Reform in fertilizer subsidy in India

India the country whose main occupation is agriculture and more than 60% population engage in this primary sector. The interest of farmers should be conserved and for that various reforms are necessary. After 68 years of independence still agriculture here is not developed. Still Indian government spends huge money on subsidies for farmers. The ideology of Intensive growth is still difficult to achieve and for that there are natural as well as manmade problems. There is need to reform the plan of subsidy and the fertilizer market should be made free as diesel. There should be less interference of government which could save $1.8 billion of government. As due to fall in prices of crude oil at international market the subsidy for fertilizers assume to get lowered to Rs. 600 billion ($9.1 billion). This savings in fertilizer will help India to reduce its fiscal deficit by 3.9%. The spending on infrastructure can be enhanced by diverting some money and development projects can be speeded up.

  Today the industry spends $375 on production of 1 metric ton urea. But considering government subsidy the farmers purchase it at $81 per MT. There is huge load on government chest. The huge import of chemical fertilizers and influence of Chinese fertilizers on Indian market can be havoc. The different fertilizers are encouraging farmers to utilize fertilizers on large scale to increase production. This has led to reduction of productivity of soil and also soil pollution. One the other hand this puts more burden on Indian government financially. The subsidized urea is also exported to neighboring nations by large a trader which earns them huge profit and on the other hand fiscal deficit of India increases.

  There are some ways to reduce this and move towards reformation in various policies. The one of freeing of fertilizer market is stated above. Another way I find is to utilize jan dhan yojna and transfer subsidy on fertilizer direct to accounts of farmers. This will avoid smuggling of urea across national border. The subsidy should be based on availability of land with farmers. This will help to regulate fertilizer flow and help farmer to optimize the use of it.