The government fertiliser subsidy is likely to surge to Rs 1.95 lakh crore in FY26, an increase of Rs 28,000 crore from the budget estimate (BE) of Rs 1.67 lakh crore on higher demand for the soil nutrients.
Trade sources said that the subsidy bill would have been even higher had global prices of key fertilisers such as urea and Di-ammonium Phosphate (DAP) not remained largely stable in the current fiscal.
There has been a rise in demand for soil nutrients in the last kharif and rabi seasons, leading to surge in imports.
Experts say that the government in the forthcoming budget may allocate a lower amount as BE for the fertilizer subsidy for 2026-27 as cost incurred for supplying highly subsidised fertilizer to farmers remains dynamic. The costs are much dependent on global prices of soil nutrients and LNG, feedstock for urea manufacturing.
Budgetary Impact
In December, 2025, the government had provided for Rs 18,525 crore over the BE as the supplementary grant on account of fertilizer subsidy. The balance Rs 10,000 crore may be allocated at the revised estimate (RE) stage.
Surge in Consumption
“There is an increase of 8% and 2% in urea consumption in the last two seasons respectively, while imports of urea have been at record levels,” an official with a leading fertilizer manufacturer told FE.
Urea, is provided to the farmers at a notified maximum retail price of Rs 242 a 45 kg bag since March 2018, while the subsidy incurred by the government is around 85%.
Similarly, retail prices of phosphatic and potassic (P&K) fertilisers, including DAP were ‘decontrolled’ in 2010 with the introduction of a ‘fixed-subsidy’ regime as part of NBS mechanism.
As against the BE of Rs. 1.68 lakh crore in 2024-25, the government had increased the subsidy outgot to Rs 1.71 lakh crore at RE level last fiscal.
However the final allocation for soil nutrients increased to Rs. 1.91 lakh crore (Rs 1.18 lakh crore for urea and Rs 49,000 crore for nutrient based subsidy – NBS) FY25 was through supplementary demands for grants passed by the parliament.
The rating agency ICRA had projected the fertilizer subsidy in the current fiscal at around Rs 1.9 lakh crore.
ICRA had stated that the budgeted subsidy allocation for P & K fertilisers in FY26 will be inadequate and that supplementary allocations by the Government may be required during the year to meet the shortfall.
The fertilizer ministry has stated that nearly 73% of the country’s fertiliser consumption is met through domestic production.
According to industry sources, the total volume of import of all varieties of fertilisers — urea, DAP, NPK (nitrogen, phosphorus, and potassium) and muriate of potash (MOP) — rose 60% to 17.37 million tonne (MT) during April-November of 2025-26 compared to same period in the previous fiscal.
Overall imports of soil nutrients may increase to a record 20 MT by the end of current fiscal.
In FY25, the world’s second largest consumer of fertilizers, imported 16 MT of soil nutrients of all variants.
India imports 20% of its urea requirement, while two-thirds of DAP consumption is met via imports. The country depends on imports of the muriate of potash (MoP).
Domestic manufacturing of DAP also depends on key raw materials ‘rock phosphate’ mostly imported from Senegal, Jordan, South Africa and Morocco. While for potash, the country is entirely dependent on imports. India has signed a long term agreement for supply of about 2 MT of fertilizer annually from Russia, Israel, Belarus and Jordan.