The spraying of urea, the most widely consumed fertilizer in India, with Neem oil is helping to increase the output of crops by about 10% on average, according to statistics produced by the food and agricultural ministry.

The ministry found a 5.8% increase in paddy yield after the use of sprayed urea and increase of 17.5% in the yield of sugarcane. Similarly, yields of tur (a kind of pulses) and red gram jumped by 16.9% and that of soybean by 7.4% and corn to the extent of 7.1%.

Neem coating of urea was introduced towards the end of 2015 with the promise that it would help the country save a substantial chunk of the Rs 55,000 cr subsidy given on urea fertilizer every year by increasing efficiency and preventing diversion of stocks.

Despite having a production cost of around Rs 20 per kg, urea is sold in India at a price of Rs 5.36 per kg. The shortfall is made good by the government in the form of a subsidy.

The policy, introduced around fifty years ago to encourage the domestic production of urea, has however led to over-use of the material as well as diversion of a significant quantity for non-agricultural purposes.

Fertilizer Subsidy Allocation in Budget for 2016-17

Subsidized urea from India is also illegally transported to nearby countries such as Nepal and Bangladesh.

It is estimated that around 35% of the total urea subsidy, or about Rs 19,000 cr per year, never finds its intended target.

Neem coating — which renders the substance unusable for anything other agriculture — was introduced to address the above concern, as well as to increase the availability of nitrogen to the plant by slowing its release. It is estimated that spraying Neem oil slows the release of Nitrogen by 10-15%, thus, in effect, reducing the urea requirement to that extent.

Together, the two above factors are expected to result in a saving of around Rs 15,000 per year in urea subsidy. However, the agricultural ministry has not been able to tabulate the actual savings due to a lag in the disbursal of the money.

Out of the Rs 55,100 cr set apart for urea subsidy payment in the year ending March 2017, Rs 40,000 cr is set for subsidizing India-made urea and the remaining for imports.

However, the ministry claimed that crop yields have increased and diversion of urea to chemical industries has almost stopped after the coming into effect of the new policy in 2016.

“Diversion of highly subsidized urea towards non-agricultural purposes is negligible among farmers after the introduction of the mandatory policy of production and distribution of only Neem coated urea,” the ministry said in its review of the policy.

The actual expense on subsidies for the year ending March is expected to be available by about June.

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