ICRIER urges caution over AgriStack-led fertiliser subsidy rationalisation

The paper says Punjab and Haryana receive a much larger volume of central government support relative to the value of what they produce than most other states

As India’s fertiliser subsidy bill balloons to ₹2.42-3.32 trillion in FY27 due to the closure of the Strait of Hormuz, up from the Budget Estimate of ₹1.70 trillion, two policy briefs by the Indian Council for Research on International Economic Relations (ICRIER), released on Friday, recommended a neutral direct cash transfer to farmers while adopting a cautious approach to using digital frameworks such as AgriStack to rationalise fertiliser usage.

 

The policy briefs also said that while digital frameworks such as AgriStack and farmer IDs could potentially provide the information architecture for such a system, several foundations would need to be established first.

  

The two papers have been written by agriculture economists Ashok Gulati, distinguished professor at ICRIER, and Ramesh Chand, former NITI Aayog member and distinguished professor at ICRIER, along with other experts and researchers, including Purvi Thangaraj, Ritika Juneja and Tanmoy Adhikari.

 

The papers said India’s fertiliser subsidy bill rose from about ₹0.14 trillion in 2000-01, equivalent to about 4.7 per cent of crop-sector gross value added (GVA), to a peak of ₹2.51 trillion in 2022-23, accounting for 8.6 per cent of crop-sector GVA.

 

That was the year global fertiliser and energy prices spiked after the war in Ukraine, before the subsidy bill eased to a range of roughly ₹1.7-1.9 trillion over the following three years.

 

The FY27 Budget allocation of ₹1.71 trillion is already under strain.

 

The Strait of Hormuz was disrupted in late February 2026, and scenario estimates suggest the fertiliser subsidy could rise to ₹2.42-3.32 trillion during 2026-27, depending on the duration and severity of the disruption.

 

The fiscal cost of the fertiliser subsidy is also unevenly distributed across states.

 

Punjab and Haryana receive by far the largest nitrogen subsidy per hectare of net sown area (NSA) — roughly ₹25,701 and ₹21,071, respectively, in the triennium ending 2024-25.

 

That is five to 10 times what Kerala, Assam or Himachal Pradesh receive, at ₹2,540, ₹4,703 and ₹4,710, respectively.

 

Measured against the value of crop output, the contrast is similarly wide.

 

Fertiliser subsidy accounted for 9.9 per cent of crop output value in Punjab and 9.2 per cent in Haryana, compared with only 1.4-1.5 per cent in Kerala and Himachal Pradesh.

 

“A gap of this size means that Punjab and Haryana receive a much larger volume of central government support relative to the value of what they produce than most other states. Because this support is tied to the use of a specific input rather than provided directly as farm income support, it cannot readily be repurposed towards other objectives, such as water conservation or crop diversification, even where a reallocation of public support might make fiscal or environmental sense,” one of the papers said.

 

On the use of a digital backbone such as AgriStack for rationalising fertiliser usage, the papers said the platform could potentially provide the information architecture for such a system, but several foundational issues would need to be addressed first.

 

First, entitlement must be based on a credible assessment of requirement. A uniform national fertiliser entitlement is unlikely to reflect India’s considerable agronomic diversity.

 

Second, the system must identify the actual cultivator. Fertiliser support should not be determined solely by land ownership where the owner and cultivator are different.

 

Third, entitlements must be dynamic and season-specific. Crop choice, cultivated area and farming conditions can change from one season to another, and the digital system should therefore be capable of updating entitlements rather than treating them as fixed annual allocations.

 

Fourth, strong safeguards are required. Data quality, consent, privacy, interoperability, grievance redressal and mechanisms to correct erroneous land or crop records would be essential.

 

“Only after these foundations are sufficiently robust should India consider whether and how a farmer-facing direct cash transfer could complement or eventually replace elements of the existing subsidy architecture,” the paper said.