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Elevated global prices of finished products and LNG, the major feedstock for domestic urea production, resulted in the government spending over Rs 1.14 lakh crore on fertiliser subsidy in the first half of the current fiscal.
That’s about 65% of the budget estimate of Rs 1.76 lakh crore for FY27. Sources told FE that a chunk of subsidy of Rs 87,316 crore has been incurred towards imports and domestic production of urea, the country’s most consumed soil nutrient.
While Rs 26,857 crore has been provided so far for subsidies for imports as well as domestic production of fertilisers such as di-ammonium phosphate (DAP), muriate of potash (MoP) and NPKs.
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Trade sources said that while urea prices fell from their peak in May, the overall subsidy outgo towards soil nutrients would be around Rs 15,000 – 20,000 crore more than the Rs 2.17 lakh crore incurred during FY26.
Meanwhile, the budget estimate for FY27 has been revised upward to Rs 1.84 lakh crore.
With easing supplies and diversified imports, the landed cost of urea has declined by around 57% to $406/tonne last month, down from a peak of $947/tonne in May 2026.
The global price of urea dropped 23% in August year-on-year, according to the Department of Fertilisers.
As part of its diversification plan following supply disruption, the government has started importing urea from several countries including Oman, Malaysia, Vietnam, Georgia, Nigeria, Russia, Finland, Egypt, Algeria, Turkey, and the Netherlands.
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However, the global price of DAP increased by 8.4% to $925/tonne in August, from $853/tonne in April 2026, according to official data. Trade sources attribute the rise in the global price of DAP to increased freight costs due to the conflict in West Asia.
Imports of other variants like DAP and NPKs were procured from Russia, Morocco, Egypt, USA, Jordan, South Korea, Tunisia, and Saudi Arabia via the Red Sea.
Additionally, the landed cost of sulphur, used in manufacturing DAP, Single Super Phosphate (SSP) and other complex fertilisers, has doubled since the beginning of the year to around $1050/tonne due to supply disruption in the Strait of Hormuz which may boost subsidies.
Urea continues to be sold at Rs 266.50 per 45 kg bag against global prices exceeding Rs 4,000 a bag. This price has remained unchanged since March 2018. Despite the global price fluctuations, the retail price of DAP has been maintained at Rs 1,350 per 50 kg bag for farmers, a senior official said.
The last time a global conflict impacted the subsidy outgo was in FY23, when the fertiliser subsidy bill reached a record Rs 2.54 lakh crore. That happened when shipping supplies through the Red Sea were impacted due to the Ukraine-Russia conflict.
India imports about 70% of its fertiliser needs and raw materials. The annual consumption of several fertiliser variants in FY26 was over 70 million tonnes.
TOPICSfertiliserThis article was first uploaded on September twenty-five, twenty twenty-six, at three minutes past eight in the night. © IE Online Media Services (P) Ltd