NEW DELHI: As open-ended fertiliser subsidies have proven to be the single largest threat to India’s fiscal balance amid external headwinds, Prime Minister Narendra Modi has decided to tackle the issue head-on while ensuring that farmers aren’t deprived of the subsidised fertilisers in required quantities.
According to official sources, Modi will advise States to adopt an “Agri Stack-based” mechanism to determine farmers‘ fertiliser entitlement based on landholding and cropping patterns. Every farmer’s QR-coded quota will be linked to a designated fertiliser distributor in the area so that she gets her full entitlement, thwarting any scope for diversion of the chemicals for other end uses or to the grey market, sources told FE.
This will be a key agenda item at the conference of chief secretaries of states and Union Territories, scheduled for the last week of December. States will be urged to adopt a new Framework for Fertilizer Sale (FFS) for this purpose, the sources said.
The initiative seeks to integrate a mobile app-based fertiliser booking system with the existing Point of Sale (PoS) network under the Integrated Fertilizer Management System (iFMS), the digital backbone of fertiliser management in India.
The proposed overhaul could mark a significant shift in India’s fertiliser subsidy regime, where purchases have traditionally remained largely unrestricted, inflating subsidy bills and making the country vulnerable to global price shocks. The new system also aims to curb indiscriminate buying, prevent excessive application that damages soil health, and check the diversion of subsidised fertiliser for non-agricultural use and smuggling into neighbouring countries.
The Centre’s expenditure on fertiliser subsidies rose from Rs 1.58 lakh crore in FY22 to Rs 2.55 lakh crore in FY23, before declining to Rs 1.95 lakh crore in FY24 and Rs 1.77 lakh crore in FY25. The bill rebounded to Rs 2.17 lakh crore in FY26, marking a 22.6% year-on-year increase as global prices moved up. In the current fiscal year, 77% of the budgeted Rs 1.71 lakh crore subsidy on soil nutrients has already been spent because global urea, LNG, and DAP prices flared up since March this year, touching peak levels by May due to the West Asia crisis and resultant supply chain disruptions. The actual subsidy requirement in FY27 could exceed Rs 2.5 lakh crore unless the global prices of crude oil and its derivatives, as well as key fertiliser inputs like sulphur and ammonia, fall from the current elevated levels.
The iFMS ecosystem covers more than 14 crore Aadhaar-linked fertiliser buyers and over 2.5 lakh retailers, providing the Centre with an extensive digital network through which to strengthen oversight of fertiliser distribution.
Under the FFS framework, farmers or their authorised representatives register on a mobile application and enter details of their landholdings and crops to book fertiliser in advance. Once a booking is confirmed, a QR-code-based token is generated. When the buyer visits a retailer, the QR code is scanned through the PoS device, and the fertiliser is issued after Aadhaar-based biometric authentication.
The system is designed to align fertiliser purchases more closely with a farmer’s actual agricultural requirements, while making transactions more traceable and reducing the scope for misuse. The FFS pilots have yielded encouraging results in 222 districts across 29 states and Union Territories during the Kharif 2026 season, with fertiliser sales recording a 28% decline, sources said.
Encouraged by the outcome, the Centre plans to seek states’ cooperation in expanding the framework nationwide, potentially bringing an end to unrestricted sales of subsidised fertiliser.
Madhya Pradesh is one of the few states that have fully implemented the new framework. Madhya Pradesh’s e-Vikas initiative, which uses Agri Stack data on farmers, helped reduce fertiliser consumption during Kharif 2026 to 3.2 million tonnes (MT), from 3.6 MT a year earlier, saving Rs 764 crore in subsidies, a senior state government official said.
The Centre’s expenditure on fertiliser subsidies rose from Rs 1.58 lakh crore in FY22 to Rs 2.55 lakh crore in FY23, before declining to Rs 1.95 lakh crore in FY24 and Rs 1.77 lakh crore in FY25. The bill rebounded to Rs 2.17 lakh crore in FY26, marking a 22.6% year-on-year increase as global prices moved up.
Fertiliser sales, meanwhile, have continued to rise despite efforts to curb leakages and misuse. Sales increased from 579.67 lakh metric tonnes (LMT) in FY22 to 670.33 LMT in FY26, representing growth of 15.6% over the period.
The widening consumption base and volatility in global prices have made fertiliser subsidies a persistent challenge for the government.
Finance Minister Nirmala Sitharaman recently highlighted the challenges posed by the three Fs—fuel, fertiliser and foreign exchange—underscoring the external economic pressures facing India amid the West Asia crisis. She indicated that these challenges could persist into 2027.
Fertiliser subsidies have emerged as one of the biggest fiscal risks following the outbreak of the West Asia war, which began 27 days after the Union Budget for FY27 was presented on February 1.
India imports a substantial share of its fertiliser requirements, as well as liquefied natural gas (LNG) used in domestic urea production, leaving the country exposed to international price shocks and supply disruptions.
The government has previously succeeded in rationalising fuel subsidies by ending subsidies on petrol and diesel and restricting LPG subsidies to poorer households. Reforming fertiliser subsidies, however, has proved considerably more difficult, with earlier attempts failing to gain traction.
With the FFS framework, the Centre may have found a fix for the vexed fertiliser subsidy issue. Officials believe the latest initiative could make distribution more efficient and transparent without hurting genuine farmers.
Source: The Financial Express
