India's fertiliser subsidy needs reform beyond digital verification

In a year when the subsidy bill is expected to increase, the 37.56 per cent reported decline in fertiliser sales in select border districts during the 2026 kharif season has come as a relief, following the introduction of  digital verification of purchases. The decline was registered after linking purchases to farmer IDs, land records, and crop requirements through AgriStack and other digital platforms. The diversion of subsidised urea for industrial use and across borders has been a long-standing concern. The decline in offtake offers a fresh indication of the potential scale of leakage. The price differential is substantial: A 45-kg bag of urea is available to Indian farmers for about ₹265, against an estimated global landed price of ₹1,674 (September). Predictably, the fiscal implications are also significant. Allocation for fertiliser subsidies for 2026-27 stands at about ₹1.71 trillion, but expenditure could be substantially higher this year due to higher international prices owing to the West Asia crisis. Even for 2025-26, expenditure is estimated to have reached ₹2.11 trillion, around 26 per cent above the Budget Estimate of ₹1.68 trillion and 13.4 per cent higher than the Revised Estimate of ₹1.86 trillion.

 

Against this backdrop, the Framework for Fertiliser Sales (FFS) is a welcome intervention by the Union government. It links the farmer’s digital identity and verified land records with crop requirements before a purchase is completed. Combined with the existing Integrated Fertiliser Management System, the framework can help identify unusual purchase patterns, monitor district-level consumption, and rationalise subsidy distribution. The decline in fertiliser sales in districts covered under the pilot also suggests that the potential benefits extend beyond border areas. However, changes in cropping patterns and lower rain this year also need to be accounted for in the decline in fertiliser sales.

 

Equally important is ensuring that digital verification does not exclude legitimate cultivators. Tenant farmers, sharecroppers and those cultivating land with incomplete or disputed records may find it difficult to establish their eligibility. Since land ownership and cultivation are not always aligned, linking access too closely to land records may risk making the system less inclusive. The objective should be to improve targeting without making access to an essential agricultural input conditional on the perfection of land records.

 

More fundamentally, better monitoring alone cannot correct the distortions embedded in India’s fertiliser policy. Urea, the major source of nitrogen (N) remains heavily subsidised, while phosphatic (P) and potassic (K) fertilisers are relatively expensive. This encourages excessive nitrogen application at the expense of other essential nutrients. India’s N:P:K consumption ratio stood at 9.3:3.5:1 in 2024-25 against the commonly cited agronomic benchmark of 4:2:1. The resulting imbalance has implications for soil health, nutrient efficiency, and overall agricultural productivity. The government should also use digital infrastructure not merely to track fertiliser transactions but to move towards a more rational subsidy regime. Gradual price rationalisation, better-designed direct benefit transfers, and stronger incentives for balanced nutrient application can reduce both diversion and excessive fertiliser consumption. Soil-health cards and crop-specific fertiliser recommendations can inform these changes. Potential savings on fertiliser subsidies will enable the government to spend more on growth-augmenting asset creation.