NEW DELHI: Governments are spending billions of dollars subsidizing fertilizers that are increasingly delivering limited productivity gains while contributing to environmental damage, prompting the World Bank to push countries, including India, to rethink how agricultural support is designed.
In an interview, World Bank Group's global environment director Valerie Hickey said around 14% of global agricultural subsidies are directly linked to deforestation. In many countries, including India and Zambia, traditionally, a large part of subsidies in the agriculture sector was for the provision of inputs such as fertilizers, according to Hickey.
She added that global agricultural subsidies amount to nearly $2 billion a day, but a significant portion is “nature negative.”
Highlighting fertilizer misuse, she said that in some places, in emerging markets and developing economies, increasing fertilizer application is actually decreasing productivity because the soil is already oversaturated with fertilizer.
She argued that the real challenge is not the quantity of finance but its quality and impact.
"In some regions, excessive fertilizer use has even reduced yields due to soil degradation. It's a waste of government money, and so this is not that there isn't enough money, but it's about thinking differently how to spend existing money. So, that's why we're having dialogues with many countries around the world on their agricultural subsidies, to move away from being input-based, from supporting fertilizers, to thinking about, how do you support research and development," she added.
The consequences extend beyond farm output. Hickey noted that while a 10% increase in fertilizers usage results in a 2% increase in productivity, there is also a 3% increase in respiratory illness.
Against this backdrop, India has earmarked ₹1.71 trillion as fertilizer subsidy for FY27. The support goes to plant nutrients such as urea, phosphorous and potash, with the subsidy system designed to partially absorb price spikes faced by farmers arising from international commodity shocks.
At the same time, policymakers have begun encouraging alternatives. Prime Minister Narendra Modi has been promoting fertilizer-free natural farming for several years now. Taking a step in this direction, the government launched National Mission on Natural Farming (NMNF), in November 2024 as a standalone centrally sponsored scheme. As of July 2025, more than 1 million farmers have enrolled under the mission.
Industry and policy measures are also gradually shifting toward efficiency. Fertilizer producers are also now getting into more efficient micro-nutrients business, which seeks to reduce the quantity of fertilizer used. The Centre has also intensified efforts to reduce excessive chemical fertilizer use and promote sustainable agriculture through a series of targeted schemes.
Under PM-PRANAM (2023), states are encouraged to cut chemical fertilizer consumption. Initiatives like the Soil Health Card Scheme, Paramparagat Krishi Vikas Yojana (PKVY), Bharatiya Prakritik Krishi Paddhati (BPKP) and the Nutrient-Based Subsidy (NBS) regime seek to ensure balanced nutrient application, reduce urea dependency and support organic and natural farming practices.
Policy changes are also being explored in how subsidies are delivered. On 28 February, agriculture minister Shivraj Singh Chouhan had said that the government is working towards making fertilizer subsidy transparent by transferring it directly into farmers’ accounts through Direct Benefit Transfer (DBT). With subsidies in their accounts, farmers will be able to decide which fertilizers to purchase and in what quantities. Currently, fertilizer subsidies in India are primarily transferred to companies rather than directly to farmers.
The World Bank has called on countries to reconsider how they allocate public funds to agriculture, shifting away from input-based subsidies such as fertilizer support and toward more sustainable and efficient spending approaches.
The focus is on helping smallholder farmers, who manage less than two hectares on average and produce 35% of the world’s food, gain better access to technology, data and knowledge-sharing networks.
According to Hickey, small holder farmers need more help accessing better technologies, better approaches, learning not just from their immediate neighbours, but from other family farms who are doing things in similar circumstances, and that's where the innovation comes.
The World Bank has underlined that investing in nature is central to economic growth. The multilateral agency has raised its nature finance 34% year-on-year, committing over $8 billion in the last fiscal year (July-June). Funding is demand-driven, reflecting growing recognition among countries that nature-based investments drive employment and resilience.