Reforming fertilizer subsidies for efficiency and sustainability, India

• Jul 29, 2025
• 2 min

The Government of India has been working to make its fertilizer subsidy program more efficient, transparent, and targeted. To support this effort, MSC provided technical assistance to the Department of Fertilizers to redesign the subsidy mechanism through Direct Benefit Transfers (DBT) and improve fertilizer use efficiency across the country. The reforms sought to curb leakages, rationalize usage, and improve targeting to support both fiscal sustainability and soil health.

MSC conceptualized and designed the DBT system in the fertilizer subsidy program. We led the pre-pilot in two districts of Andhra Pradesh, followed by implementation support for a larger pilot in 14 districts and the eventual national rollout. At each stage, we conducted rapid and concurrent evaluations to guide program refinement. Our recommendations helped the government reduce leakages and improve monitoring. We also proposed key improvements, such as bringing urea under the Nutrient-Based Subsidy (NBS) scheme, building a farmer database, introducing fertilizer entitlements, and piloting Direct Cash Transfers (DCT) to farmers. MSC designed the DCT pilot and assessed the digital readiness of states for its rollout.

To complement these efforts, MSC evaluated the Soil Health Card (SHC) scheme through a nationwide study in 2018. We suggested establishing decentralized, real-time testing facilities with active farmer engagement. We also assessed the impact of Neem Coated Urea (NCU) and changes in urea packaging on fertilizer consumption patterns.

MSC’s work helped the government save approximately USD 2.2 billion by March 2022, largely due to reduced diversion and overuse, amounting to 15 million metric tons of fertilizer. The interventions also contributed to a reduction of urea use per hectare by 8%, signaling progress toward more balanced fertilizer usage and improved soil health.

The Gates Foundation commissioned the project.