Upcoming agriculture year: Season of scarcity, rich for reform
Crops need water and nutrients for growth and sufficient grain yields. The signals on both fronts aren’t encouraging for the upcoming agricultural year. The India Meteorological Department has forecast a “below normal” southwest monsoon, with nationwide rainfall during June-September at 92 per cent of the long period average for the season. Even if the anticipated El Niño becomes a “strong” event only towards the end of the four-month season, its association with warmer-than-normal winters can also have an impact on the 2026-27 rabi crop, in addition to the one whose planting will start in a month’s time. But more than water – improved irrigation coverage has over the years made Indian agriculture relatively resilient against subnormal rains – it is plant nutrients that should be real cause for concern.
The current supply shock in fertilisers is unprecedented. Prices of urea and di-ammonium phosphate (DAP) imported into India haven’t yet surged to the highs of late-2021 to mid-2022 (just before and after Russia’s invasion of Ukraine) or even the 2008 global food crisis. But those were largely price shocks. The ongoing one, from the conflict in West Asia, is a supply shock that extends beyond finished fertilisers to key raw materials/intermediates such as natural gas, ammonia and sulphur too. The crisis today isn’t of prices alone, but of availability itself. The Strait of Hormuz’s effective closure has affected around one-third of the world’s seaborne fertiliser trade. With other major producers like Russia (which has a one-fifth share of the global trade) and China (India’s biggest urea and DAP supplier till 2023-24) also prioritising domestic availability and restricting exports, the shortages would only mount. India will feel the pressure, especially as it has hardly any gas, rock phosphate, potash or mineable sulphur reserves and is predominantly import dependent in plant nutrients.
2026-27 could well be a perfect storm for Indian agriculture, but also an opportunity for reforms where kicking the can down the road isn’t an option any longer. There are limits to subsiding products whose supply is itself in question. In the case of fertilisers, the focus must be on augmenting availability – including of alternative nutrient sources – rather than artificial underpricing that would only aggravate shortages. The government should muster the courage to deregulate retail prices of urea, DAP and all other fertilisers. Replace the existing product-wise subsidy regime with a flat per-acre payment of, say, Rs 5,000 for all cultivating farmers. The monies from both the fertiliser subsidy and PM-Kisan can be redirected and repurposed towards what can become a genuinely pro-farmer direct income support scheme.
- 1The editorial proposes a major governance reform by suggesting the deregulation of fertilizer prices and replacing the current product-wise subsidy regime with a direct income support scheme. This policy shift would involve repurposing funds from existing fertiliser subsidies and the PM-Kisan scheme into a flat per-acre payment to farmers. Such a move from indirect subsidies to direct benefit transfers aims to enhance efficiency and empower cultivators directly.
- 2India's agricultural stability is threatened by international geopolitical events, specifically the disruption of fertilizer trade through the Strait of Hormuz and export restrictions by key producers like Russia and China. This highlights India's significant import dependency for critical plant nutrients and raw materials. The situation underscores the vulnerability of national food security to global supply chain shocks and the necessity for robust diplomatic and trade strategies.
- 3The convergence of a forecast below-normal monsoon and an unprecedented fertilizer supply shock poses a severe economic threat, potentially leading to lower crop yields and heightened food price inflation. This 'perfect storm' could exacerbate rural distress, disproportionately affecting small and marginal farmers who are most vulnerable to rising input costs and climate variability. The crisis directly impacts national food security and the socio-economic fabric of the agricultural community.
- 4The India Meteorological Department's forecast of a subnormal monsoon, linked to the El Niño phenomenon, highlights the critical impact of climate patterns on Indian agriculture. This environmental challenge, compounded by the fertilizer crisis, presents an opportunity to promote sustainable alternatives like organic nutrient sources and efficient water management. The situation necessitates a scientific approach to build resilience against climate change and reduce dependence on imported, resource-intensive agricultural inputs.