Do POS-based Fertilizer Subsidy Reforms Influence Nitrogen Use Intensity in India? Evidence from Interrupted Time Series Analysis

Abstract

This study investigates whether the introduction of India’s Point-of-sale (PoS) based subsidy system (commonly referred to as fertilizer DBT) influenced nitrogen use intensity. It is important to note that this system does not involve direct cash transfers to farmers. Instead, subsidy release is linked to PoS-authenticated retail transactions and paid to manufacturers. Employing an interrupted time series analysis framework with annual national and state-level data, we estimate both immediate and long-term effects of this reforms while controlling for key structural determinants of fertilizer demand including cropping intensity, irrigation coverage, institutional agricultural credit, urea subsidy allocation, rainfall variability, and adjusting for prior fertilizer policy reforms. At the national level, the reform did not produce a statistically significant change in nitrogen use intensity, suggesting that enhanced subsidy delivery and transaction monitoring alone are insufficient to modify aggregate fertilizer application behavior. State-level analysis, however, reveals considerable heterogeneity, with short-term adjustments and selective responses emerging in a limited number of states, underscoring the context-dependent nature of delivery-oriented reforms in shaping fertilizer use outcomes. Qualitative evidence from farmer and retailer interactions indicates that the reform has strengthened transparency, product availability, and accountability in fertilizer distribution, thereby reinforcing the institutional infrastructure of subsidy administration. Taken together, these findings offer policy-relevant insights into the potential and limitations of PoS-based subsidy delivery system as a reform mechanism and highlight the need to combine governance improvements with complementary agronomic and incentive-based interventions to achieve meaningful and sustained gains in nitrogen use efficiency.