Chemical fertilizer subsidy may prove to be a costly deal for the country

The increasing use of chemical fertilizers in India's agricultural sector and the subsidies provided for them are becoming a heavy burden on the country's economy. Various reports released on the first day of the COP 31 summit, which began in Antalya, Turkey, discussed critical issues such as agriculture, health, and energy. During this, an important research report titled 'The Economics of Cultivation' was presented by the environmental monitoring organization 'Climate Trending'.

According to this report, while farmers may appear to benefit economically from using chemical fertilizers, the country's actual economic gain is significantly reduced when government subsidies, greenhouse gas emissions, and environmental damage are taken into account. The report warns about the rise in hidden costs of farming due to subsidies on chemical fertilizers, unbalanced fertilizer use, and dependence on imports. The report recommends policy changes to promote organic and natural farming.

This research report by Climate Trending studied the agricultural systems of eight states, including Punjab, Haryana, Uttar Pradesh, Bihar, Madhya Pradesh, Chhattisgarh, Andhra Pradesh, and Karnataka. The key findings of the report show that the production of chemical nitrogen fertilizers is based on fossil fuels like natural gas and coal. Globally, the entire supply chain of nitrogen fertilizers generates 1.13 gigatons of CO2e emissions, which is approximately 2.1% of global greenhouse gas emissions.

In these emissions, the share of fertilizer production is 38.8%, while nitrous oxide emissions from fields contribute a significant 58.6%. Additionally, transportation accounts for 2.6% of emissions. These figures clarify that the environmental impacts of chemical fertilizers are not limited to factories, but their use in fields also accelerates climate change.

the most important finding of the report highlights the gap between the individual income of farmers and the country's socio-economic benefit. A study of five case studies related to wheat production found that the socio-economic benefit was 36% to 182% lower than the farmer's private profit. On average, this gap was approximately 90%.

Taking the example of the economic details of wheat cultivation in Punjab for the year 2019-20, the report stated that the farmer's net private profit was ₹31,901 per hectare. However, after deducting subsidies and estimated costs of emissions, the country's social net benefit remains only ₹20,347 per hectare. That is, while the farmer sees a profit of ₹31,901, the country realistically gains only ₹20,347 after accounting for public and environmental costs.

The report also expressed concern about the increasing burden of fertilizer subsidies on Punjab and Haryana. During the year 2021-22, the government's estimated financial burden on chemical fertilizers in India was ₹3,630 per hectare. In contrast, this burden was ₹5,198 in Haryana and ₹6,283 per hectare in Punjab. However, during the year 2022-23, this financial burden in Punjab rose to ₹14,072 per hectare.

Thus, the estimated financial burden in Punjab during the year 2022-23 was approximately 3.88 times higher than the national average (2021-22). These figures show that the financial pressure of subsidies on the government is continuously increasing due to agricultural practices that have excessive dependence on chemical fertilizers.