India’s fertilizer subsidy bill for the current financial year may reach ₹2 trillion, surpassing the initial estimates of ₹1.75 trillion, according to experts at rating agencies. In the first six months of FY24, fertilizer subsidies have already exceeded 63% of the full-year allocation. Out of the ₹1.12 trillion spent on fertilizer subsidies this year, about ₹67,926 crore was allocated for urea and ₹42,200 crore for P&K (phosphatic and potassic) fertilizers. The conflict in West Asia may keep natural gas prices elevated, leading to higher fertilizer prices, and an anticipated increase in rabi acreage is expected to drive higher fertilizer consumption.
Pushan Sharma, Director of Research at Crisil Market Intelligence and Analytics, stated that the overall fertilizer subsidy for FY24 is projected to be 13-14% higher than the budgeted estimates due to increased consumption during the rabi season. Urea typically accounts for 53-55% of the total fertilizer consumption during the rabi season. Fertilizer consumption saw a 13-14% increase during the 2023-24 kharif season, with urea consumption rising by 6-7% and non-urea by 23-24%, as reported by Crisil. Urea represented 65% of the total fertilizer subsidy for kharif this year, with non-urea accounting for the remaining 35%. The conflict in West Asia is also expected to drive up natural gas and liquefied natural gas (LNG) prices, which could impact the urea subsidy bill for the 2024–25 rabi marketing season, resulting in a potential increase of 7-9% over that of kharif 2023-24.
India’s fertilizer subsidy bill for this financial year may reach ₹2 trillion, surpassing initial estimates of ₹1.75 trillion, as higher consumption and costlier natural gas drive up costs. During the first six months of FY24, fertilizer subsidies have already exceeded 63% of the full-year allocation. Out of the ₹1.12 trillion spent on fertilizer subsidies this year, approximately ₹67,926 crore went to urea, and ₹42,200 crore to P&K (phosphatic and potassic) fertilizers. The ongoing conflict in West Asia may maintain elevated natural gas prices, increasing fertilizer costs, while an anticipated increase in rabi acreage could lead to higher fertilizer consumption. Pushan Sharma, Director of Research at Crisil Market Intelligence and Analytics, stated that the overall fertilizer subsidy for FY24 is expected to be higher by 13-14% over the budgeted estimates, given the expected consumption increase during the rabi season. Urea accounts for 53-55% of the total fertilizer consumption during the rabi season, and the consumption of fertilizers has increased in recent years. With rising natural gas and liquefied natural gas (LNG) prices due to the conflict in West Asia, the urea subsidy bill for the 2024–25 rabi marketing season is expected to increase by 7-9% over that of kharif 2023-24.
For non-urea fertilizers, which make up 45-47% of rabi fertilizer consumption, Nutrient-Based Subsidy (NBS) rates for rabi 2024–25 have been revised to be 40% lower compared to those of kharif 2023–24, which is expected to help moderate the rise in the subsidy bill.