India seeks major fertilizer subsidy increase as Iran-Israel conflict drives up import costs

India’s fertilizer ministry has asked the finance ministry to roughly double the country’s fertilizer subsidy allocation for the current fiscal year, as escalating costs linked to the Iran-Israel conflict push up the price of imported fertilizers and energy, Reuters reported.

The request comes just three months into the fiscal year that began in April, highlighting the speed and scale of recent cost increases. India is the world’s largest importer of urea and also relies heavily on imports of diammonium phosphate (DAP) and natural gas used in domestic nitrogen fertilizer production. Rising global energy prices have increased production and import costs across the fertilizer sector.

Under India’s subsidy system, the government fixes retail prices for urea and several key crop nutrients, compensating producers and importers for the difference between market costs and farmer prices. As global fertilizer and energy prices rise, the subsidy burden increases accordingly. India’s reliance on imports further heightens its exposure, as it imports about 90% of its crude oil requirements.

The ministry’s request is separate from the nutrient-based subsidy (NBS) rates announced in April, which increased support for phosphatic and potassic fertilizers by about 11%. If approved, the additional funding would represent one of the largest mid-year revisions to India’s fertilizer subsidy budget in recent years and underscore the fiscal pressure that fertilizer inflation is placing on import-dependent economies.

Government officials have not yet finalized the revised subsidy figure, according to Reuters.

Source: Reuters