First urea, now DAP: High use of subsidised fertilisers raises crop yield fears

• The Soil Health Card and mandatory neem-coating of urea were supposed to promote balanced use of fertilizers.
• However, far from weaning farmers from urea, annual consumption of this nitrogenous fertiliser has only risen from 30 to 35 million tonnes (mt) in the last five years.

Reasons for increased usage of chemical fertilizers

• Informally fixed low rates for fertilizers:
• MRPs of other fertilizers are technically decontrolled, but companies are “told” not to charge > a ceiling limit for certain chemicals.
• Underpricing of urea and DAP (recent):
• Due to subsidy-induced market distortions

What can be done instead

• Replacing subsidies on individual fertilizer products: with a flat per-hectare cash transfer, maybe twice a year.
• Provision of e-wallet account: used only for the purchase of fertilizers.
• Maintaining a stock of basic fertilizers: to ensure no untoward price rise even in a decontrol scenario.