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India's Fertilizer Subsidy to Hit Rs 1.9 Lakh Crore in FY27, Says ICRA

ICRA projects the Government of India's fertilizer subsidy outlay will remain substantial at approximately Rs 1.9 lakh crore for the fiscal year 2027. The rating agency notes that higher subsidy rates will support domestic producers, but importers of DAP face profitability challenges due to high international prices. The report suggests the current FY26 budget for P&K fertilizers may be inadequate, potentially requiring supplementary government allocations. Fertilizer sales volumes are expected to grow at a steady 1-3% annually, aligning with long-term trends.

Key Points: India's FY27 Fertilizer Subsidy Projected at Rs 1.9 Lakh Crore

  • Major fiscal commitment for agriculture
  • Support for domestic NPK producers
  • Import challenges for DAP
  • Steady volume growth forecast
2 min read

ICRA projects fertiliser subsidy outlay at Rs 1.9 lakh crore for FY27

ICRA projects India's fertilizer subsidy at Rs 1.9 lakh crore for FY27. Analysis covers NBS rates, import challenges, and fiscal support needs.

"The fertiliser subsidy outgo is expected to be around Rs 1.9 lakh crore for FY27. - Varun Gogia, ICRA"

New Delhi, December 31

The Government of India's total fertilizer subsidy outlay is projected to remain substantial at approximately Rs 1.9 lakh crore for FY27, according to the rating agency ICRA. This forecast highlights a major fiscal commitment intended to maintain the affordability and availability of fertilizers for the agricultural sector across the nation.

The estimate is part of a broader assessment of the Indian fertilizer industry, which indicates that while certain subsidy rates will benefit domestic manufacturers, challenges persist for importers.

ICRA noted that the higher Nutrient-Based Subsidy (NBS) rates for the Rabi season of FY26 are expected to support domestic NPK producers. However, the imports of Di-ammonium Phosphate (DAP) will likely remain unprofitable due to elevated international prices and an NBS structure that fails to bridge the cost gap for importers.

Varun Gogia, Assistant Vice President & Sector Head, ICRA, said, "The fertiliser subsidy outgo is expected to be around Rs 1.9 lakh crore for FY27. The profitability of P&K fertilisers is expected to remain stable, with the Government of India likely to keep subsidy rates under the NBS scheme remunerative to ensure comfortable availability of non-urea fertilisers for farmers."

Given the current pricing dynamics, the agency anticipates that the budgeted subsidy allocation for P&K fertilizers in FY26 may prove inadequate. Consequently, supplementary allocations by the government might be required during the year to address the projected shortfall. The report emphasizes that calibrated fiscal support remains essential to balance global price volatility with farmer affordability.

Gogia said the Government of India is expected to revise the energy norms and the fixed costs payable to urea units as part of the retention pricing mechanism by the end of this fiscal. He added that the new policy regime will be a key development to watch and will have an important bearing on the profitability of urea units going forward.

Gogia noted, "Fertiliser sales volumes are expected to grow at a steady 1%-3% year-on-year in FY2027, broadly in line with long-term trends."

- ANI

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Reader Comments

S
Sarah B
While the intent to support farmers is clear, nearly 2 lakh crore is a huge fiscal burden. I hope there is strict monitoring to prevent leakages and ensure the subsidy actually reaches the small and marginal farmers who need it most, not just the big players or middlemen.
A
Arjun K
Good to see support for domestic NPK producers. We need to become more self-reliant (Aatmanirbhar) in fertiliser production. Relying on imports with volatile international prices is too risky for our food security. The focus should be on boosting local manufacturing capacity.
P
Priyanka N
The article mentions a steady 1-3% growth in sales volume. But alongside subsidy, we need a stronger push for sustainable farming. Over-reliance on chemical fertilisers is degrading our soil in the long run. Subsidy policies should also encourage organic and natural farming practices.
V
Varun X
The fact that they already anticipate a shortfall in FY26 and might need supplementary allocations is concerning. It shows how difficult it is to budget for this. Global prices are so unpredictable. Hope the new policy regime for urea units brings some stability.
K
Karthik V
As a taxpayer, I understand the need, but I have a respectful criticism. Such a large, recurring subsidy needs a clear, long-term exit strategy. We must invest in R&D for more efficient fertilisers and water management so that farmers' productivity increases and dependence on subsidies reduces over time.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

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