Fertiliser sector needs policy clarity to attract investment: FAI chairman

Sailesh Mehta urges clearer subsidy mechanism, market-based urea pricing, and Direct Benefit Transfer to resolve imbalances and revive fertiliser sector investment

The fertiliser industry needs clarity on policies related to subsidies to attract more investments into the sector, newly appointed Chairman of Fertiliser Association of India (FAI) and Chairman and Managing Director (CMD) of Deepak Fertilisers and Petrochemicals Corporation Sailesh C Mehta said on Wednesday.

 

He said for more than decade now, the P&K (phosphorus and potash) sector had been working under the Nutrient-Based Subsidy (NBS) regime in true “letter and spirit”. The Centre was even planning to bring urea under the NBS regime, he added.

 

“The core thought under NBS was fixed subsidy with no cap on retail price. This was the first step towards full decontrol. However, in the last few years, no actions have been taken to bring urea under NBS, but instead tacit controls on the retail price of P&K has crept in. Moreover, lack of clarity on the formula or basis or logic behind the subsidy support, and lack of clarity on its actual mechanism has impacted decision-taking by the Industry,” Mehta said.

   

He said in the current volatile and dynamic global pricing scenario, this lack of clarity makes it difficult for the Industry to take timely actions. 

 

“Moreover, these uncertainties preclude industry from making any long-term commitments or investment decisions that could ensure long-term improvement in supply of fertilisers,” Mehta said

 

The FAI chief said that to ensure the sector kept on attracting investments, the government needed to gradually reduce subsidies on urea and make it more market-oriented, which had not been done for more than a decade now.

 

On skewed retail pricing, Mehta said in India 1 kilogram (kg) of common salt cost around ₹27 but a kg of urea was sold at just ₹5.5/kg. “Someone should realise that after spending over ₹10,000 crore for setting up an ammonia-based urea plant, the returns are dismal,” Mehta said.

 

On the recent statements made by a senior industry official on not-so-encouraging sales of Nano fertilisers despite being launched sometime back, Mehta said that Nano as a concept was very interesting but its efficacy at the ground level would need some more time to prove itself.

 

India, in the 2025-26 (FY26) Budget, pegged fertiliser subsidy at ₹1.68 trillion, which was around 2 per cent more than the Revised Estimate (RE) of FY25. It had crossed ₹2.51 trillion in FY23 in view of the Russia-Ukraine crisis.

 

Mehta said apart from investments, the skewed subsidy regime has also created a clear imbalance in the soils in terms of NPK (nitrogen, phosphorus, and potassium) ratio.

 

Quoting a paper by noted agriculture economist Ashok Gulati, Mehta said despite spending around $22-25 billion over the last three years on fertiliser subsidies, outcomes remained suboptimal — both in terms of productivity and soil health.

 

“The imbalance in fertiliser use has also resulted in a dramatic decline in the fertiliser-to-grain response ratio, dropping from 1:10 in the 1970s to a mere 1:2.2 today,” Mehta said.

 

He said a solution to all these could be found in direct benefit transfer (DBT), which could be implemented after allowing proper grace period for transition to using digital platforms.