A parliamentary panel on Friday urged the finance ministry to allocate sufficient funds for the fertiliser subsidy at the budget estimate (BE) level itself.
Recurring Pattern
“This recurring pattern of underestimation at the BE stage and subsequent mid-year enhancement through supplementary grants creates operational uncertainty, disrupts subsidy release cycles, and impairs the longterm planning capacity of the fertilizer industry,” the standing committee on chemicals and fertilisers (2025-26) stated in the report.
In FY24, against the BE of Rs. 1.79 lakh crore, the final allocation for providing highly subsidised fertilisers to farmers were revised upward to Rs. 1.95 lakh crore. In FY25, although the BE of Rs. 1.68 lakh crore was enhanced to Rs 1.77 lakh crore.
In 2025-26, the BE of Rs. 1.84 lakh crore of fertiliser subsidy has been revised to Rs 2.15 lakh crore, an increase of over Rs. 31,000 crore, the panel its report stated.
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The panel urged the fertiliser ministry to adopt a more realistic, data-driven approach to budgetary estimation; one that takes into account historical expenditure trends, projected consumption, prevailing international commodity prices, exchange rate volatility, and natural gas price fluctuations, so that BE allocations are as close to actual requirements as possible.
The practice of parking subsidies in subsequent year’s liabilities also distorts the true picture of Government’s subsidy outgo, it has observed.
Volatility in Urea Imports
The panel also noted that the budgetary provision for imported urea has shown considerable volatility, reflecting the challenges in accurately estimating subsidy requirements in a sector influenced by domestic production levels and global price movements.
In 2025–26, the BE of Rs. 21,000 crore towards urea subsidy (imported) was revised to Rs. 51,972 crore at the revised estimate (RE) stage, representing an increase of about Rs. 30,972 crore or 147%. By the end of January 2026, actual expenditure had already reached Rs. 36,952.33 crore, the panel noted.
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The panel also has noted that diversion of fertilisers especially urea to industries such as resin, adhesive, plastic, textiles and leather industries remain a serious concern despite the direct benefit transfer framework with Aadhaar based biometric authentication with a cap of 50 bags per buyer per month. At present, urea is provided to farmers through about three lakh retail outlets at a notified maximum retail price of Rs 242 per 45-kg bag since March 2018, while the subsidy borne by the government is around 90%.
Retail prices of phosphatic and potassic (P&K) fertilisers, including DAP, were decontrolled in 2010 with the introduction of a fixed-subsidy regime under the NBS mechanism. The government announced Nutrient based subsidy twice – kharif and rabi seasons annually.
TOPICSFertilisersThis article was first uploaded on March thirteen, twenty twenty-six, at forty-two minutes past eight in the night.