A 45-kilogram bag of urea has cost an Indian farmer 242 rupees since March 2018. Diesel has gone up since then. Tractor hire has gone up. Most other farm inputs have gone up. Urea hasn’t moved, because the central government absorbs roughly 85 to 90 percent of what the bag actually costs to make and move, and has done so for years regardless of what is happening to global fertiliser prices.
That frozen number is the root of one of Indian agriculture’s stranger problems: a subsidy built to protect food security has become the main driver of a slow soil health crisis, and the government’s own economists are now arguing, in an official Economic Survey, that the fix is to stop subsidising urea so heavily rather than to subsidise it more.
A Ratio That Keeps Getting Worse
Indian agronomists have recommended applying nitrogen, phosphorus and potassium, the big three plant nutrients, in roughly a 4:2:1 ratio. Urea supplies nitrogen and is cheap. DAP and MOP supply phosphorus and potassium and are priced closer to the market, even after their own, smaller subsidy. Farmers respond to the price gap exactly as you’d expect: they pile on nitrogen and skip the rest.
That gap has widened every decade since the ratio was last close to ideal.
| Year | All-India N:P:K ratio | Recommended ratio |
|---|---|---|
| 2009-10 | 4:3.2:1 | 4:2:1 |
| 2019-20 | 7:2.8:1 | 4:2:1 |
| 2023-24 | 10.9:4.1:1 | 4:2:1 |
That last row comes from the Economic Survey 2025-26, tabled in Parliament on January 29, 2026, and it is a worse number than most policy reports were citing even a year or two earlier. The Survey’s own language is blunt: the divergence has been driven almost entirely by excessive nitrogen application, mostly through urea, which has become the dominant nutrient source across most of the country.
The on-the-ground effects are well documented by now. Nutrient use efficiency nationally sits at only 35 to 40 percent, meaning more than half of what farmers apply is wasted, lost as runoff or as nitrous oxide, a greenhouse gas roughly 273 times as potent as carbon dioxide. In Punjab, one of the two states most associated with the Green Revolution, nitrogen use runs about 61 percent above the recommended level while potash use is around 89 percent below it. Excess nitrogen that doesn’t get taken up by the crop leaches into groundwater as nitrate, and parts of Punjab, Haryana and western Uttar Pradesh now have drinking water sources that test above safe nitrate limits. Soil organic carbon across India has fallen from roughly 1 percent to about 0.3 percent over seventy years, a decline concentrated in the same high-urea states.
There’s also a leakage problem that rarely makes it into the official subsidy debate: because urea is priced so far below market value, somewhere between a fifth and a quarter of subsidised urea gets diverted to non-agricultural industrial uses or smuggled across the border, according to industry estimates, rather than reaching the crops it was paid for.
A Scheme That Scaled Faster Than Its Target Behavior
For a long time, the government’s main response was informational rather than financial: the Soil Health Card scheme, which tells farmers what their specific plot of land actually needs instead of letting habit and urea’s low price decide for them. Launched on February 19, 2015, in Suratgarh, Rajasthan, it has grown well past its original ambitions. By July 2025, its tenth anniversary year, more than 25 crore cards had been issued nationwide, tested across twelve soil parameters and renewed on a two- to three-year cycle through a network of more than 8,000 testing facilities, static labs, mobile vans and village-level units.
More recently, the government introduced a financial lever through the PM-PRANAM scheme, which incentivises states by granting them 50% of the fertilizer subsidy they save by reducing chemical fertilizer consumption. The states are then required to use 70% of this grant for bio-fertilizer infrastructure and 30% to reward farmers and local bodies adopting sustainable practices.
The trouble is that distributing a card or offering state-level grants and actually changing a habit at the farm level are two different problems. A 2025 survey of farmers in Haryana found that those who actually used their Soil Health Card recommendations cut urea use by roughly 12 percent on paddy and wheat, with no meaningful yield loss, which is exactly the result the scheme is designed to produce. But that same body of research keeps surfacing an uncomfortable number alongside it: only 57 percent of farmers whose soil had been tested were even aware the scheme existed. A card sitting unread in a drawer doesn’t change anyone’s fertiliser order. The government itself estimates that full adoption could cut the annual subsidy bill by 8,000 to 10,000 crore rupees, which is a meaningful sum, and also a clear admission of how far adoption still has to go.
Layered onto this is the Nutrient Based Subsidy scheme, in effect since April 1, 2010, which lets the government vary the subsidy on phosphatic and potassic fertilisers by nutrient content while leaving their retail prices loosely linked to the market. It is, on its own terms, a reasonably well-designed mechanism. Its defining flaw is what it left out: urea was kept outside the NBS framework specifically because of how politically sensitive any change to its price has proven to be, and that exclusion is what preserves the core distortion at the centre of the whole system.
The Fix That Finally Has an Official Seal of Approval
What makes 2026 a genuinely different moment in this story is that the Economic Survey has put a specific reform on the table, not as outside commentary but as the government’s own analysis. It proposes deregulating the retail price of urea while compensating farmers through a direct, per-acre cash transfer pegged to roughly what they currently save under the subsidy. The logic, in the Survey’s words, is that farmers receive the same overall purchasing power, but the relative price of nitrogen moves closer to its actual agronomic cost. A farmer who already applies nitrogen efficiently keeps the full transfer while spending less at the till. A farmer who over-applies faces a real incentive, for the first time in decades, to dial it back.
The Survey’s authors flag tenancy as the obvious design problem: a transfer tied to land records risks missing tenant farmers who don’t hold formal title, which in parts of India is a large share of those actually working the fields. Whether the government acts on the recommendation, and whether it can solve that tenancy gap, will determine whether this becomes the year urea policy actually changes or just the year a respected official report said it should.
For now, the price stays at 242 rupees. The 2026-27 Kharif season subsidy alone is budgeted at roughly 41,534 crore rupees for phosphatic and potassic fertilisers, on top of a urea subsidy bill running close to 1.19 lakh crore rupees a year. In total, the Union Budget 2026-27 allocated a massive 1.71 lakh crore rupees to the Department of Fertilizers, together pushing total fertiliser subsidy spending past 3 percent of the entire Union government’s expenditure. Whatever else changes, that is the bill India keeps paying to keep one number from moving.
Sources
- Economic Survey 2025-26, Ministry of Finance, Government of India (tabled in Parliament, January 29, 2026)
- Department of Fertilizers, Government of India, Annual Report and Nutrient Based Subsidy notifications, 2024-26
- Union Budget 2026-27, Ministry of Finance, Government of India
- Press Information Bureau releases on fertiliser policy, PM-PRANAM, and NBS rates, 2025-26
- PMF IAS, “Fertiliser Subsidy in India” and “Soil Degradation in India,” 2025-26
- Drishti IAS, “10th Anniversary of Soil Health Card Scheme,” 2025
- Grokipedia, “Soil Health Card Scheme,” entry citing 2025 Haryana adoption survey
- Tarun IAS, “Soil Health in India: Challenges, Fertiliser Use and Sustainable Solutions,” 2025
