Examine the merits and limitations of routing fertilizer subsidy through companies rather than directly to farmers.

Under the Nutrient Based Subsidy (NBS) scheme, in force since 2010, the Centre pays manufacturers and importers a fixed per-nutrient subsidy on 28 grades of P&K fertilizers. Farmers benefit only indirectly, through lower retail prices [1]. Paying companies keeps supply steady, but it weakens accountability for whether the benefit reaches farmers.

Merits

• Administrative ease: a limited number of companies are paid at notified rates, so the government does not have to identify and pay crores of farmers one by one [1].
• Shock absorption at sowing: the Rabi 2026-27 outlay of Rs.62,370 crore is about 64% above Rabi 2025-26. It absorbs global price rises in DAP, MOP and sulphur before they reach farmers [1].
• Supply security: the subsidy keeps imports viable. India imports most of its phosphate and nearly all of its potash [2].
• Inclusion: farmers pay no full price upfront. Tenant farmers who lack land records are not excluded at the point of sale.

Limitations

• Unverified pass-through: companies set the MRP themselves. The CAG found no system to check whether prices matched production costs. It also found unrelated costs, such as losses on bond sales, loaded into DAP prices [3].
• Leakage at retail: the Parliamentary Standing Committee (2026) found repeated forced bundling, where dealers make farmers buy unwanted products with subsidised fertilizer. The only response so far has been advisories [4].
• No targeting: large and small farmers get the same subsidy per bag, whatever their landholding or soil needs.
• Nutrient imbalance: urea stays price-controlled outside NBS. India's NPK use ratio reached 8.2:3.2:1 in 2012-13, against the 4:2:1 norm [5].
• Weak focus on outcomes: the CAG found no road map for achieving NBS objectives [3].

Way Forward

• Audit company costs before each rate revision [3].
• Amend the Fertilizer (Control) Order, 1985 to penalise forced bundling [4].
• Link fertilizer sales to Soil Health Card advice.
• Pilot direct transfers to farmers in states with digitised land records.
• Raise domestic P&K production, as the committee recommended [2].

Paying companies has kept fertilizers available and affordable, but no one can verify how much of the subsidy actually reaches the farmer. A hybrid model works better: keep paying companies for supply security, and add cost audits, enforcement at retail shops and gradual targeting of farmers. That would keep the subsidy affordable for the budget, fair to small farmers and aligned with SDG 2 (Zero Hunger).