With global urea prices falling to pre-West Asia war levels, the government’s fertiliser subsidy budget in the current fiscal year is likely to be around Rs 2.5 lakh crore, down from the Rs 3.4 lakh crore projected earlier amid the conflict, official sources said
An official with a leading state-owned fertiliser company told FE that with urea from Iran no longer under US sanctions, the price of the soil nutrient variant declined to around $ 415- 420/tonne on Tuesday, against the average price of $ 947/tonne prevailed in May 2026.
The official said that prices of urea, the most consumed fertiliser variant are likely to fall further. Supply eased after the Strait of Hormuz reopened, and vessels carrying fertilier are set to reach Indian ports. Trade sources said that China easing export restrictions also helped bring down urea prices.
Huge spike in the fertiliser subsidy was projected for FY27 last month, against a budget estimated of Rs 1.77 lakh crore as global fertiliser prices remain elevated and supplies were hit due to closure of the Strait of Hormuz and damage to production facilities in Qatar amid the US-Israel-Iran war.
“Higher fertiliser subsidy of over Rs 30,000 crore is projected in the current fiscal against actual outgo in FY26 as urea during April and May was imported at a double the prices which prevailed in February, 2026,” sources said.
In FY26, expenditure on fertiliser subsidies was Rs 2.17 lakh crore – Rs 1.42 lakh crore for urea and Rs 74,999 crore for nutrient-based subsidy. This was a 17% increase over the revised estimate of Rs 1.86 lakh crore. This, according to officials, was due to the rise in fertiliser prices from March 2026.
“Urea prices have come down, subsidies will be less then what was earlier projected,” S Mahendra Dev, Chairman of the Economic Advisory Council to the Prime Minister, told FE at the sidelines of an event organised by FICCI.
Earlier this month, National Fertilizers, one of the agencies responsible for soil nutrient imports, received a much lower bid—a landed cost between $444.9/tonne and $449.3/tonne—for importing 1.7 million tonnes (MT) of urea. This is less than half the contracted bids in the range of $935/tonne – $959/tonne for an earlier tender issued by Indian Potash for the import of 2.5 MT of urea.
Out of the total estimated urea consumption of 40 MT in FY26, 10 MT was imported while a large portion of domestic output depends on LNG as feedstock.
Last time global conflict impacted the subsidy outgo was in FY23, when fertiliser subsidy was at a record Rs 2.54 lakh crore as shipping of supplies through the red sea was impacted due to Ukraine-Russia conflict
As part of diversification of imports, the official of the deparment said urea is currently sourced from Oman, Malaysia, Vietnam, Georgia, Nigeria, Russia, Finland, Egypt, Algeria, Turkey, and the Netherlands.
Import of other variants diammonium phosphate (DAP) and NPKs were procured from Russia, Morocco, Egypt, USA, Jordan, South Korea, Tunisia, and Saudi Arabia via the Red Sea.
Urea continues to be sold to farmers at Rs 266.50 per 45 kg bag against global prices exceeding Rs 4000 a bag last month. Despite the global fluctuations in prices, the retail Diammonium Phosphate (DAP) prices are maintained at Rs 1,350 per 50 kg bag for farmers. according to the official.