Food and fertilizer subsidies should be climate-adapted and aimed better

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The allocation of about one-ninth of India’s total budget spending on food and fertilizer subsidies in 2023-24 and similar amounts in preceding years underscores a need to examine this expenditure. While acknowledging the welfare benefits of these two subsidies, we should explore if these benefits could be better targeted, and with fewer environmental consequences, without reducing the annual outlay.

Promote organic fertilizers: India’s budget data indicates a consistent upward trajectory in its fertilizer subsidies since 2017. While these have boosted fertilizer consumption, crop yields have fallen over this period, a decline that can be attributed to farmers’ excessive application of nitrogen fertilizers, driven largely by subsidy-induced price distortions. A worsening imbalance in nutrient use has led to depletion in soil fertility. Urea consumption has outpaced other essential nutrients like PKS complexes and SSP to such an extent that NPK use ratio reached 11.8:4.6:1 in 2022-23, as against the ideal use-ratio of 4:2:1. Farms must move towards organic fertilizers, bio-fertilizers and phosphate-rich organic manure.

The country needs comprehensive structural reforms in fertilizer management and a sustainable transition plan that extends beyond expressions of intent and aligns with our net-zero emission goal. Rather than abruptly reducing the use of conventional chemical fertilizers, an effective strategy could be to subsidize nano fertilizers (both inorganic and organic), which are cost-effective, conducive to reducing carbon intensity and offer benefits such as higher average yields, alongside improved soil health. This can be an intermediate step to reduce over-use of chemical fertilizers before shifting entirely to farm production based on organic fertilizers. Additionally, promoting natural farming methods is vital.

As a starting point, we should consolidate the oversight of fertilizers under the agriculture ministry by shifting its department from the chemicals and fertilizers ministry. This could ensure a more strategic, focused and coherent approach. Currently, these ministries work at cross-purposes insofar as deepening of organic farming is concerned, as they have disparate objectives and conflicting mandates. While the department of fertilizers fixes annual targets for increasing the use of conventional chemical fertilizers, the agriculture ministry pushes for organic alternatives. The recent classification of nano urea as a ‘nano fertilizer’ by the ministry of agriculture (and not ministry of chemicals and fertilizers) points to turf overlaps. Similarly, the National Plan for Organic Productions, which also speaks of shifting to organic and bio-fertilizers, was published by the ministry of commerce and industry. This carries the risk of a policy gridlock. Moreover, lack of clarity on definitions and the absence of a robust certification system for organic fertilizers makes their adoption by farmers that much harder. A unified policy-making entity could do better in crafting and executing a roadmap that offers clear policy guidance on transitioning from conventional chemical to organic fertilizers, expanding domestic manufacturing capacities to achieve self-sufficiency in the latter, and educating our farmers on their proper use.

Odisha has made progress in organic farming. Through initiatives like the Odisha organic farming policy of 2018, the state has provided significant support, including financial assistance of 10 lakh for a 50-acre plot. It has spurred crop diversification via a rice-fallow management approach, wherein farmers cultivate short-duration pulses or nitrogen-fixing crops after their rice harvest. This approach has proven both eco-friendly and economically viable.

Channel food subsidies to millets: India’s food subsidy bill, at roughly 1% of GDP, has been around 2 trillion, a trend seen since 2020 . A significant portion of this subsidy bill stems from the variance between the minimum support prices (MSPs) and the central issue prices (CIPs) of grains procured and distributed. MSPs for wheat and rice have historically witnessed steady increases. With CIPs remaining relatively stagnant, this variance has contributed to cost escalation. Our ever-increasing food subsidy bill was even raised as a concern by the Standing Committee on Food, Consumer Affairs and Public Distribution in 2017. The government’s disproportionate emphasis on promoting wheat and rice through high MSPs has incentivized farmers to opt for environmentally unsustainable farming practices like mono-cropping.

In 2023, designated as the International Year of Millets, the spotlight was on the exceptional nutritional properties and unique agronomic characteristics of millets. We have an opportunity to direct our food subsidies to this more nutritious and less carbon-intensive alternative. Moreover, promoting millets promises to foster social equity, as Tribal communities and women farmers are likely to be key beneficiaries. Additionally, it can catalyse a transition towards a circular economy. Hence, we should explore a high-MSP regime for millets instead of rice and wheat.

In conclusion: While the government grapples with the challenge of striking a delicate balance between welfare, fiscal prudence and mitigating climate change, redirecting subsidies towards low-carbon alternatives such as organic fertilizers and millets while retaining their outlay levels would create a win-win for all sides.

These are the author’s personal views.

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