Over 58% of India's FY27 fertiliser subsidy budget has been exhausted in under five months as global prices surged significantly. According to sources from Business Standard, the percentage of expenditure comes down to around 56% of Budget Estimates if a re-appropriation of some expenditure is taken into account. The Budget Estimates then becomes ₹1.77 trillion if those expenses are added. This rapid expenditure pace indicates the substantial impact of global price increases on India's fertiliser import requirements and domestic production costs.
As reported by sources, the data shows that till August 19, the central government spent around ₹99,000 crore, a significant chunk of which is for paying for urea imports. Against the Budget allocation of around ₹36,349 crore for subsiding imported urea, almost ₹33,592.41 crore (almost 92.4%) had been spent till August 19. This expenditure pattern indicates the substantial impact of global price increases on India's fertiliser import requirements. The government's response has been to cap retail prices of urea at ₹267 per 45-kg bag for farmers, with the difference between market prices and retail prices being paid as subsidy to companies.
For subsidies on the production of urea in the country, sources reported that as against a reassessed sum of ₹86,635 crore given in the Budget, almost ₹44,279.27 crore (around 51.1%) was spent till August 19. This spending pattern reflects the government's commitment to supporting domestic urea manufacturing amid rising input costs and international price pressures. The government also caps DAP retail prices at ₹1,350 per 50-kg bag for farmers, ensuring affordable crop nutrients through subsidy payments.
Regarding subsidies on P&K (phosphorus and potassium) fertilisers, for indigenous production and imports, as against the Budget allocation of ₹54,000 crore, around ₹21,256.45 crore (or around 39.3%) was exhausted till August 19. This spending level suggests that while P&K fertiliser subsidies are being utilized, they represent a smaller portion of the total fertiliser subsidy expenditure compared to urea-related subsidies. The government's pricing strategy ensures that farmers have access to essential plant nutrients at controlled rates.
According to sources, average urea prices in international markets had jumped to almost $947 per tonne (free-on-board) around May, up from around $447 at the start of the conflict in February, before coming down to $447 from July onwards. The spike, coupled with the rise in prices of DAP and ingredients such as phosphoric acid, ammonia and sulphur, meant that India had to purchase crucial plant nutrients at a much higher cost ahead of kharif sowing. The government, through its fertiliser companies and cooperative sector, started a drive to purchase urea, DAP and other critical ingredients to ensure farmers got adequate supplies during the season, which started in July. As a result, India had around 20 million tonnes of fertiliser in stock before the sowing season, which was almost 53% of the season's requirement. Notably, the prices of liquefied natural gas (LNG), which accounts for almost 80% of the production cost of urea, also shot up significantly, adding to the overall cost pressures.
