Fertiliser subsidy fuels pollution and inefficiency, distorting farm output, poisoning water, and locking agriculture into a costly cycle of excess and imbalance
Chemical fertilisers, in their pure form, carry no odour. But fertilisers in India stink to high heaven, figuratively and literally. The literal stink is from contact with moisture, which causes urea and diammonium phosphate to release ammonia, the culprit behind the inspiring smell of public urinals. The figurative stink will take an entire article to describe, at which challenge, we make this present attempt.
Fertiliser subsidy is one of the largest line items in the Union Budget: Rs 1.84 trillion this year, expected to hit Rs 2 trillion in the forthcoming Budget. A trillion has 12 zeroes, making it equal to one lakh (five zeroes) crore (seven zeroes). Almost two-thirds of the subsidy goes to urea, the fertiliser that enhances the soil’s nitrogen content. Phosphatic and potassic fertilisers receive smaller amounts of subsidy. As a result, the proportions of these different fertilisers used in India depart considerably from the optimal, as farmers use more of the heavily subsidised urea, and less of the others.
How urea is wasted
In the periodic table of the elements that constitute the natural world, N stands for nitrogen, P for phosphorus, and K for potassium—“kalium” is the Latin term for potassium, harking back to its Arabic root, “al-qalyah”, meaning plant ashes, the traditional material for enriching soil with potassium. Al-qalyah is the root for the term “alkali” as well.
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The ideal proportion of the different fertilisers is N:P:K is 4:2:1. In India, the ratio has deteriorated to 10.9:4.4:1. What this means is that a whole lot of the heavily subsidised urea just goes waste, without benefitting our crops.
According to agronomist Ashok Gulati, Nutrient Use Efficiency, which measures what percentage of the applied nutrient actually makes it into the plant versus what was lost to leaching, volatilization, or soil fixation, is down to 35-40 per cent. The bulk of the fertiliser that is applied fails to get absorbed by the plants. A fifth of the subsidised urea gets diverted as well.
Environmental and productivity costs mount
The urea rejected by the plants breaks down and releases nitrous oxide into the atmosphere, to add to global warning, as nitrous oxide is a potent greenhouse gas. The unabsorbed urea that breaks down into nitrate turns the water undrinkable. It reduces the absorption of nutrients in the body, once ingested.
The imbalanced use of fertilisers results in wastage of subsidy and poisoning of the air and water. Even when some of the excess urea is absorbed by the plants, it only serves to yield additional vegetation, without a proportionate increase in grain output.
The additional yield to be derived from using fertilisers has dropped in India from 10 units of grain for every additional unit of fertiliser in the 1970s to 2.7 units of grain for every additional unit of fertiliser, says Gulati. The agricultural value added per unit cropped area in India is only 38 per cent of that in China. Imbalance in the use of fertilisers is one reason.
Food subsidy compounds fertiliser waste
But this is not the totality of the fertiliser subsidy saga. Natural gas used in the production of urea in India is heavily subsidised, up to 50 per cent, compared to the price at which gas is sold for other industrial uses. India imports liquefied natural gas at market prices, pipes it around the country after regasification, and then sells it way below cost to the fertiliser industry, whose output is then subsidised again, for it to pollute the air we breathe and the water we drink.
If that strikes you as criminal, there is yet more. There is additional subsidy, subsumed in the Food Subsidy Bill. Food subsidy is the difference between the Food Corporation of India’s costs and its revenues from selling grain, mostly to state civil supplies departments for the public distribution system, and a little bit in the open market. The principal cost is, of course, procurement of grain at the minimum support prices announced by the government, plus the cost of handling, transport, storage, spoilage and pilferage. Storage costs include the hefty interest burden on the funds borrowed to procure and store the grain, apart from the cost of godowns and grain silos.
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Procurement prices are ratcheted up year after year, to give the farmer a margin over the cost of production, and these costs are not benchmarked against efficiency norms implicit in globally traded prices. More grain is produced than is needed to feed the people. Last year, 5.2 million tonnes of rice from the FCI’s godowns was diverted for fermentation into ethanol for blending with petrol.
In fact, 56 per cent of all ethanol in India is derived from grain, rather than from sugarcane. Grain is produced using subsidised fertilisers. We let fertiliser subsidy go up into the atmosphere as global-warming-inducing nitrous oxide, and as toxic waste that leaches into aquifers. Not satisfied with such profligacy, we also burn the subsidy in internal combustion engines, which are notoriously inefficient in converting the energy produced by burning the fuel into forward motion of the vehicle.
Reforming agriculture subsidies and incentives
How can we move away from such a plainly wasteful and idiotic subsidy regime?
Give farmers income support, rather than subsidy on their inputs. Price the inputs so as to recover all costs and leave a margin for the input producer. This would incentivise competition and technology development in the production of inputs. It would also lead farmers to optimise input use.
Complex fertilisers that combine N, P and K in different mixtures ideal for different crops would come to the market—one reason for China’s greater farm productivity is the extensive use of complex fertilisers. If water and electricity used to pump water are priced properly, farmers would replace wasteful flood irrigation with controlled release of moisture that increases yield and reduces water usage and soil salinity.
Indian agriculture is terrible at growing crops in the agroclimatic zones most suited for them. We grow water-guzzling sugarcane in the arid Deccan, instead of only in the floodplains of the Ganga in Uttar Pradesh and Bihar, for example.
India relies extensively on imports for edible oils and pulses. Surely, we should turn some of the land where cereals are cultivated to oilseeds and pulses. That calls for ending and getting out of the cycle of ever-rising MSP for cereals, and giving such support to oilseeds and pulses.
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Procure for the FCI only as much grain as is required to meet the buffer-stocking norm for each season. Let FCI acquire commodity trading expertise to intervene in the futures and options markets to keep prices stable.
Give more power to farmers
Open up such markets, where they stand banned at present. Use the power of total rural electrification to encourage the emergence of a decentralised food processing industry so that farm produce does not go waste and farmers capture more of the value addition along the journey of food from farmgate to the dining table. Make extensive use of cooperatives and farmer-owned companies to this end.
Give farmers income support, to buy farm inputs at market prices and to give them the latitude to choose crops that would maximise yields and incomes. Income support does not fall foul of WTO norms, as these are not considered to be trade-distorting subsidies.
Invest in R&D for efficient conversion of underground coal into gas and to eliminate the costly import of both coal and LNG. Supplement that with R&D for technology to capture carbon dioxide from gas turbines. Deploy emerging technology to pyrolyse natural gas into hydrogen and pure carbon. Hydrogen is a clean fuel, which converts to electricity in fuel cells or produces water vapour when burnt inside a turbine or an internal combustion engine.
All this is doable. The technology exists, for the most part. What has been missing has been the needed combination of policy ambition and political courage to carry out the needed reforms. Aren’t ambition and political courage the two virtues present government sees as its USP?
(The Federal seeks to present views and opinions from all sides of the spectrum. The information, ideas or opinions in the articles are of the author and do not necessarily reflect the views of The Federal.)
