India needs to reduce the strategic importance of fertilisers through a bold agricultural policy

Events, dear boy, events,' British PM Harold Macmillan had said when asked what tends to upend governments. Today, convergence of conflict in West Asia and arrival of El Nino may be the fatal catalyst to topple elected leaders and autocrats. What comes after this moment is fraught with uncertainty, and governments worldwide should be worried.

Politicians excel at managing perception, and bureaucracies at managing crises. Working in tandem, they find a way to kick the can down the road to the next gen. But with global fertiliser prices doubling in a single month, that road is running out. A bag of urea that costs a farmer ₹266.50 costs GoI ₹4,184. Combined with crude oil hovering near $100 a barrel, this is fiscally unsustainable, and a political nightmare.

Even in the event of a continuing West Asia conflict, India won't face a fertiliser shortage crisis, as a 10-15% shortfall is manageable. A slightly lower application won't reduce yields. Also, combination of a strong wheat harvest and healthy buffer stocks has insulated the country's food security. The full force of the current supply shock will manifest in the next sowing cycle.



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On the ground, rather than just buying basal - fertilisers applied at or before planting, to support early plant development - farmers are stockpiling for a full crop cycle. This isn't driven by a desire to profiteer but by a pervasive fear of future scarcity, a self-fulfilling prophecy that creates artificial shortages. This panic-buying is a symptom of a deeper issue: GoI is yet to bridge the trust deficit with the farming community.

After the Russian energy price shock, German households and industry lowered gas consumption by about 20%. India once mirrored this discipline when it responded to Lal Bahadur Shastri's plea to skip a meal a week. But today's India is different. Bred on a diet of freebies and with a lack of institutional and political credibility, any hint of a fertiliser shortage won't trigger conservation but will trigger panic-buying.

Policy fixes being offered by regulators are unlikely to address fundamental problems. They are divorced from the reality around these issues. The real lesson is that food security cannot be achieved simply by securing more fertilisers. It requires reducing their strategic importance through a bold agricultural policy.

For decades, economists have recycled two ideas about fertilisers: nutrient-based subsidies and direct subsidy transfers paired with price deregulation. Yet, both remain non-starters. Habitual invocation of 'food politics' as an obstacle to reform represents a failure of leadership rather than an inherent structural constraint.


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They first introduced neem-coated urea, claiming it would end diversion to industry. It did not. Then came a seemingly brighter idea of nano urea. It was an open secret that farmers were being coerced into buying it. Agriculture ministry was compelled to announce that farmers cannot be forced to buy it. The lesson here is bleak, but also clarifying: if GoI sees reforms as a money-saving exercise, it will end up with neither.

Irrespective of how events unfold, once fertiliser prices have normalised, GoI should increase cost of urea by 50% and compensate farmers by increasing per-farmer PM Kisan payout. Yes, there will be losers. But 85% of cultivators will gain. GoI has been unable to optimise the use of fertilisers for decades. This will make it happen in the blink of an eye. The solution is not flawlessly efficient, but that is precisely the point.

While farmers learn early on to reconcile with inherent inefficiencies on the farm, policymakers seek theoretical efficiency, often without a deep knowledge of what it means. Paradox of efficiency is that it cannot exist without inefficiency. This is the same for food systems, which are prone to failures from unseasonal rains, floods, droughts, geopolitical choke points like Hormuz, or the cautionary tale of Sri Lanka's overnight ban on agrochemicals.

These apparent inefficiencies are not flaws but features. Like agri inputs, the difference between optimum application and poison lies in the dose. One can kill the very system it aims to improve.

It's too early to predict the full consequences of El Nino, though it is not too early to make informed guesses on some aspects of it. The greater danger of a drought, should it come to that, will have a devastating impact on farmers' fragile livelihoods and decimate the economy. This would inevitably trigger an inflationary spiral and a political firestorm.

These challenges have uncanny echoes of the past. In 1971, Indira Gandhi got India its biggest moment by helping create Bangladesh from Pakistan. But, in 1973, the repercussions of the Opec oil embargo were one of the factors that led to the imposition of the Emergency.

The surge in food prices between 2007 and 2008 sparked protests and riots in about 40 countries. The 2008 financial crisis further contributed to dozens of leadership changes in the years that followed.

For many today, it's easy to assume they live in unprecedented times and circumstances. Irrespective of whether the war in West Asia and the dangers of El Nino fizzle out or continue, GoI should have the courage to push for change. Because for voters, the lag effect of these events may not go away.