Urea is an organic compound with the chemical formula CO(NH₂)₂ (also known as carbamide), which functions as the most widely used nitrogenous fertilizer in India and globally, containing 46% nitrogen by weight. It is a heavily subsidized commodity under the Urea Subsidy Scheme.
The compound was first synthesized from inorganic materials by German chemist Friedrich Wöhler in 1828. In the Indian context, its widespread use led to the problem of diversion of subsidized agricultural-grade urea for non-agricultural industrial uses. To solve this, the government mandated 100% neem-coating of all subsidized urea (domestic and imported) in December 2015.
Urea works by undergoing hydrolysis and nitrification in the soil to release ammonium ions (NH₄⁺) and nitrate (NO₃⁻), which are absorbed by plants for growth. The government provides it to farmers at a statutorily notified Maximum Retail Price (MRP), which is significantly lower than the actual cost. For instance, the MRP of a 45 kg bag is around ₹242, while the actual cost is approximately ₹3,000, with the difference covered by the subsidy.
Urea is central to India's agricultural policy and connects to several concepts, including the Nutrient-Based Subsidy (NBS) policy, which governs other fertilizers like DAP and MOP, but not urea. It is also linked to the Atmanirbhar Bharat initiative, which aims to boost domestic production, and the One Nation One Fertilizer scheme.
The most significant recent change was the introduction of Neem-Coated Urea in 2015, which curbed diversion and improved Nitrogen Use Efficiency. Other changes include the replacement of 50 kg bags with 45 kg bags in March 2018 and the launch of Liquid Nano Urea by IFFCO in June 2021 to reduce the overuse of conventional urea. The government's planned urea subsidy for FY 2026-27 is ₹1.168 trillion.