Fertiliser Subsidy Hike and Agricultural Resilience: Short-Term Shield or Structural Reform Opportunity?

Introduction

Resilience in agriculture is more than just the capacity to produce in good years; it is the capacity to withstand economic shocks, geopolitical disruptions and environmental uncertainties and not be compromised in the livelihoods of farmers. The allocation of fertiliser subsidy in India has been doubled to ₹62,370.02 crore in the current fiscal year (Rabi 2026–27) from the previous year's allocation of ₹37,952.29 crore, highlighting the increasing significance of safeguarding the agricultural production from external market fluctuations. The increased allocation has been approved by the Union Cabinet on 11 November 2026 when the prices of fertiliser in the country are rising and the global supply chain is affected by the geopolitical tension in West Asia's countries.

The measure reflects the government's effort to safeguard farmers against the rising prices of their raw materials; but it also poses a number of questions regarding fiscal sustainability, reliance on imports and long-term sustainability of the Indian agriculture model. The central issue is thus how to use this emergency financial measure to help achieve structural change in agriculture.

Insuring Farmers against price volatility in the global markets.

Fertilisers play a crucial role in India's agricultural economy as they directly affect productivity, farmers' input expenses and food security. A timely availability of low-cost fertilizers is especially crucial during the Rabi season when crops like wheat, mustard and pulses are grown.India's fertiliser market is very much linked to the commodity prices prevailing in the international markets. The rising geopolitical tensions in West Asia and problems with the shipping lines have escalated procurement costs, along with the volatility of key raw material prices like natural gas, ammonia, sulphur and phosphate. The developments highlight how vulnerable Indian farmers are when it comes to price shocks, given that they have very little influence on the international markets.

There are immediate economic advantages. This helps in mitigating the uncertainty in the expenditure on cultivation for the farmers, assists agricultural planning and helps to safeguard the farm income against international price increases. The cost of the fertiliser is also an issue that helps to keep domestic food production steady and minimizes the risk of inflation due to the cost of fertiliser.

From this point of view, subsidy acts as an economic safety-net for small and marginal farmers with limited financial resources to cope with the unexpected surge in the costs of their farm production.

It is hardly surprising that the financial cost is the issue, with the question of import dependence being posed.Whilst the expansion of fertiliser subsidies has obvious benefits, it is clear that there are significant fiscal issues. The extra demand was of about ₹24,417.73 crore compared to the previous rabi season shows the financial impact of India's dependence on the international commodity market.

The Union Budget 2026-27 had reckoned the total fertiliser subsidy expenditure at around ₹1.71 lakh crore. The new requirement of the Rabi season, however, adds to the burden of government spending, especially when added to the spending needs of the Kharif season.A key issue is whether the regular hikes in subsidies could lead to a vicious circle in which the government simply cushions itself against price shocks from outside, rather than tackling the drivers of these price shocks. While it shields farmers from losses, it also uses precious public funds which could be better spent on agricultural research, irrigation facilities, rural development and climate-resilient agriculture.

What is more significant is that India is heavily reliant on imported fertilisers and raw materials, which shows a structural vulnerability in the supply chain for agriculture. Indian statistics show that around 100% of the muriate of potash, 86% of rock phosphate and 78% of natural gas consumed in urea sector is imported. With dependence on imported ammonia and phosphoric acid the vulnerability is increased to international disruptions.This means that with the high production of domestic fertiliser, it is not necessarily a strategic self-reliance. Domestic manufacturing is still reliant on inputs sourced from overseas.

Moving beyond subsidises: The Soil Health Imperative

The opportunity to re-think what and how fertilisers are used in the subsidy expansion is also an opportunity to re-think how they are used.

Historically, there has been an imbalance in nutrient application in Indian agriculture along with overreliance on nitrogenous fertilizers like urea. In 2023-24, India had an N:P consumption ratio of ~10.9:4.4:1, which is significantly different from the recommended ratio of 4:2:1, according to PRS Legislative Research.These imbalances may lead to soil degradation, micronutrient deficiencies, lower nutrient-use efficiency and lower soil fertility. Overuse of chemical fertiliser can also lead to groundwater pollution as well as to emissions of greenhouse gasses.

A link between financial support and better nutrient management is thus required by the government.

Some of the ongoing efforts like Soil Health Card Scheme and PM-PRANAM can be a stepping stone towards this. Soil Health Cards provide information on soil nutrient composition and fertiliser application to the farmers and the PM-PRANAM encourages states to encourage balanced use of fertilisers. But they are only effective if they are implemented, accessible and the farmer is aware of them. The higher level of allocation of the subsidy can be supported by additional investment in soil-testing laboratories, agricultural extension and demonstration at the village level to show balanced nutrient application.

In addition, precision agriculture, nano-fertilisers, biofertilisers and organic alternatives can enhance the absorption of nutrients, and decrease the over-dosage of chemicals. The adoption of integrated nutrient management (IWM), i.e., use of chemical fertilizers with organic manure, compost and recycling of crop residue would also help in restoring soil health.The goal should be to change the agricultural policy from shifting the focus from fertiliser use to the efficient use of nutrients.

To reinforce the domestic production and strategic autonomy.

The sustainability of agriculture is also necessary for long-term agricultural resilience which includes mitigating the vulnerability of Indian agriculture to external shocks in the supply chain.

The government needs to use the higher spending on the subsidy as an opportunity to build up domestic manufacturing capacity. This calls for raising investment in indigenous fertilisers technologies, modernisation of existing plants and growth of indigenous production of phosphatic and potassic fertilizers.

PLI and tax incentives and concessional financing may be provided to the private sector to promote fertiliser production and R&D. Special focus needs to be placed on the development of alternatives to imported raw materials, and on energy efficiency and speeding up the use of green ammonia via renewable hydrogen.

Strategic partnerships with resource-rich countries also offer the possibility of diversifying procurement sources, and decrease dependency on geographically concentrated supply chains. International partnerships must be supplemented, however, and not replaced by domestic capacity development.

Also, agricultural waste, bio-based inputs and recycled nutrients are potential to develop more sustainable alternatives to fertiliser. These investments could also help to decrease import reliance, create jobs in rural areas, and support a circular agriculture economy.Importantly, domestic production incentives should be tied to measurable outcomes, such as improved production efficiency, cost and environmental sustainability, and a reduced reliance on imported feedstocks.

The conclusion discusses the implications for short-term protection but also for structural transformation.

India's Rabi fertiliser subsidy rose by 64.3% is a significant measure to shield farmers from the global economic uncertainty. It confirms the Government's duty to keep agri-inputs at prices not beyond the reach of farmers and to ensure food security in the country in the event of international crises.

But the efficiency of this intervention should not only be assessed in terms of the cost of fertilisers for a single harvest. The long-term success of this will hinge on its ability to support a more sustainable, self-reliant and economically viable agricultural system that is environmentally friendly.

India needs to take fertiliser subsidies out of its fiscal obligations and start considering them as tools of agricultural transformation. Some of the goals may be addressed through the integration of subsidy policy with soil health management, nutrient-use efficiency, and incentives for domestic manufacturing, and strategic diversification of imports.

Financial protection is not sufficient to enhance farmers' resilience. It calls for strengthening of the institutions, technologies and production systems which will enable farmers to withstand external shocks independently. The current expansion of subsidies should, thus, be seen not only as a short-term buffer against global price fluctuations, but as a chance to establish India's long-term food security and economic stability.