A Call for National Debate on Direct Benefit Transfer in Fertilizers

Shivraj Singh Chouhan emphasizes the need for a debate on DBT to enhance subsidy efficiency for farmers and curb diversion.

Surya

•February 25, 2026•5 mins read

Chouhan calls for national debate on fertiliser DBT reform

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1. DBT in Fertilisers: Rationale and Emerging Debate

The Union Agriculture Minister has called for a national debate on introducing Direct Benefit Transfer (DBT) in fertilisers. The objective is to prevent diversion of subsidised fertilisers and empower farmers to choose nutrients based on agronomic need rather than distorted price signals.

Currently, fertiliser subsidy is embedded in the product price. Urea is sold at a heavily subsidised retail rate, leading to excessive consumption and imbalance in nutrient use. The proposal envisions transferring subsidy directly into farmers’ bank accounts using technology-enabled platforms.

“There should be manthan on this… fertiliser subsidy can be transferred directly to the farmer’s account.” — Shivraj Singh Chouhan

If subsidy delivery is restructured, it could rationalise usage patterns and reduce leakages. However, any abrupt transition without consensus may disrupt input access and farm economics.

Shifting from product-based subsidy to income support aims to improve efficiency and reduce distortions. If ignored, rising subsidy burdens and nutrient imbalance could undermine fiscal sustainability and soil health.

Key Data:

Urea consumption (FY26 expected): ~40 million tonnes
Subsidy allocation (FY26): ₹1.86 trillion (↑ 11.05% from ₹1.68 trillion)
Retail price of urea: ₹5,630 per tonne
Domestic production cost: ₹32,000–35,000 per tonne
Imported urea cost: ₹36,000 per tonne (at $420/tonne)

2. Subsidy Burden and Nutrient Imbalance

India’s fertiliser subsidy regime has kept urea prices unchanged for over a decade. The large gap between cost of production/import and retail price has incentivised overuse of nitrogenous fertilisers relative to phosphatic and potassic nutrients.

Higher acreage under maize and rice, combined with low urea prices, has driven record consumption. This has fiscal implications and environmental consequences, particularly for soil quality and groundwater contamination.

The rising subsidy outgo also constrains fiscal space for investment in irrigation, research, and diversification.

Price distortions alter farmer behaviour, encouraging input overuse rather than optimal use. If not corrected, this can reduce long-term productivity and increase ecological stress.

3. Agricultural Dependence and Structural Challenges

Despite economic diversification, 48% of India’s workforce remains dependent on agriculture, down from over 70% earlier. However, productivity remains relatively low compared to other sectors.

Ensuring food and nutrition security for a population exceeding 1.4 billion remains central to policy. At the same time, pressure on land and farm incomes necessitates alternative employment growth in industry, services, and IT.

The structural challenge lies in raising farm productivity while gradually reducing disguised unemployment in agriculture.

High workforce dependence on low-productivity agriculture limits income growth. Without diversification and productivity enhancement, rural distress and fiscal pressures may persist.

4. MSP, Price Support and Bhavantar Model

The government maintains that MSP ensures at least 50% return over cost of production. Large-scale procurement of wheat and rice continues, with interventions extended to perishable crops such as tomatoes, onions and potatoes.

Under PM-AASHA, states can procure at MSP, and transport costs are sometimes borne by the Centre. The “Bhavantar” price-deficiency payment model compensates farmers for the gap between MSP and market price without physical procurement.

“If the MSP is ₹5,000 and the market price is ₹4,000, the ₹1,000 difference can be transferred directly to the farmer’s account.” — Shivraj Singh Chouhan

This reduces storage and handling costs but depends on state capacity and accurate price assessment.

Price-deficiency payments aim to balance fiscal prudence with farmer income security. If poorly designed, they risk delayed payments or inadequate compensation.

5. Digital Agriculture and Direct Transfers

Over 85 million farmers have been issued digital farmer IDs capturing landholding and crop details. This database supports targeted DBT and reduces over-claiming.

The Budget has prioritised digital agriculture platforms integrating crop advisory, weather updates, disease detection (via photo uploads), and market access through e-NAM.

Such technological integration aims to enhance transparency, improve market efficiency, and support evidence-based policymaking.

Digitisation strengthens last-mile delivery and reduces leakages. Without reliable databases and state-level implementation, however, benefits may not reach intended recipients.

6. Rural Employment and Income Support Reforms

The rural employment programme, now renamed Vikshit Bharat Grameen Rojgar Yojana (VB-G RAM G), remains demand-driven.

Key Changes:

Budget allocation increased from ₹86,000 crore to ₹1.51 trillion
₹95,600 crore provided upfront
Employment days increased from 100 to 125
Automatic unemployment allowance if wages delayed beyond 15 days

Greater gram sabha involvement in project prioritisation seeks to improve asset quality and accountability.

Strengthening rural employment programmes supports consumption stability and reduces agrarian pressure. Without monitoring, however, asset quality and fiscal efficiency may suffer.

7. Research, Diversification and Productivity Push

The government has outlined six guiding principles: increasing production and productivity, reducing cultivation cost, ensuring remunerative prices, compensating losses, promoting diversification and value addition, and protecting soil health.

Over 16,000 scientists have been directed to undertake field-level engagement, addressing more than 500 identified issues, including red rot in sugarcane and pink bollworm in cotton.

A productivity push is also planned in coconut, cashew, cocoa and coffee through replanting with high-yield varieties.

Research-driven diversification reduces monoculture risks and enhances income stability. If extension services remain weak, scientific innovation may not translate into field-level gains.

8. Trade Policy and Federal Coordination

The minister clarified that free-trade agreements have not granted concessions on core crops such as wheat and rice. Instead, export opportunities are expected to expand for spices, tea, coffee and textiles.

Agriculture remains a concurrent responsibility in practice: the Centre formulates policy, while states implement schemes at the grassroots level.

“Policies must reach the field. Research must reach the farm. And benefits must reach the farmer directly.” — Shivraj Singh Chouhan

Effective coordination between Centre and states determines programme success.

Federal alignment ensures uniform standards while allowing state-specific adaptation. Weak coordination may dilute reform impact.

Conclusion

The debate on DBT in fertilisers reflects a broader shift towards efficiency, transparency, and fiscal sustainability in agricultural policy. Rationalising subsidies, strengthening digital delivery systems, enhancing productivity, and promoting diversification are essential for long-term farm income stability.

A calibrated reform approach—balancing farmer welfare, fiscal prudence, environmental sustainability, and federal coordination—will determine whether India’s agricultural transformation becomes structurally durable and inclusive.

Quick Q&A

Everything you need to know

Conceptual background: India currently provides fertiliser subsidies indirectly by selling urea to farmers at a highly subsidised price of ₹5,630 per tonne, despite production/import costs ranging between ₹32,000–36,000 per tonne. This price distortion has remained unchanged for over a decade. The proposed shift toward Direct Benefit Transfer (DBT) aims to transfer subsidy amounts directly into farmers’ bank accounts using digital identification systems.

Rationale:

Prevent diversion: Cheap urea is often diverted for non-agricultural or industrial uses.
Promote rational usage: Farmers tend to overuse urea because of its artificially low price, leading to soil degradation.
Farmer choice: DBT would allow farmers to choose fertilisers based on agronomic need rather than price distortion.

Policy significance: With fertiliser subsidies rising to over ₹1.86 trillion in FY26, fiscal sustainability and efficiency have become critical concerns. By leveraging digital farmer IDs (issued to over 85 million farmers), DBT could improve targeting, reduce leakages, and support balanced nutrient application. However, successful implementation requires consensus-building and careful calibration to avoid disrupting farm economics.

Fiscal implications: Fertiliser subsidies have increased significantly, reaching nearly ₹1.86 trillion in FY26. Since urea retail prices remain frozen while global and domestic production costs fluctuate, the government bears the expanding fiscal burden. This constrains public spending on infrastructure, irrigation, and agricultural research.

Environmental consequences:

Nutrient imbalance: Excessive urea use distorts the ideal NPK (Nitrogen-Phosphorus-Potassium) ratio.
Soil degradation: Long-term overuse reduces soil fertility and microbial activity.
Water contamination: Runoff leads to groundwater pollution.

Structural concern: While ensuring affordable inputs for farmers is essential for food security, price distortions incentivise inefficient input use. A reform such as DBT could align economic incentives with environmental sustainability, ensuring that subsidies promote productivity without harming soil health or fiscal stability.

Digital infrastructure: The issuance of over 85 million digital farmer IDs capturing landholding and crop details forms the backbone of targeted subsidy reform. This database enables direct transfers and reduces duplication or over-claiming.

Integrated platforms: The government’s integrated digital agriculture platform allows farmers to upload crop disease images, access weather updates, check mandi prices, and connect with e-NAM for online marketing.

Governance impact:

Transparency: Real-time tracking of benefits ensures accountability.
Efficiency: Eliminates intermediaries and reduces administrative leakages.
Evidence-based policymaking: Field-level data can inform targeted research and interventions.

Example: The DBT model in PM-KISAN demonstrates how direct transfers enhance inclusion and reduce delays. Extending similar architecture to fertiliser subsidies can transform input governance while empowering farmers through informed decision-making.

Model explanation: Under the Bhavantar scheme, farmers are compensated for the difference between the Minimum Support Price (MSP) and the market price without physical procurement. For example, if MSP is ₹5,000 and market price is ₹4,000, ₹1,000 is directly transferred to the farmer’s account.

Advantages:

Reduces storage and logistics costs.
Minimises wastage of perishable commodities.
Improves fiscal efficiency compared to large-scale procurement.

Limitations:

Requires accurate and transparent price discovery.
May not stabilise markets if procurement volumes are low.
Implementation capacity varies across states.

Evaluation: While physical procurement remains essential for food security crops like wheat and rice, price-deficiency payments may be more suitable for oilseeds and perishables. A hybrid approach, depending on crop type and national need, could ensure both farmer welfare and fiscal prudence.

Current scenario: Nearly 48% of India’s workforce depends on agriculture, although its contribution to GDP is significantly lower. This indicates disguised unemployment and low productivity.

Underlying reasons:

Limited rural industrialisation: Non-farm job creation has not kept pace with population growth.
Risk aversion: Small and marginal farmers lack capital to shift sectors.
Skill mismatch: Rural workers may not possess skills required for manufacturing or services.

Policy direction: Expanding employment opportunities in industry, IT, and services, as well as schemes like Vikshit Bharat Grameen Rojgar Yojana (increasing employment days to 125), can gradually reduce pressure on agriculture. Structural transformation must be gradual to ensure food security while improving productivity and incomes.

Step 1: Stakeholder consultation: Conduct gram sabha discussions and farmer awareness campaigns explaining how DBT works, ensuring transparency and trust-building.

Step 2: Digital readiness: Verify farmer IDs, bank account linkage, and land records. Establish grievance redress mechanisms to handle payment delays.

Step 3: Monitoring and evaluation:

Track fertiliser usage patterns to assess behavioural changes.
Coordinate with Krishi Vigyan Kendras to promote balanced nutrient application.
Use real-time dashboards for subsidy disbursement tracking.

Balancing welfare and reform: A phased rollout with pilot districts would reduce transition risks. Ensuring that benefits reach farmers directly without delays would uphold the minister’s principle: “Policies must reach the field, and benefits must reach the farmer.”

Mechanisation: Introduction of cotton-picking machines has reduced harvesting costs from ₹10–15 per kg to about ₹5 per kg, improving farm profitability.

Research outreach: Over 16,000 scientists have been directed to address field-level issues such as red rot in sugarcane and pink bollworm in cotton. This demand-driven research ensures practical solutions.

Digital integration: e-NAM integration allows farmers to access wider markets, improving price realisation. Combined with DBT and financial literacy training via Krishi Vigyan Kendras, these reforms create a holistic ecosystem.

Outcome: Such interventions reflect a shift toward technology-enabled, state-coordinated, and farmer-centric governance, balancing productivity, sustainability, and income security.