Mother Nature possesses bountiful natural resources. After all, it is not for nothing that our planet is today supporting a seven billion human population, besides a large number of other living beings with varying survival requirements.

Till around the end of the 19th century, agriculture, in the form it was practised, provided more or less enough food to sustain the human population of that time. This is even after factoring in mal-distribution of what was being produced and large sections of the population being deprived of food necessary for a healthy body and mind.

By early 20th century, it became evident that it would not be possible to produce enough food for a growing population by following traditional agriculture practices.

Our soils, no doubt, contain sufficient organic matter and a variety of nutrients, including bacteria, that enable the growth of plants and, in turn, yielding a particular quantum of grains and other food products.

But these natural plant nutrients and organic matter were being constantly depleted, with repeated cultivation tending to remove more of these than what was getting replenished.

That, then, imposed natural limits on increasing foodgrain yields to support a growing population. This is consistent with the simple law of conservation, which is that you cannot produce or generate something out of nothing.

Nutrients from outside

It was around this time that the idea of application of nutrients ‘from outside’ was thought of. Such ‘nutrients’ were also present in the earth’s crust, but unlike the more ubiquitous soil, not distributed evenly across the globe. These nutrients happened to be minerals that needed to be mined and further processed — and only then applied to the soil, yielding more crop quantities per acre of cultivated land.Simultaneously, crop scientists developed new seed varieties that could give much higher yield than the traditional indigenous cultivars. But that again, following the old law of conservation, required higher nutrient input application in the soil. The new dwarf crop varieties were, in fact, amenable to such higher nutrient application.

Therefore, use of ‘outside’ mineral fertilisers became part of modern agriculture capable of feeding a larger, growing human population.

In 1950-51, India produced around 50 million tonnes (mt) of foodgrains, with almost negligible application of mineral-based fertilisers, barring small amounts of phosphatic fertilisers in form of single super phosphate. But this changed with the Green Revolution and the advent of high yielding seed varieties from the mid-sixties. It led to an increase in the country’s average wheat productivity from 851 kg/hectare in 1960-61 to 1307 kg/hectare in 1970-71. More than half of this came from the simultaneous application of fertilisers.

Mother Nitrogen

Initially, it was only nitrogen (N) that was applied in large quantities because our soils were most deficient in this nutrient. But gradually, it was realised that the soil was also not getting enough of other nutrients, including phosphorous (P) and potash (K). These, too, were produced from mining and processing of naturally-occurring minerals below the earth.

But mineral-based fertilisers turned expensive after the oil crisis of 1973. The resulting adverse economics of growing foodgrains, then, forced the Government to devise policies to encourage farmers to continue — rather increase — the application of such fertilisers. It resorted to regulating the retail prices of various fertiliser products. Simultaneously, it reimbursed companies for their higher cost of production or imports, in return for selling at the prescribed retail prices to farmers.

As a result, fertiliser consumption increased from 2.57 mt of NPK nutrients in 1974-75 to 12.73 mt by 1991-92. Alongside, balanced use of these nutrients was promoted through extensive extension work. In 1991-92, the ratio of NPK application, at 5.9:2.4:1, was very close to the desired 4:2:1 level recommended by experts.

The above twins efforts, aimed both at encouraging fertiliser consumption and balanced nutrient application, bore fruit in terms of foodgrain production, which rose from 105.2 mt in 1971-72 to 168.4 mt in 1991-92.

The subsidy problem

But by this time, the subsidy involved in making available fertilisers at below cost to farmers had mounted.

The Government, in its anxiety to reduce the subsidy bill, decontrolled the prices of fertilisers containing P and K nutrients alone in 1992. It led to a sudden doubling of prices of the decontrolled fertilisers and a nose-diving of their consumption. The NPK use ratio got distorted to 9.5:3.2:1 in 1992-93.

Realising the folly of selective decontrol, the Government restored the subsidy in the form of an ad hoc concession on P&K fertilisers. But streamlining the administration of the new concession scheme took many years and it was not before 2009-10 that the NPK ratio was restored again to a more balanced 4.3:2.0:1.

With effect from April 2010, the Government introduced a nutrient-based subsidy or NBS regime, with the primary objective of balanced fertilisation, including application of micronutrients, and also unshackling the industry from stifling controls rendering investments in sector unattractive.

The new scheme provides for the announcement of a fixed subsidy for every kg of primary nutrients (N, P, K, sulphur) and micronutrients present in any fertiliser product for the whole year, while giving the industry the freedom to fix retail prices.

However, as before, the Government has implemented the scheme selectively only on non-urea fertilisers. Urea, accounting for almost 50 per cent of fertiliser application, has been left out of NBS. The above selective implementation has brought back the earlier distortions. On the one hand, production costs for P&K fertilisers have soared in the last three years due to high global prices of inputs alongside depreciation of the rupee.

Simultaneously, the reduction in the fixed subsidy on their nutrients has resulted in higher retail prices of these fertilisers, even while the government has refrained from increasing the same on urea.

The cumulative effect of this has been a deterioration of the NPK use ratio, from 4.3:2:1 in 2009-10 to 6.7:3.1:1 in 2011-12. If this state of affairs continues, there will also be deterioration of soil health, lower yields and poor economic return to farmers. The present policy of keeping urea prices artificially low, apart from harming soil health and agriculture productivity, is also causing other collateral damage.

For one, highly subsidised urea is getting diverted for non-agricultural use. Secondly, since retail price of urea in India, now at $98 per tonne, is way below the $348 in China, $344 in Pakistan and $250 in Bangladesh, is probably leading to cross-border illegal trade in urea. Such diversions are inevitable when prices of any controlled commodity are kept at same level or changed little for long periods.

To restore balanced application of nutrients, there is a need for correction in the retail prices of various fertiliser products.

Pricing policy can stimulate such correction, by fixing appropriate subsidies on the three primary nutrients — N, P and K.

It is obvious that there has to be higher subsidy support for P&K fertilisers and lower support for urea to bring about the desired corrections in retail prices and consumption of fertiliser products. Also, subsidy on a particular nutrient needs to be same across all products.

Within the suggested policy framework, the Government can keep its subsidy bill of fertilisers at manageable levels and farmers continue receiving the benefit of subsidy on this vital agricultural input. It will ultimately encourage balanced fertilisation in the interests of soil health, agricultural productivity, farmer welfare, and food security of the country.

(The author is the Director General of the Fertiliser Association of India.)

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