Weak rupee may raise fertiliser import, production costs and subsidy load

A sliding rupee could make both fertiliser imports and domestic production costlier, pushing the subsidy bill higher as urea and DAP prices remain fixed for farmers

India’s fertiliser subsidy could rise further as the sharp depreciation of the rupee in recent days increases the landing cost of imports and domestic production expenses, particularly of urea and DAP whose retail prices are fixed, experts and industry players have said.

 

Since the prices are capped, companies cannot pass this additional burden to farmers, and this can only be covered by a higher subsidy, they said.

 

Between April to October 2025, India has imported almost 137 per cent more urea as compared to the corresponding period last year, while DAP imports during the same period were almost 69 per cent more than April-October 2024, industry data showed. NP/NPKS imports too have risen by almost 81 per cent in this period. 

A weaker rupee not only makes import of finished products costlier, but also increases domestic cost of producing urea, as almost 85-90 per cent of the production cost of urea is imported gas that is priced in dollars.

 

DAP production will also become more expensive, as its key inputs — rock phosphate and phosphoric acid — are fully imported.

 

Sources said if rupee depreciates by a minimum of ₹3 against the dollar, then domestic production cost of urea could go up by at least ₹700 per tonne, while that of imported price of urea could go up to by ₹1,200 per tonne.

 

The net subsidy implication could be around ₹1,000 crore -1,500 crore extra, both on account of rise in prices of imported urea and also increase in production cost of domestically produced urea, traders said.

 

These calculations are based on the assumptions of the last four months of FY26.

 

When it comes to DAP, experts said additional implication due to higher imported cost and higher input cost would be somewhere around ₹2,100 per tonne.

 

Presently, the imported price of DAP is quoted at around $730 per tonne, which is around ₹65,700 per tonne. DAP calculations are also based on import assumptions.

 

Some experts said that the net impact on fertiliser subsidy could be around ₹3,000 crore.

 

India's expenditure on fertiliser subsidies (both urea and non-urea) has exceeded last year's level in the first seven months of FY26, as the country imported huge quantities urea, DAP and NPKS.

 

Against last year's level of ₹102,445.92 crore in the first seven months of FY25, the government has already spent around ₹123,315.24 crore in FY26.

 

The FY26 budgeted fertiliser subsidy for both urea and non-urea fertilisers is around ₹168,000 crore.

 

Experts said that even before the rupee depreciation, the overall subsidy was estimated to exceed around ₹190,000 crore.