 "Centre hikes non-urea fertiliser subsidies with allocation of Rs 37K cr")
The Union Cabinet on Friday approved Nutrient-Based Subsidies (NBS) for the first half of 2025-26 (H1FY26) with an allocation of ₹37,216 crore, highlight of which was a sharp over 41 per cent jump in per-kg subsidy on phosphorus (P) as compared to the rabi season of FY25.
Experts, however, said that despite the sharp spike in per-kg subsidy on phosphorus, it has yet not accounted for the entire loss that companies are bearing in importing Di-Ammonia Phosphate (or DAP that contains the highest almost 46 per cent phosphorus) and that the firms would continue to make a loss of around ₹1,000 on every tonne of DAP imported into India at current landed price.
“This, however, could get adjusted only if global rates come down in coming months,” a senior industry executive said.
DAP is the second most-consumed fertiliser in India after urea.
In a statement in Parliament on Friday, the government said that FY25 Revised Estimate (RE) of fertiliser subsidies now stands at more than ₹1.91 trillion as against the Budget Estimate (BE) of ₹1.68 trillion, a rise of almost 14 per cent.
The increased expenditure on subsidies is largely due to spike in non-urea fertiliser subsidy by almost ₹9,310 crore in FY25.
The full-year subsidy on non-urea fertiliser for FY26 has been pegged at ₹49,000 crore in the Union Budget, of which ₹37,216 crore was allocated just for kharif crops.
Welcoming the decision, Agriculture Minister Shivraj Singh Chouhan said that between 2010-11 and 2012-13, the then UPA government led by the Congress party had raised the retail price of a bag of DAP by almost ₹800 but ever since the Narendra Modi government took over, there has not been any hike in retail rates of DAP and the Centre has been bearing all the subsidy burden.
The sharp jump in phosphorus subsidy also means that the special incentive of ₹3,500 per tonne that the Centre was giving outside the NBS since April 2024 to compensate for the loss in imports now gets subsumed into the overall NBS.
This, some experts said, will also benefit all products that contain phosphorus, such as different grades of NP and NPKs, and not just DAP.
"The subsidy announced by the government under the NBS scheme for the kharif season 2025 has been revised upwards with the hardening in some of the input prices and finished fertilizer prices. The subsidy for DAP, which was ₹25,411 per tonne (including special additional package) for the rabi season of FY25 has now been increased to ₹27,800. As the prices of key inputs and finished fertilizers in the international markets had risen in the recent past, the contribution margin on imported DAP was negative to the tune of around ₹4,000 per tonne. The revised subsidy rates and rupee appreciation against the dollar of late are likely to result in easing of these losses to around ₹1,000 per tonne,” said Girishkumar Kadam, senior vice president, Icra.
That apart, as per the announced NBS rates, the subsidy for other grades of NPKs will witness an increase, translating into an improvement in the profitability of the phosphatic fertilizer players, Kadam added.