Fertilizer Subsidies: White Paper Calls for Exploration of Alternatives

Primus Partners, a management consulting services firm, has released a White Paper focusing on the chemicals industry and specifically addressing the fertilizer subsidy.

The paper emphasizes the importance of facilitating a transition to alternative practices in this sector. According to Primus, conducting economic studies in each crop cluster is crucial to assess the impact on farm inputs, investments, cash flow, farmer efforts, and output quality. It is essential to identify the necessary support and cost-effective initiatives for farmers to switch to alternative practices.

The White Paper also highlights the significance of developing value chains for the proposed solutions and implementing special schemes. This approach will enhance the economic viability of key participants in the industry.

Furthermore, the document sheds light on the fertilizer subsidy's substantial allocation and inherent volatility, emphasizing the urgent need for effective policies to address the challenges it presents.

The fertilizer subsidy constitutes a significant portion of the budget, with an annual allocation of approximately ₹1.75 lakh crore. This accounts for around 20 percent of all schemes in the 2023-24 budget. The allocation is divided into two major components: ₹1.31 lakh crore for urea subsidy and ₹44,000 crore for nutrient-based subsidy.

However, Primus points out that the fertilizer subsidy has been consistently unpredictable, with the revised estimate for 2022-23 exceeding the budgeted amount by more than twice.