Fertiliser Subsidy DBT Reform: Agriculture Minister Proposes Shift to Farmer-Direct Transfer
Agriculture and Farmers' Welfare Minister Shivraj Singh Chouhan publicly pitched for shifting India's annual Rs 1.7 lakh crore fertiliser subsidy from manufacturers to farmers' bank accounts via Direct Benefit Transfer (DBT).
Chouhan stated that farmers should be given the freedom to choose which fertilisers to buy and in what quantities, rather than being locked into subsidised products available at fair price shops.
Under the current system, a 50-kg bag of urea that costs Rs 2,400 to produce reaches farmers at Rs 265-270 due to the government absorbing the difference — but this subsidy flows to manufacturers, not farmers.
A government-constituted small group has been tasked with deliberating on the DBT-fertiliser modalities, signalling that a "national debate" is being initiated rather than immediate implementation.
The proposal is conceptually similar to DBT reforms already implemented in LPG (Pahal scheme) and food (PMGKAY-CBDC pilot) sectors.
India's Fertiliser Subsidy Architecture
India operates a dual-track fertiliser subsidy system: a fixed Maximum Retail Price (MRP) system for urea, and a Nutrient Based Subsidy (NBS) scheme for phosphatic and potassic (P&K) fertilisers. In both cases, subsidies currently flow to manufacturers and importers, who sell to farmers at controlled or subsidised prices; the government then reimburses the companies.
The 2018 DBT system is a halfway measure — the subsidy is verified against actual farmer purchases but still reaches the farmer's pocket as lower prices rather than cash. Chouhan's proposal would complete the DBT transition by crediting cash directly to farmers' bank accounts.
Direct Benefit Transfer (DBT): Framework and Precedents
DBT is a reform mechanism that routes government scheme benefits directly to the bank accounts of intended beneficiaries, eliminating intermediaries and reducing leakage. DBT was launched as a mission in 2013 and has since been expanded to over 300 central government schemes.
Chouhan's proposal would apply the Pahal model to fertilisers — the largest remaining farm subsidy where DBT has not been fully implemented in cash terms.
PM PRANAM and Fertiliser Reform Context
The government has also introduced PM PRANAM (Pradhan Mantri Programme for Restoration, Awareness, Nourishment and Amelioration of Mother Earth) to incentivise states to reduce chemical fertiliser use by offering savings-linked grants. This operates alongside the Soil Health Card scheme, which guides farmers on balanced fertiliser use.
Key Details
- PM PRANAM: Any state that reduces chemical fertiliser consumption below a baseline gets 50% of the subsidy savings as a grant; designed to encourage shift to organic/bio-fertilisers
- Soil Health Card: Recommends fertiliser dosage based on soil testing; over 22 crore cards distributed
- Nano Urea: Promoted by IFFCO as a liquid alternative to bag urea; claimed to reduce urea consumption significantly
- Neem-coated Urea mandate: Mandatory since 2015 to reduce diversion of urea to non-agricultural uses (neem coating makes it unsuitable for industrial processes)
Fertiliser DBT reform is part of a broader pivot — from subsidising chemical fertilisers broadly to ensuring only genuine farming beneficiaries receive support while nudging towards sustainable fertiliser practices.
- Annual fertiliser subsidy: approximately Rs 1.7-1.9 lakh crore
- Urea MRP: Rs 242/45-kg bag (vs production cost ~Rs 2,400/50 kg)
- NBS Scheme launch year: April 2010
- DBT in fertiliser sales (retailer verification): Implemented since 2018
- LPG DBT (Pahal) estimated savings: Rs 59,000+ crore via elimination of bogus connections
- Total DBT schemes (central government): 300+
- JAM Trinity components: Jan Dhan accounts, Aadhaar, Mobile
- Nodal ministry for fertiliser subsidy: Department of Fertilizers, Ministry of Chemicals and Fertilizers