Elevated global prices of finished products and LNG, the major feedstock for domestic urea production have seen the government spending close to Rs 1 lakh crore in the current fiscal so far on fertiliser subsidies. That’s about 56% of the budget estimate of Rs 1.76 lakh crore. Sources told FE a chunk of subsidy of Rs 77,871 crore has been incurred towards imports and domestic production of urea, India’s most consumed soil nutrients.
While Rs 21,255 crore has been so far provided for subsidies for imports as well as domestic production of fertilisers such di-ammonium phosphate (DAP), Muriate of Potash (MoP) and NPKs.
Officials said that while global prices of urea have fallen sharply from their peak in April, the higher subsidy outgo during the first quarters of the current fiscal is likely to push up subsidy expenditure by around Rs 15,000 – 20,000 crore against the Rs 2.17 lakh crore incurred during FY26.
With easing global supplies and diversified imports, the landed cost of urea, India’s most consumed soil nutrient variant, has declined by around 60% to $390/tonne currently, down from a peak of close to $1,000/tonne in April.
However, sources said that the global prices of DAP and MoP global have risen by 15% and 10% to $ 931/tonne and $ 383/tonne respectively in July, compared to a year ago period. Of the total estimated urea consumption of 40 million tonne (MT) in FY26, 10 MT was imported while a large portion of domestic output depends on LNG as feedstock.
The closure of the Strait of Hormuz since February has led to severe disruption in supplies of raw materials like LNG and finished products of soil nutrients. However, the government has been diversifying its imports and has purchased fertiliser variants from the spot market.
As part of its diversification plan following the disruption of supplies , the government has started importing urea from several countries including Oman, Malaysia, Vietnam, Georgia, Nigeria, Russia, Finland, Egypt, Algeria, Turkey, and the Netherlands.
Import of other variants 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 at Rs 266.50 per 45 kg bag against global prices exceeding Rs 4,000 a bag. This price has remained unchanged since March 2018.
Despite the global price fluctuations, the retail price of DAP has been maintained at Rs 1,350 per 50 kg bag for farmers, a senior official said.
The last time a global conflict impacted the subsidy outgo was in FY23, when the fertiliser subsidy bill was a record Rs 2.54 lakh crore. That happened when shipping supplies through the Red Sea were impacted due to the Ukraine-Russia conflict.
India imports about 70% of its needs of fertiliser and its raw materials. The annual consumption of several variants of fertiliser in FY26 was over 70 MT.