India’s fertilizer subsidy bill is set to exceed previous records as DAP imports are finalized at $935 per tonne

India’s fertilizer subsidy program faces increasing fiscal pressure as rising global prices push government spending beyond budgeted limits. Recently, a consortium of state-owned and cooperative fertilizer companies secured about 1.3 million tonnes of DAP at USD 930-935 per tonne CFR, one of the highest prices in recent years, significantly raising subsidy needs.

The government maintains the retail urea price at Rs 276 per 45-kilogram bag, even as import-parity prices are near Rs 78,000 per tonne, according to Agro Spectrum India. At these levels, New Delhi covers over 90% of urea’s economic cost. A similar gap exists for DAP, with the retail price fixed at Rs 1,350 per bag despite rising import costs due to supply disruptions in the Strait of Hormuz.

To protect farmers from higher input costs in the 2026 Kharif season, the Indian cabinet raised the Nutrient-Based Subsidy (NBS) rates, effective from April 1 to September 30. Subsidies are now Rs 47.32 per kilogram for nitrogen, Rs 52.76 for phosphate, Rs 2.38 for potash, and Rs 3.16 for sulfur, with increased support for nitrogen, phosphate, and sulfur compared to the previous Rabi season. While these rates prevent retail price hikes, they also increase the government’s fiscal burden.

India uses about 40 million tonnes of urea each year, with domestic production meeting 87% of demand. However, this production depends on imported liquefied natural gas, exposing manufacturers to higher feedstock costs after energy supply disruptions in the Strait of Hormuz. Increased production costs and expensive imports are expected to push total fertilizer subsidies above the 2026-27 budget allocation.

Analysts expect the government to keep regulated fertilizer prices in place through the Kharif season due to the political sensitivity of input costs ahead of the upcoming state elections. Longer-term reforms, such as extending the Nutrient-Based Subsidy to urea, are under discussion but unlikely in the near future.

Source: Agro Spectrum India