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India's Fertiliser Subsidy to Hit Rs 1.9 Lakh Crore by FY27: Key Insights

India's fertiliser subsidy is forecast to remain a major fiscal commitment, reaching approximately Rs 1.9 lakh crore in the 2026-27 financial year. The current Nutrient-Based Subsidy structure may require supplementary allocations as it doesn't fully cover import costs, particularly for Di-ammonium Phosphate. Industry bodies like CII are advocating for a shift to a Direct Benefit Transfer model to reduce misuse and encourage balanced fertiliser application. Concurrently, the government is revising urea pricing norms, which will critically affect domestic manufacturer profitability moving forward.

Key Points: India's Fertiliser Subsidy to Reach Rs 1.9 Lakh Crore in FY27

  • Subsidy to hit Rs 1.9 lakh crore in FY27
  • NBS gaps may need extra funds
  • DBT model proposed to curb misuse
  • New urea policy to impact profits
2 min read

India's fertiliser subsidy outgo to touch Rs 1.9 lakh crore in FY27

India's fertiliser subsidy is projected at Rs 1.9 lakh crore for FY27. Explore the fiscal impact, industry challenges, and proposed DBT reforms.

"The profitability of P&K fertilisers is expected to remain stable, with the Government of India likely to keep subsidy rates... remunerative. - Varun Gogia, ICRA"

New Delhi, Dec 31

The government's total fertiliser subsidy outgo is expected to remain substantial at around Rs 1.9 lakh crore in FY27, marking a major fiscal commitment to ensure affordability and availability of fertilisers, a report said on Wednesday.

The report from ICRA forecasted that fertiliser sales volumes will grow at a steady 1 per cent to 3 year-on-year rate in FY27, broadly in line with long-term trends.

The data showed that the higher Nutrient‑Based Subsidy rates for the Rabi season of FY26 will support domestic NPK manufacturers, but profitability of imports of Di‑ammonium Phosphate is doubtful due to elevated international prices.

Nutrient Based Subsidy (NBS) structure does not fully close the cost gap for importers, it noted. The agency forecasted that that budgeted subsidy allocations for P&K fertilisers in FY26 may prove inadequate, calling for supplementary allocations to meet shortfalls.

"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," said Varun Gogia, Assistant Vice President & Sector Head, ICRA said.

The government 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. The new policy regime will have crucial impact on the profitability of urea units going forward, Gogia added.

Apex business chamber CII, earlier this week, proposed that fertiliser subsidies, which accounts for 39 per cent of total central subsidies, should transition to a Direct Benefit Transfer (DBT) model to curb misuse and promote balanced fertiliser use. Issuing the DBT amount or fertiliser coupons before sowing can address farmers' concerns about upfront expenses.

Prime Minister Narendra Modi on December 21 laid the foundation stone of the ammonia-urea fertiliser project at Namrup in Assam's Dibrugarh district, which will be set up with an investment of Rs 11,000 crore.

- IANS

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Reader Comments

P
Priya S
My father is a farmer in Punjab. These subsidies are a lifeline for us, especially with rising input costs. The news about the new plant in Assam is good for long-term self-reliance. But the immediate concern is availability - sometimes we face shortages at the peak season. Hope the government ensures smooth supply.
A
Arjun K
₹1.9 lakh crore is a huge fiscal burden. As a taxpayer, I support helping our annadata, but we also need to promote sustainable farming practices. Over-reliance on chemical fertilisers is harming soil health in the long run. Subsidies should gradually shift to encourage organic and natural farming too. 🌱
S
Sarah B
Interesting analysis. The point about import profitability being doubtful due to international prices highlights our vulnerability. Investing in domestic manufacturing, like the Assam project, is the right strategic move for food security. Stable policy is key for industry to invest.
V
Vikram M
The report says budgeted allocations may be inadequate and need supplements. This is poor fiscal planning. Every year it's the same story with supplementary demands. Can we not forecast better? This ad-hoc approach needs to stop for better management of the economy.
N
Nisha Z
Good to see focus on non-urea fertilisers (NPK). Balanced use is so important for crop yield and soil. Many small farmers near my hometown still use too much urea because it's cheaper. Education along with subsidy is needed to change this habit. Jai Kisan! 🙏

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