A Supply Shock: Lessons for India’s Agriculture Policy

(Source: The Indian Express, Editorial Page)

Also Read: The Indian Express Editorial Analysis: 19 July 2025
Also Read: The Hindu Editorial Analysis: 19 July 2025

Introduction

A robust monsoon and increased cropping area have spiked fertilizer demand in India. However, abrupt restrictions on fertilizer exports by China—a primary supplier of Di-Ammonium Phosphate (DAP) and urea—triggered shortages, rising prices, and anxious queues at supply centers. This editorial unpacks the intricacies of India’s import dependence, policy inertia, and the urgent need for reform to ensure food security and sustainable agriculture.

Causes and Consequences of the Fertilizer Supply Shock

• Monsoon-Driven Demand: Early and abundant rains in 2025 triggered an accelerated sowing season, amplifying the demand for fertilizers.

• Stock Shortfalls: Fertilizer inventories (especially DAP and urea) fell to multi-year lows as of June-end, prompting widespread farmer distress.

• Dependence on Chinese Imports: China’s export bans cut off a major source—India saw a drastic reduction in DAP and urea imports just as demand peaked.

• Ripple in Global Markets: As other fertilizer-exporting countries introduced their own controls or raised prices, India’s import bills soared.

Structural and Policy Weaknesses

• Lack of Resource Self-Sufficiency: India has limited reserves of key fertilizer inputs (e.g., rock phosphate) and relies heavily on imported natural gas for fertilizer manufacturing.

• Political Pricing and Subsidies: Fertilizer prices for Indian farmers are kept artificially low through subsidies, encouraging over-application and waste. In 2024, urea prices for Indian farmers were almost unchanged from a decade earlier.

• Inhibited Innovation: The price cap regime stifles the introduction of efficient, crop/customized fertilizers and discourages new product adoption.

Reform Opportunities and Recommendations

• Subsidy Reform: Transition to direct cash transfers and a nutrient-based subsidy system to encourage balanced, need-based usage.

• Boost Domestic Capacity: Enhance local fertilizer production, invest in technology, and diversify import partners to reduce reliance on single countries.

• Promote Efficient Usage: Train farmers on precision and appropriate fertilizer application to curb misuse and protect the environment.

• Strengthen Supply Chain Resilience: Create buffer stocks, streamline distribution, and encourage R&D on indigenous alternatives.

Key Issues and Solutions in India’s Fertilizer Supply Crisis

Conclusion

• The fertilizer supply shock highlights India’s overdependence on imports, especially from China.

• Existing subsidy and pricing policies are outdated and incentivize overuse.

• There’s an urgent need to shift to nutrient-based subsidies and boost domestic production.

• Strategic reform now can strengthen food security and make Indian agriculture more resilient.

• For UPSC aspirants, this is a key example of policy reform, self-reliance, and sustainable governance.