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Fertiliser sector needs policy clarity to attract investment: FAI chairman
He said for more than a decade, the P&K (phosphorus and potash) sector was working under the Nutrient-Based Subsidy (NBS) regime in true letter and spirit. The Centre was even planning to bring urea under the NBS regime.
'The core thought under NBS was fixed subsidy with free MRP. This was the first step towards full decontrol. However, in the last few years, no actions have been taken to bring urea under NBS, but instead, tacit controls on the retail price of P&K have crept in. Moreover, lack of clarity on the formula or basis or logic behind the subsidy support and lack of clarity on its actual mechanism has impacted decision-taking by the industry,' Mehta said.
He said in the current volatile and dynamic global pricing scenario, this lack of clarity makes it difficult for the industry to take timely actions.
'Moreover, these uncertainties preclude industry from making any long-term commitments or investment decisions that could ensure long-term improvement in the supply of fertilisers,' Mehta said.
He said that to ensure the sector continues to attract investments, the government needs to gradually reduce subsidies on urea and make it more market-oriented, which has not been done for more than a decade now.
On skewed retail pricing, Mehta said in India one kilogram of common salt costs around Rs 27 but a kilogram of urea is sold at just Rs 5.5. 'Someone should realise that after spending Rs 10,000 crore-plus for setting up an ammonia-based urea plant, the returns are dismal,' Mehta said.
On the recent statements made by a senior industry official on not-so-encouraging sales of Nano fertilisers despite being launched some time back, Mehta said that Nano as a concept is very interesting, but its efficacy at the ground level would need some more time to prove itself.
India, in the FY26 Budget, pegged fertiliser subsidy at Rs 168,000 crore, which was around 2 per cent more than the Revised Estimate of FY25. It had crossed Rs 251,000 crore in FY23 in view of the Russia–Ukraine crisis.
He said apart from investments, the skewed subsidy regime has also created a clear imbalance in the soils in terms of the NPK ratio.
Quoting a paper by noted agriculture economist Ashok Gulati, Mehta said that despite spending around $22–25 billion over the last three years on fertiliser subsidies, outcomes remain suboptimal—both in terms of productivity and soil health.
'The imbalance in fertiliser use has also resulted in a dramatic decline in the fertiliser-to-grain response ratio, dropping from 1:10 in the 1970s to a mere 1:2.2 today,' Mehta said.
He said a solution to all these could be found in Direct Benefit Transfer (DBT), which could be implemented after allowing a proper grace period for transition using digital platforms.
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