Uttar Pradesh’s clampdown on fertiliser “tagging” aims to restore farmer choice and transparency, but raises deeper questions about pricing distortions, supply chain discipline, and the future of balanced nutrient use in India’s regulated fertiliser market

India’s fertiliser industry underpins the productivity of one of the world’s largest farming economies. With nearly half the population dependent on agriculture and the country feeding over 1.4 billion people, inputs such as urea, Di-Ammonium Phosphate (DAP), Muriate of Potash (MOP) and NPK complexes are indispensable for crop production. Given the economic and political importance of agriculture, the sector is heavily regulated, with government intervention covering pricing, subsidies, distribution and retail practices to ensure both affordability and access for farmers.

In January 2026, the government of Uttar Pradesh introduced a regulatory measure prohibiting urea manufacturers and authorised fertiliser suppliers from selling non-subsidised fertilisers through the same channels used for subsidised urea. The ban targets the widespread practice of “tagging” — compelling farmers to buy non-subsidised or speciality products to access heavily subsidised urea — and has sparked intense debate about the balance between market efficiency, farmer protection, and long-term agricultural sustainability.

Price Regulation in India’s Fertiliser Sector

India’s fertiliser policy is marked by extensive price regulation, particularly for nitrogen-based fertilisers. Urea remains the only fertiliser whose Maximum Retail Price (MRP) is fully controlled by the government, currently fixed at Rs 266.5 per 45-kg bag, a level unchanged since 2012 despite rising energy costs and higher import prices.

As production or import costs far exceed the administered price, the government compensates manufacturers through subsidies, effectively creating a quasi-regulated environment in which profitability depends largely on government reimbursements. The New Urea Policy 2015 ties subsidy payments to energy efficiency benchmarks, encouraging modernisation of domestic plants. However, subsidies for nitrogen fertilisers have become one of the largest components of India’s agricultural budget, often exceeding Rs 1.5–2 lakh crore annually.

Phosphatic and potassic fertilisers, including DAP, MOP and NPK complexes, were formally decontrolled in 2010 under the Nutrient Based Subsidy Scheme. The government provides a fixed subsidy per kilogramme of nutrient content, leaving retail pricing largely to market forces. In practice, however, authorities monitor prices closely and may intervene if they are deemed excessive, maintaining a delicate balance between regulation and market dynamics.

This dual system — strict urea price control alongside partial decontrol of other fertilisers — has created distortions in nutrient application. Nitrogen is far cheaper than phosphorus or potassium, encouraging overuse of urea and under application of other nutrients, contributing to soil nutrient imbalances. Subsidised urea also fuels diversion, including illegal industrial use or cross-border smuggling, exposing one of the sector’s most persistent vulnerabilities.

Precision Farming, At a Price

Alongside the large subsidised segment, companies produce a growing range of non-subsidised and speciality fertilisers — including water-soluble formulations, calcium nitrate, zinc sulphate, bentonite sulphur, micronutrient mixtures and bio-stimulants. These products, regulated under the Fertiliser (Control) Order 1985, aim to correct specific soil nutrient deficiencies or support precision agriculture.

Speciality fertilisers are widely used in horticulture, fruit cultivation, vegetables, sugarcane, and cotton, often applied through drip irrigation and fertigation systems to improve nutrient efficiency. Despite their benefits, these products are far more expensive than heavily subsidised urea, with prices often ranging between Rs 60–90 per kilogramme compared with Rs 5.9 per kilogramme for urea.

As a result, farmers often prioritise cheaper nitrogen-based fertilisers even when balanced nutrient application would improve soil health and yields. The speciality fertiliser market remains small, estimated at around 0.4 million tonne annually versus more than 67 million tonne of total fertiliser consumption.

Farmers Gain Control Over Inputs

The Uttar Pradesh directive came after widespread reports of “tagging” practices. Dealers would compel farmers to buy costly non-subsidised fertilisers to access heavily subsidised urea, particularly during the Kharif and Rabi sowing seasons when demand spikes. Temporary shortages caused by logistical bottlenecks further heightened farmers’ dependence on local dealers.

Government representatives underscored the policy’s intent. Prof. Ramesh Chand, Member (Agriculture) at NITI Aayog, observed: “It is deeply concerning that farmers have been compelled to purchase non-subsidised fertilisers because subsidised products were being misused or improperly tagged. The government has now imposed a complete prohibition on the supply and sale of non-subsidised fertilisers by such entities. This decisive step reflects our commitment to safeguard farmers and maintain integrity in the fertiliser distribution system.”

Industry leaders welcomed the move but also noted the need for careful implementation. Rajib Chakraborty, President of the Speciality Fertiliser Industry Association (SFIA), called it “a forward-looking initiative” that could empower farmers: “This will significantly enhance fairness in the fertiliser distribution, while allowing farmers the freedom to choose products best suited to their crop and soil requirements. … This reform is a positive step towards ensuring equal opportunities for all stakeholders and will further encourage innovation-driven agriculture.”

Vinod Goyal, CEO of Agricare Corporation, highlighted operational benefits: “The ban imposed on fertiliser companies selling non-subsidised fertilisers will control indirect blackmarketing of subsidy fertilisers and ensure discipline in fertiliser trade. The UP government’s move will benefit farmers by providing essential fertilisers at fixed rates, reinforcing the purpose of subsidy programmes.”

Vipin Saini, CEO of BASAI, observed, “The UP situation basically reflects the fertiliser companies’ practice of bundling non-subsidised fertilizers and other agri-inputs while selling subsidised fertilisers. This practice may prove beneficial if it is voluntary and leaves the choice with farmers. However, if compulsive, forcing a farmer to purchase non-subsidy products to get subsidized fertilisers, it is a huge concern. Hence, the UP directive tends to discourage such ongoing practices. This issue requires further deliberations with respect to marketing practices and their pros and cons.”

Dr Rahul Mirchandani, President of the Indian Micro Nutrient Manufacturers Association (IMMA), warned that curbing tagging alone would not suffice: “While reducing tagging will ease pressure on a stressed fertilizer supply chain, the real success of the policy lies in ensuring uninterrupted access to water-soluble NPKs and micronutrients to maintain balanced crop nutrition.”

During peak sowing seasons, coercive bundling had previously allowed dealers to profit from cross-selling speciality fertilisers, whose margins exceed those of regulated urea. Authorities argue that separating subsidised and non-subsidised channels is essential to protect farmers and uphold the intended purpose of subsidy programmes.

Stopping Tagging, Tracking Quality: The Challenge Ahead

In principle, the ban may improve transparency in fertiliser transactions. Tagging often involved bundling micronutrients or speciality fertilisers with subsidised urea, making it difficult for farmers to distinguish between necessary inputs and those pushed by dealers. By requiring fertilisers to be sold individually with proper documentation, the policy could improve traceability within regulated distribution channels.

Stronger traceability may assist regulators in enforcing quality standards under the Fertiliser (Control) Order 1985, making it easier to verify invoices, track suppliers, and detect suspicious products. In this sense, the ban could reduce opportunities for counterfeit or substandard fertilisers to be discreetly bundled with legitimate products.

However, counterfeit fertilisers largely originate from informal production and distribution networks that operate outside authorised dealer systems. If speciality fertilisers become less accessible through formal channels, farmers may turn to informal markets where the risk of counterfeit products is higher.

Consequently, while the ban may improve transparency in retail practices, its impact on counterfeit fertiliser supply chains is likely to be limited without stronger enforcement, product testing, and supply chain monitoring.

The debate surrounding the Uttar Pradesh ban ultimately highlights deeper structural tensions within India’s fertiliser policy. Resolving these tensions will require reforms that balance farmer protection, market flexibility, technological innovation, and long-term agricultural sustainability.

— Suchetana Choudhury (suchetana.choudhuri@agrospectrumindia.com)