Disruption carries a reminder: Policy reforms in fertiliser sector are overdue, Pg11

Key Highlights:

• The ongoing conflict in the Middle East is disrupting global energy and fertiliser supplies, impacting India's food security.
• India imports approximately 243 million tonnes of crude oil annually, with a significant portion coming from the Middle East.
• LNG prices have surged due to Middle East disruptions, affecting India's urea production.
• India's dependence on fertiliser imports from the Persian Gulf region makes it vulnerable to geopolitical tensions.
• The fertiliser subsidy bill in FY27 could exceed Rs 2 lakh crore due to the crisis.

Detailed Insights:

• India's economic reforms in 1991 were triggered by a balance-of-payments crisis, highlighting the importance of addressing vulnerabilities during crises.
• Disruption in the Strait of Hormuz impacts commodity markets, especially oil, gas, and fertilisers.
• India imports about two-thirds of its LPG, with rising import costs leading to increased domestic prices.
• Domestic urea production is affected as gas allocation is prioritised for households and transport under the Essential Commodities Act.
• India's effective import dependence in urea is about 55 per cent, considering both direct imports and imported gas feedstock.
• India relies heavily on imports for ammonia, sulphur, DAP, MOP, and phosphatic raw materials.
• Diversifying imports, investing in overseas fertiliser assets, and domestic exploration can enhance supply security.
• Policy reforms like direct benefit transfer (DBT) of fertiliser subsidies and deregulation of nutrient prices can encourage balanced fertiliser use.
• Implementing quantitative restrictions on sales based on farm size and cropping patterns is a feasible alternative using AgriStack.
• Bringing urea under the Nutrient-Based Subsidy (NBS) framework can align its price with other fertilisers and promote balanced nutrient application.

Key Concepts Involved:

• Urea: A nitrogen-rich compound used as a fertiliser in agriculture.
• Nutrient-Based Subsidy (NBS): A subsidy scheme promoting balanced use of fertilisers by fixing subsidy on nutrients.
• AgriStack: A collection of technological interventions in agriculture to create a unified digital infrastructure.