A new Climate Trends study, The Economics of Cultivation, argues that India’s fertiliser subsidy costs the country more than it delivers once environmental and fiscal costs are counted. The authors place the blame on the price signal rather than on farmers.
A decade-old pricing rule keeps nitrogen artificially cheap, so farmers over-apply it while the state absorbs a bill that rises with global gas prices.
Tested on wheat and paddy in eight states, the “social return” fell short of the farmer’s direct financial benefit in every wheat case, by 36 to 182 per cent, and turned negative in two of five cases.
Meanwhile, grain produced per kilogram of fertiliser fell from 13.4 kg in 1970 to 2.7 kg in 2015. Soils are low in nitrogen and organic carbon despite heavy application, and groundwater in five states exceeds nitrate limits.
The Strait of Hormuz closure in February 2026 showed the exposure. Urea prices jumped 53.7 per cent in a month, gas supply to fertiliser plants was capped, and India avoided a shortage only through stockpiles and extra imports, all paid for by the exchequer. The study says the same pattern played out in 2022.
What it proposes
The authors say organic farming is not a free fix but can pay off if the transition is supported. International evidence suggests it can be 22 to 35 per cent more profitable despite yield losses, though costs start immediately while premiums arrive only after two to three years of certification.
An ICAR trial found that replacing 50 to 75 per cent of chemical inputs matched fully organic yields and earned Rs 53,200 more per hectare than chemical plots, so full conversion is not required.
Andhra Pradesh’s gradual programme worked, while Sikkim’s under-resourced shift and Sri Lanka’s abrupt 2021 ban show the risks of poor management.
The paper recommends four policy changes: subsidising urea per nutrient rather than per bag, linking Soil Health Card advice to part of the subsidy, fixing the PM-PRANAM baseline to a set year, and placing fertiliser pricing and soil health under one agency.
Study leaders stress that the shift should be gradual, backed by training, inputs and market access, and that building political acceptance may prove as hard as the economics.
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