The Indian government regulates the sale, prices, and quality of fertilisers. It does so under the provisions of the Fertiliser Control Order (FCO) under Essential commodity Act (EC Act) of 1957. In 1973, the Movement Control Order was passed for regulating the distribution of fertilisers by the central government. In the early 1990s, India faced a foreign exchange crisis due to fiscal deficit. The government was forced to increase process of fertilisers by around 40% and some subsidy schemes were decontrolled. This led to distress in the country’s expansive agrarian sector.
The government eventually set up a Joint Parliamentary Committee (JPC) on fertiliser pricing to review the manufacture of fertilisers and also to look into its pricing in 1991. The committee aimed to reduce the prices of fertilisers. In 1992, the committee submitted its report. It concluded that spiralling prices of fertilisers originated from increasing cost of fertiliser imports and was complemented by the de-valuation of the rupee at that time. It advised to decontrol the import of phosphate and potassium based fertilisers. It also advised a reduction in the cost of urea. According to the recommendations of this report, extensive subsidies were given on hybrid seeds, fertilisers and pesticides. Though agricultural production has taken off in a big way after 1991, the sector is not completely risk free. Subsidies are still required to keep cost of the food grains in control and to avoid inflation of food prices.