Reforming India’s fertilizer subsidy programme: getting the design right

Price risk adds further urgency when set against India’s import dependence. In 2024-25, India produced 46.5 million tonnes of fertilizer against the demand of 64.9 million tonnes. The 18.5-million-tonne gap was met through imports, with approximately 70% of urea coming from Gulf countries. Nearly 60% of diammonium phosphate (DAP) is imported, Saudi Arabia alone accounts for over 40%, and India has no domestic potash reserves. Much of this trade moves through the Strait of Hormuz, which is now under strain. In 2022, when Russia invaded Ukraine, urea prices rose from $270 to $925 per tonne and India’s subsidy bill nearly doubled as the state absorbed the shock. Under a full DBT system, a fixed transfer meets a moving price and the burden shifts to farmers. With urea currently at $540 to $675 per tonne, that is not a theoretical concern. It is the question of this season.