Fertiliser Policy Reform And Food Security Amid Global Conflict

Global Conflict and Food Security Link

• War-Driven Uncertainty: The article places India’s food security concerns in the wider context of growing global instability and conflict.
• Primary Policy Lesson: India’s first priority in such a world should be to ensure food security for its population.
• Fertiliser Foundation: Food security, according to the article, cannot be ensured unless India secures its fertiliser supplies.
• Natural Farming Limitation: Natural farming is described as desirable only as a niche market and not sufficient to feed India at scale.

India’s Import Dependence in Fertilisers

• High Import Dependence: India depends on imports for around 70 per cent of chemical fertilisers, including feedstocks.
• Urea Dependence: India consumes about 40 million tonnes of urea, of which around 10 million tonnes are imported.
• Domestic Production Constraint: Even domestically produced urea depends on imported gas to the extent of nearly 85 per cent.
• Strategic Vulnerability: This high import dependence makes India vulnerable to global supply disruptions and price surges.

Price Shock from Conflict

• Urea Price Rise: During the 40 days of war, global urea prices rose by nearly 65 per cent, from $482 per tonne at the end of February to $795 per tonne in the first week of April.
• LNG Price Rise: Liquefied Natural Gas prices rose from $12 per MMBtu to $19.5 per MMBtu over the same period, an increase of 63 per cent.
• Indian Impact: India is hit both by rising prices and by difficulties in receiving adequate supplies through the Strait of Hormuz.
• Subsidy Response: The Cabinet has already approved a higher subsidy on urea, suggesting that urea prices may not be raised for farmers.

Phosphatic Fertiliser Stress

• DAP Price Increase: DAP prices rose from $627 per tonne to $720 per tonne, an increase of about 15 per cent.
• Supply Difficulty: Procuring DAP, phosphate rock, and phosphoric acid from Gulf countries, especially Saudi Arabia, is becoming more difficult.
• Input Security Concern: The article highlights that fertiliser stress is not confined to urea alone but extends to phosphatic fertilisers as well.

Overuse and Diversion of Urea

• Official Acknowledgment: While a farmer may need two bags of urea, four bags are being used.
• Nature of the Problem: This indicates overuse of urea relative to phosphatic and potassic fertilisers and possible diversion for non-agricultural uses or to neighbouring countries.
• Price Distortion: Urea is sold to farmers at less than $70 per tonne while global prices are close to $795 per tonne.
• Arbitrage Incentive: The large price gap encourages inefficient use and creates major opportunities for diversion.

Proposal for Quantitative Rationing

• Supply Cut Proposal: The article suggests that the Union government could announce a 10 to 15 per cent cut in urea supplies to each state due to procurement difficulties and rising import costs.
• State-Level Allocation: States could then distribute restricted supplies on the basis of land records, crops grown, previous sales, and recommended doses from state agriculture universities.
• Legal Route: Such quantitative rationing is considered possible under the Essential Commodities Act.
• Cooperative Federal Approach: The exercise is proposed as a joint effort between the Centre and the states.
• Policy Objective: Rationing is presented as a desirable mechanism for ensuring better use of nitrogenous fertilisers.

Nutrient Use Efficiency and Environmental Costs

• Low NUE of Granular Urea: Granular urea, as currently applied in India, has a Nutrient Use Efficiency of only around 35 to 40 per cent.
• High Waste: Plants absorb no more than 40 per cent of the nitrogen applied.
• Environmental Damage: The remaining nitrogen escapes into the environment as nitrous oxide or leaches into groundwater as nitrates.
• Climate Impact: Nitrous oxide is stated to be 273 times as potent as carbon dioxide.
• Health Impact: Increased nitrate content in groundwater is linked in the article to blue baby syndrome, thyroid disorders, and diabetes.

Pricing Irrationality and Alternative Application

• Liquid Urea Disadvantage: Liquid urea is not subsidised even though it has much higher efficiency.
• Higher NUE Through Fertigation: Liquid urea used through drip irrigation has a Nutrient Use Efficiency of almost 90 per cent.
• Policy Contradiction: The article treats this as evidence of an irrational fertiliser pricing policy.
• Natural Farming Constraint: It argues that promotion of natural farming cannot scale up meaningfully unless fertiliser pricing or quantities are rationalised.

Direct Cash Transfer and Subsidy Reform

• PM-KISAN Limitation: PM-KISAN excludes tenants, leaving a vulnerable section of cultivators outside its benefits.
• Suggested Reform: The article proposes combining PM-KISAN funds and fertiliser subsidy into a direct per-acre transfer to landowners and tenants, while freeing fertiliser prices.
• Precondition: This reform would require advance preparation to identify real cultivators.
• Priority Claim: The article argues that the Prime Minister should place this issue on high priority because the gains could be substantial.

Rebalancing N, P and K Use

• Current Imbalance: The article notes that India already uses urea or nitrogen in excess relative to phosphatic and potassic fertilisers.
• DAP Composition Concern: It questions why DAP contains 18 per cent nitrogen along with 46 per cent phosphorus when the goal should be to raise phosphorus use relative to nitrogen.
• TSP Alternative: Triple Super Phosphate with 46 per cent phosphorus is proposed as a better alternative to DAP.
• Domestic Production Gap: India has no plant producing TSP, though it has more than 100 plants producing Single Super Phosphate with only 16 per cent phosphorus.
• Industrial Policy Suggestion: The article recommends incentivising TSP production domestically or in collaboration with phosphatic-rich countries.
• Fiscal Advantage: Replacing DAP with TSP could save at least 18 per cent nitrogen and reduce the subsidy burden on urea.

Core Reform Argument

• Two Reform Routes: Fertiliser policy must be reformed either through direct benefit transfer or through quantitative rationing.
• Policy Goal: The objective is to reduce misuse and diversion of fertilisers.
• Food Security Outcome: Fertiliser reform is presented as necessary for ensuring national food security in an unstable global environment.