In the FY27 Union Budget, the government pegged the fertiliser subsidy at about ₹1.7 trillion, 8.4 per cent lower than the revised estimate (RE) of ₹1.86 trillion for FY26. The FY26 RE itself was more than 11 per cent higher than the Budget estimate (BE), as India used record quantities of urea and diammonium phosphate (DAP) at high prices. The subsidy burden could rise as retail prices of major fertilisers, such as urea and DAP, are kept fixed to support farmers, while import costs and domestic production expenses increase.
Experts said urea prices in West Asia have risen by nearly $100 per tonne to around $600 per tonne (FOB) since the crisis began a week ago. DAP prices have also increased to around $750-770 per tonne from about $650-670 per tonne before the crisis. India imported roughly 70 per cent of its urea, 42 per cent of DAP, 83 per cent of ammonia, and about 60 per cent of liquefied natural gas (LNG) from Gulf countries in FY25.
Overall, the country imported close to 5.65 million tonnes (mt) of urea, 4.57 mt of DAP, and 2.54 mt of ammonia last year. As for LNG, a majority of the 60 per cent imports come from Qatar, which has halted supplies due to the war.
Natural gas is cooled and converted into LNG, which compresses its volume and makes it suitable for transportation over long distances. Once it reaches ports, LNG is reconverted into gas through a process called regasification and supplied to industries such as fertiliser, power and city gas distribution.
Sources said nearly 80 per cent of the raw material used to produce urea is natural gas, which is priced through a pooled mechanism.
India has already imported about 83 per cent more urea during April-January of FY26 due to a surge in domestic consumption.
“In FY26, I don’t think there will be any impact of the jump in fertiliser prices on subsidy calculations, as not many supplies have been contracted recently,” a senior industry official said.
He said that just before the crisis broke out, a leading public-sector fertiliser company had signed a deal to supply 1.3 mt of urea. “But since this deal was signed before the current crisis, it will not factor into the subsidy calculations,” the official said.
On DAP, the requirement for March has already been tied up and attention is now shifting to April, the official added. If the crisis continues into April, the landed price could start rising by the end of the month or early May.
“This is when the actual impact will begin to show,” the official explained.
On LNG prices as well, he said rates might not immediately track crude oil movements, as most prices are indexed to benchmarks, such as crude prices in Qatar, and are calculated using rolling averages rather than a single month’s price.
“Therefore, in short, the ill-effects of West Asia crisis on fertiliser landed price and also its subsidy implications will start setting in from April, not in March,” the official clarified.
 "India has already imported about 83 per cent more urea during April-January of FY26 due to a surge in domestic consumption")