Context: Declined across all major fertilisers, including urea, during April–September 2026 compared to the corresponding period in 2025, despite higher domestic production and imports.
- Underlying reason: Below-normal monsoon rainfall due to El Niño reduced farmers' demand for fertilisers.
- Rainfall Deficit: Southwest monsoon rainfall (June–September) was 12.6% below normal, with significant deficits in South India, Marathwada, Vidarbha, Saurashtra and Kutch, Rajasthan, Bihar and Northeast India.
Impact of El Niño on Agriculture
- Lower Fertiliser Consumption: Inadequate rainfall discouraged farmers from purchasing and applying fertilisers, resulting in lower nutrient consumption.
- Kharif Production: Despite relatively stable overall kharif acreage, reduced fertiliser application may adversely affect crop yields.
- Rabi Season: October rainfall was 31.4% below normal, reducing soil moisture availability for newly commenced rabi sowing.
- Warmer Winters: El Niño generally causes warmer-than-normal winters in India, potentially reducing both rabi acreage and crop yields.
- Future Outlook: Global weather agencies expect the current strong-to-very-strong El Niño to persist through January–March 2027 before weakening towards April–May 2027.
Implications for Food Inflation
- Rising Food Inflation: Consumer food inflation increased from 4.2% to over 7.7% year-on-year between April and September.
- Historical Experience: During July 2023–December 2024, food inflation averaged over 8.5%, partly due to a prolonged and strong El Niño.
- Current Concern: A potentially stronger El Niño could further reduce agricultural production, intensifying food-price pressures.
Immediate Measures Suggested
- Duty-free Imports: Permit duty-free imports of pulses (masoor, chana and yellow peas), raw sugar and cotton until March 31.
- Edible Oil Imports: Scrap basic customs duty on crude palm oil and crude soybean oil.
- Import Certainty: Extend the zero/low-duty window to encourage importers to contract larger quantities and compensate for anticipated domestic production shortages.
Long-term Structural Challenges
- Climate Change: Treat climate change and geopolitical tensions as permanent structural realities rather than temporary risks.
- Agricultural Productivity: Invest in climate-smart crop breeding and improve farmers' efficiency in using water, fertilisers, energy and other scarce resources.
- Inefficient Subsidies: Reorganise the existing fertiliser subsidy regime and fiscal priorities to improve resource-use efficiency and agricultural resilience.
- Policy Challenge: Reforming subsidies and reallocating public expenditure requires political commitment, beyond merely economic considerations.
Way Forward
- Climate-resilient Agriculture: Promote drought-tolerant and heat-resistant crop varieties, climate-smart agriculture and weather-based advisories.
- Efficient Resource Utilisation: Expand micro-irrigation, soil testing, precision fertiliser application and efficient nutrient management.
- Agricultural Diversification: Reduce excessive dependence on water-intensive crops, particularly in drought-prone regions.
- Strategic Trade Policy: Maintain flexible import duties and diversified import sources to manage domestic supply shortages and food inflation.
- Subsidy Reforms: Gradually shift towards targeted, nutrient-balanced and efficiency-oriented fertiliser subsidies.
Key Concept: El Niño and Indian Monsoon
- El Niño: Periodic warming of the central and eastern equatorial Pacific Ocean, associated with changes in atmospheric circulation and global weather patterns.
- Impact on India: Often weakens the Indian summer monsoon, increases the probability of rainfall deficits and can cause warmer winters.
- Agricultural Impact: Reduced rainfall affects soil moisture, irrigation availability, sowing decisions and crop productivity.
