Centre hikes non-urea fertiliser subsidy 10-21% amid West Asia crisis

Government raises non-urea fertiliser subsidy by up to 21 per cent for kharif 2026 to shield farmers from rising global prices and supply disruptions linked to West Asia tensions

With fertiliser prices rising sharply due to the West Asia crisis, the Union Cabinet on Wednesday approved a 10 to 21 per cent increase in per kilogram subsidy rates for non-urea fertilisers in kharif 2026 under the Nutrient-based Subsidy (NBS) regime as compared to kharif 2025. This will cost the exchequer around Rs 41,534 crore, around 12 per cent more than the last season.

 

This clearly means that unless global prices of finished products such as DAP and other complex fertilisers come down significantly, or there is a reduction in the prices of raw materials such as sulphur, ammonia and sulphuric acid used in domestic production of P&K fertilisers, India’s fertiliser subsidy might overshoot the FY27 Budget estimates.

   

The Gulf region accounts for 20–30 per cent of India’s urea requirement and 30 per cent of DAP imports, and also supplies nearly 50 per cent of India’s LNG imports, which is a key feedstock for urea production.

 

This higher subsidy also means that the Centre has decided to ensure that DAP, which is the second-largest fertiliser consumed in India, continues to be sold at Rs 1,350 per 50 kg bag while the Centre bears the additional cost.  "The Cabinet’s approval of a ₹41,500-crore fertilizer subsidy is a prudent and timely measure to mitigate the cascading impact of supply disruptions and price volatility arising from the West Asia conflict. By ensuring the continued availability of key fertilizers at stable prices, the decision safeguards farmers’ input affordability during the critical Kharif season," Chirag Jain, Partner - Agri and Allied Sector at Grant Thornton Bharat said in a statement.

 

In FY27, the Centre had budgeted Rs 54,000 crore out of the total fertiliser subsidy allocation of Rs 170,781 crore for non-urea fertilisers in the Budget. This was almost 10 per cent lower than the revised subsidy estimate on non-urea fertilisers in FY26, pegged at around Rs 60,000 crore.

 

After Wednesday’s decision, the per kg subsidy on nitrogen has been increased by 10 per cent compared to last kharif season, while that on phosphorus has gone up by 21 per cent and that on sulphur by another 21.07 per cent.

 

The subsidy on potash has been kept unchanged at last year’s level of Rs 2.38 per kg.  The decision, taken at a Cabinet meeting chaired by Prime Minister Narendra Modi, fixed subsidy rates effective April 1 to September 30, 2026.Subsidy is extended across 28 grades of P&K fertilisers under the Nutrient Based Subsidy (NBS) scheme, in force since April 2010.

 

Globally, ever since the conflict broke out in West Asia, the price of urea has risen by almost $200–$250 per tonne from pre-conflict levels to nearly $700 per tonne, while DAP rates have also increased from $650–$670 per tonne to around $750–$770 per tonne during the crisis.

 

In total, the country imported close to 5.65 million tonnes of urea, 4.57 million tonnes of DAP and 2.54 million tonnes of ammonia in FY25.

 

Retail prices of non-urea fertilisers such as di-ammonium phosphate (DAP), muriate of potash (MoP) and nitrogen, phosphate, potash (NPK) are decontrolled and determined by manufacturers, while the Centre gives them fixed subsidies each year.

 

As per a recent ICRIER paper, India, the world’s second-largest fertiliser producer and consumer after China, in 2024–25 consumed about 70.7 million metric tonnes (MMT) of fertiliser products, equivalent to roughly 33 MMT of nutrients (nitrogen (N), phosphorus (P) and potash (K)). However, despite its sizeable domestic industry, India’s fertiliser economy remains deeply embedded in global supply chains.

 

Domestic production is itself reliant on imported feedstock: nearly 85 per cent of the natural gas used in urea manufacturing is imported, while about 90–95 per cent of phosphatic rock phosphate and half of the phosphoric acid are sourced from abroad.

 

Once the import content of intermediate inputs is accounted for, India’s effective dependence on global fertiliser supply chains rises to nearly 68–70 per cent, leaving the fertiliser sector, and by extension the country’s food security, highly exposed to geopolitical disruptions and supply shocks.