Fertiliser industry seeks subsidy rate hike amid rising raw material costs

Rising raw material costs due to the West Asia crisis may pressure India's complex fertilizer production unless the government revises subsidy rates

India's domestic production of key complex fertilisers, namely NP and NPKS, could come under pressure in the coming months if the Central government does not immediately revise the subsidy allocated for kharif 2026, as production costs have risen sharply due to the West Asia crisis, senior officials at leading fertiliser manufacturing companies said.

 

Sources said representatives of top domestic fertiliser firms, who have been meeting government officials over the past few days, believe the landed prices of key raw materials used to manufacture NP and NPKS fertilisers have increased sharply because of the conflict in West Asia, pushing up production costs.

   

"We have taken some price hikes in NP and NPKS because of the war, but there is a limit to which retail prices can go up, after which it starts hurting us if the subsidy component is not increased," a senior industry official said.

 

The official said the nutrient-based subsidy (NBS) rates were last revised in April 2026 for the kharif season and did not take into account the impact of the West Asia conflict.

 

According to the official, the landed price of ammonia, which was around $400-500 per tonne, had surged to nearly $900 per tonne before easing somewhat, while sulphur prices had risen to around $1,000-1,100 per tonne from about $550 per tonne.

 

"All this has put a heavy burden on production, which the price hike is not able to compensate for fully," the official said.

 

In India, complex fertilisers such as di-ammonium phosphate (DAP), NP and NPKS are covered under the nutrient-based subsidy regime. While companies are free to determine retail prices, they receive a fixed per-kilogram subsidy based on nutrient content.

 

In April 2026, the Union Cabinet approved a 10-21 per cent increase in per-kilogram subsidy rates for non-urea fertilisers for kharif 2026 under the NBS regime compared with kharif 2025. The decision is expected to cost the exchequer around Rs 41,534 crore, about 12 per cent more than the previous season.

 

However, industry representatives said the increase is no longer adequate as raw material prices have risen further since then.  In India, nutrient-based subsidies are fixed twice a financial year. First during kharif season which runs from April to September and secondly for the rabi season from October to March.