A new fertilizer allocation plan is in the works—a hot potato or a crucial step?

The move is aimed at controlling excessive fertilizer use, aligning domestic agricultural practices with India’s export ambitions, optimising the use of soil nutrients through scientific planning, and curbing India’s rising subsidy burden, one of them said.

The plan is currently under inter-ministerial consultation, this person added.

If the government goes ahead with this plan, soil nutrients will be allocated to farmers through point-of-sale units in their villages or panchayats (village councils) based on their crops’ requirements, said the second person mentioned above. Both of them declined to be identified.

“A calibrated fertilizer usage will not only help restore soil health but also improve the quality of crops, which is critical for meeting residue and quality norms in global markets,” said Rakesh Arrawatia, professor (finance), Institute of Rural Management Anand (IRMA).

The overuse of fertilisers, especially urea, has become a dual challenge—depleting soil health, and putting a heavy burden on the government’s subsidy bill, although this has been declining gradually. 

The government’s spending on providing fertilisers at subsidised rates declined from ₹2.54 trillion in 2022-23 to ₹1.88 trillion in FY24 and ₹1.77 trillion in FY25. For FY26, India’s fertiliser subsidy has been pegged at ₹1.68 trillion.

Spokespersons of the ministries of agriculture and chemical and fertilizers did not immediately reply to Mint’s queries.

What farmers say

The government’s plan to cap the distribution of subsidised fertilizers risks becoming a politically vexed issue given the sensitivity of farmers to changes in policy, according to some experts. 

India has witnessed two high-decible farmers’ protests in recent years. The first was during the pandemic years over the government’s plan to liberalise rules governing agriculture markets and trade, and the more recent one over the government’s proposal for private-sector involvement in the purchase, processing, and marketing of crops.

“As a member of the government’s MSP committee, I have submitted my recommendations to ensure better utilisation of fertilisers,” said Pramod Kumar Choudhary, who represents the Bharatiya Kisan Sangh (BKS), a farmers’ organisation. 

MSP is the minimum support price at which the government procures crops from farmers to ensure a guaranteed income from farming. 

Also read | Privatization of fertilizer companies back on the menu, one small firm at a time

“I have proposed that instead of routing subsidies through fertiliser companies, the government should transfer the amount directly to farmers’ accounts. For example, a 45 kg bag of urea is currently priced at ₹242, whereas its actual cost is around ₹2,650. The difference— ₹2,408 —should go straight to the farmer, while fertiliser companies should be free to sell at the market price,” Choudhary said.

“This shift will have a significant impact on fertiliser usage patterns, encouraging farmers to adopt alternative soil nutrients, which in turn will support the growth of agricultural exports,” he said, adding that India has about 350 million acres of arable land.

Agreeing with Choudhary, another farmers’ leader, Rakesh Tikait, told Mint over phone that the government should invite farmer representatives for discussions and consider giving fertiliser subsidies directly to farmers based on their landholding size.

“What about those farmers who don’t use fertilisers because they practice organic farming? Their share of the subsidy is also going into the pockets of fertiliser companies. The government should seriously consider transferring the money directly into farmers’ accounts rather than allocating a quota of soil nutrients based on land size,” said Tikait, national spokesperson of Bhartiya Kisan Union (BKU), another farmers’ organisation.

A crucial step?

As India works on strategies to scale up exports in high-value segments like basmati rice, fruits, vegetables, and organic produce, quality compliance has become a key focus. 

India’s overall agricultural exports have shown an increasing trend, rising from $32.43 billion in FY23 to $33.24 billion in FY24 and $36.97 billion in FY25, indicating growing demand for Indian crops and related products. 

But rejections of Indian consignments in the European Union and other developed markets have often been traced to chemical residues and non-compliance with agro-chemical standards.

Experts say streamlining fertiliser use is a crucial precondition for building a globally competitive agri-export ecosystem.

“For Indian produce to gain wider access to premium markets, quality must begin at the soil level. Controlling fertiliser misuse is a necessary step,” said Shahid Khan, a fruit exporter who owns Royal Farms in Shahjahanpur, Uttar Pradesh.

Also read | Millions of drones to be deployed in villages to spray fertilizers

Under the government’s proposed pilot fertiliser distribution plan, a farmer with 10 acres of land cultivating three crops—pulses, wheat, and rice—would receive an allocation of soil nutrients based on the specific requirement of each crop. The distribution would be managed through point-of-sale units located in the farmer’s village or panchayat.

Digital tools such as the government’s Soil Health Card platform and Aadhaar-linked direct benefit transfers would be leveraged to implement the plan, with Maharashtra, Punjab, Tamil Nadu, and Odisha likely to be among the first to pilot the initiative, according to the two people mentioned above.