Budget 2026-27: Fertiliser industry seeks duty cuts, subsidy reforms

The Fertiliser Association of India has suggested rationalisation of customs duties on key raw materials, incentives for downstream projects, and bringing urea under the nutrient-based subsidy framework in Union Budget 2026-27.

The FAI has demanded exemption or reduction of basic customs duty on inputs such as ammonia, phosphoric acid, sulphuric acid, rock phosphate and sulphur.

It has also sought relief from Agriculture Infrastructure and Development Cess, and resolution of issues arising from inverted GST duty structures leading to accumulation of unutilised input tax credit.

On the direct tax front, the industry has recommended restoration of weighted deductions for R&D and farmer education, incentives for downstream fertiliser projects, accelerated depreciation for energy-efficient equipment, and easing of compliance and litigation burdens.

 

The FAI has emphasised the need to promote balanced fertilisation to protect soil health, noting that disparities between urea and P&K fertiliser prices have led to an imbalanced N:P:K consumption ratio.

Bringing urea under the nutrient-based subsidy framework, alongside promotion of innovative fertiliser products, bio-fertilisers and integrated nutrient management, would help correct price distortions and support sustainable farming practices, it said.

The industry has underscored the need for sustained policy support to encourage fresh investments in indigenous phosphatic and potassic fertiliser capacity, backward integration projects, and strategic overseas sourcing, in line with Aatmanirbhar Bharat and Make in India objectives.

Sustained volatility in international prices of key fertiliser inputs such as rock phosphate, phosphoric acid, ammonia, potash and sulphur, driven by geopolitical tensions, supply chain disruptions and export restrictions by major producing countries, has increased production costs and import dependence.

While timely government interventions, including supply arrangements with Morocco, Saudi Arabia and Qatar, have helped secure availability, continued uncertainty in global markets has impacted investment sentiment.

FAI Director General Suresh Kumar Chaudhari said sustained fertiliser security depends on maintaining a balance between affordability for farmers, financial viability for manufacturers, and investment continuity.

"Predictable subsidy frameworks, rational taxation, and timely policy interventions are essential to ensuring uninterrupted nutrient availability while supporting efficient and sustainable fertiliser use," he said in a statement.

The industry has urged the government to consider targeted policy and fiscal measures to strengthen India's fertiliser security, promote balanced nutrient use, and support domestic manufacturing.

To maintain the momentum in foodgrain production, it has emphasised the importance of improving nutrient use efficiency, encouraging modern agricultural technologies, and ensuring a stable and predictable policy environment amid rising input costs and climate variability.

Budget 2026-27 will be presented on February 1 in Parliament.