Fertiliser subsidy zooms amid unrestrained consumption, weak rupee and geopolitical tensions
India's fertiliser subsidy bill has surged sharply due to a combination of unrestrained consumption growth, rupee depreciation raising import costs, and geopolitical disruptions to global fertiliser supply chains.
In the first ten months of 2025-26 (April–January), India's fertiliser imports rose approximately 50% year-on-year to ~20.9 million tonnes, driven by an 83% jump in urea imports (~8.9 million tonnes).
The Union Cabinet approved a one-time special package on DAP (Diammonium Phosphate) beyond the normal NBS rates of ₹3,500 per MT due to adverse geopolitical conditions affecting procurement viability.
Final Budget allocation for the Department of Fertilizers for 2025-26 was revised upward to ₹1,91,836.29 crore.
India's rupee depreciation has compounded import costs: a ₹3 fall in the rupee against the dollar raises the domestic production cost of urea by at least ₹700/MT and the imported urea cost by ₹1,200/MT.
Nutrient-Based Subsidy (NBS) Scheme
The Nutrient-Based Subsidy (NBS) Scheme was introduced in 2010 to rationalise fertiliser subsidies by fixing a per-nutrient subsidy rate (per kg of N, P, K, S) instead of subsidising specific fertiliser products. It applies to phosphatic and potassic (P&K) fertilisers. Urea remains outside the NBS framework and is price-controlled separately.
Key Details
- NBS Scheme: launched April 1, 2010 by the Department of Fertilizers, Ministry of Chemicals and Fertilizers
- NBS covers: DAP, MOP, SSP, complex fertilisers — all non-urea P&K fertilisers
- Urea: Not under NBS; MRP is fixed by the government; subsidised through a separate urea subsidy mechanism
- NBS Kharif 2025 outlay: ₹37,216.15 crore (approved by Cabinet)
- Phosphorus subsidy increased sharply — from ₹30,800/MT to ₹43,600/MT (41% jump) for Kharif 2025
- The Cabinet approves NBS rates biannually (Kharif: April–September; Rabi: October–March)
- Criticism of NBS: Incentivises overuse of specific nutrients where subsidy is high; does not curb consumption, only shifts subsidy mechanism
The surge in fertiliser subsidy is partly structural to the NBS design — it passes through global price spikes (when MRP is fixed but import cost rises) as increased government outgo. Geopolitical supply disruptions to DAP directly inflate the NBS payout.
India's Fertiliser Import Dependency
India is structurally import-dependent for key fertiliser nutrients. While domestic urea production covers most consumption, potash (MOP) is 100% imported, and phosphatic fertilisers (DAP, MAP) require significant imports. This creates strategic vulnerability when geopolitical events — such as Russia-Ukraine war or sanctions on Belarus — disrupt global supply.
Key Details
- India's total fertiliser consumption 2023-24: ~601 LMT (Lakh Metric Tonnes)
- Domestic production: ~503 LMT; imports: ~177 LMT (balance-of-trade context)
- Urea import dependency: ~87% domestically met (domestic production has increased significantly)
- Muriate of Potash (MOP): 100% imported — primarily from Canada, Jordan, Russia, Belarus
- DAP: Major source is China, Saudi Arabia (Maaden), Jordan (JPMC), and Morocco
- Long-term supply agreements: Saudi Arabia's Maaden signed with Indian companies (IPL, KRIBHCO, CIL) for 3.1 MMT DAP annually for 5 years from 2025-26
- Russia-Ukraine war: Disrupted potash from Belarus; elevated DAP and urea prices globally 2022-2024
- India's urea: Neem-coating of 100% urea made mandatory in 2015 to reduce misuse
The 50% surge in imports and 83% jump in urea imports in 2025-26 reflects both the policy-driven restoration of stocks and the impact of a weaker rupee making every import tonne costlier.
PM Pranam Scheme and Balanced Fertiliser Use
PM Pranam (PM Programme for Restoration, Awareness, Nourishment and Amelioration of Mother Earth) is a government scheme launched in 2023 to reduce chemical fertiliser consumption and encourage balanced nutrient use and organic alternatives.
Key Details
- PM Pranam Scheme: announced 2023-24 Budget; operational for three years (FY 2023-24 to FY 2025-26)
- Mechanism: States/UTs that reduce fertiliser consumption below a 3-year baseline receive grants equivalent to 50% of the resultant subsidy savings (as capital investment for soil health/organic farming infrastructure)
- Target: ₹20,000 crore reduction in the national fertiliser subsidy bill over the scheme period
- Complements: Soil Health Card Scheme, National Mission for Sustainable Agriculture (NMSA), and Paramparagat Krishi Vikas Yojana (PKVY)
- India's fertiliser NPK use ratio (ideal: 4:2:1) is skewed toward N (nitrogen/urea) due to price differential
Despite PM Pranam's incentive structure, fertiliser consumption has continued to rise — revealing that price controls and subsidies on urea create persistent overconsumption. The geopolitical-driven subsidy surge underscores the urgency of the scheme's objectives.
- Department of Fertilizers revised Budget allocation 2025-26: ₹1,91,836.29 crore
- NBS Kharif 2025 outlay: ₹37,216.15 crore; Phosphorus subsidy: ₹43,600/MT
- India fertiliser imports (Apr–Jan 2025-26): ~20.9 MMT (up ~50% YoY)
- Urea imports (Apr–Jan 2025-26): ~8.9 MMT (up ~83% YoY)
- India's MOP (potash) dependency: 100% imported
- One-time special DAP package: ₹3,500/MT above NBS rates
- Rupee impact: ₹3 depreciation → ₹700/MT higher urea production cost; ₹1,200/MT higher urea import cost
- Saudi Arabia–India DAP deal: 3.1 MMT/year for 5 years from 2025-26
- PM Pranam: 3-year scheme (FY24–FY26); 50% of subsidy savings returned as grants to states
- Neem-coated urea mandate: 100% of urea production since 2015 (reduces misuse as industrial input)