Effectiveness of fertilizer subsidy in India

Abstract

Indian Union is primarily an Agro-based economy employing more than 50% of the population directly or indirectly. It holds the second largest agricultural land (157.35 million hectares) in the world and is the second largest producer of wheat, rice while leading the production in tea, jute, spices, pulses and cotton. The yield of crops is highly dependent on many factors like seed quality, fertilizer input, proper irrigation facilities, etc., While there are many other supply side constraints, one factor which has been a driver is the fertilizer input. In the last 60 years, we have come from a food grain production of 59.2MT in 1952 to 273.8MT in 2016. The green revolution in 1960 was a catalyst for this change. The green revolution’s use of High-Yield-Variety seeds and chemical fertilizers was a vital step in leading the Indian union towards self-sufficiency. Indian cereal output grew by about 45% between 1967-1977. The new high yield variety seeds were more responsive to the chemical fertilizers and hence more importance was afforded to usage of chemical fertilizers. However, the cost of fertilizers, especially that produced indigenously have been expensive. The central government has hence intervened and implemented subsidy policies to make sure the fertilizers reach the farmers at affordable prices to improve usage and also to encourage domestic production. The main source of nutrients to the soil are through Nitrogen, Potassium and Phosphorous commonly known as NPK. The different sources of these elements are as follows: Urea for Nitrogen, Diammonium Phosphate(DAP) for phosphorous, Muriate of Phosphate(MOP) for potassium. The optimal quantity ratio that has been advised is around 4:2:1, but this ratio may vary depending on the different types of soil.