whatever you want to call it can be reduced or abolished. This is a net saving, “ said Dr Ashok Gulati, Distinguished Professor at ICRIER. He said that the ultimate solution nevertheless remains market dynamics based pricing.

 

“Secondly, if you are giving, let us say rice to a rice farmer and then adding on the procurement cost, the carrying cost, the distribution cost, you are adding at least 25-30 per cent on top of that. Instead give him the benefit through DBT; then you also save something because that much stock will not be needed.

 

“Thirdly, and most importantly, all these will bring some rationality into the system.”