ICRA projects fertiliser subsidy outlay at Rs 1.9 lakh crore for FY27

New Delhi [India], December 31 : The Government of India's total fertilizer subsidy outlay is projected to remain substantial at approximately Rs 1.9 lakh crore for FY27, according to the rating agency ICRA. This forecast highlights a major fiscal commitment intended to maintain the affordability and availability of fertilizers for the agricultural sector across the nation.

The estimate is part of a broader assessment of the Indian fertilizer industry, which indicates that while certain subsidy rates will benefit domestic manufacturers, challenges persist for importers.

ICRA noted that the higher Nutrient-Based Subsidy (NBS) rates for the Rabi season of FY26 are expected to support domestic NPK producers. However, the imports of Di-ammonium Phosphate (DAP) will likely remain unprofitable due to elevated international prices and an NBS structure that fails to bridge the cost gap for importers.

Varun Gogia, Assistant Vice President & Sector Head, ICRA, said, "The fertiliser subsidy outgo is expected to be around Rs 1.9 lakh crore for FY27. The profitability of P&K fertilisers is expected to remain stable, with the Government of India likely to keep subsidy rates under the NBS scheme remunerative to ensure comfortable availability of non-urea fertilisers for farmers."

Given the current pricing dynamics, the agency anticipates that the budgeted subsidy allocation for P&K fertilizers in FY26 may prove inadequate. Consequently, supplementary allocations by the government might be required during the year to address the projected shortfall. The report emphasizes that calibrated fiscal support remains essential to balance global price volatility with farmer affordability.

Gogia said the Government of India is expected to revise the energy norms and the fixed costs payable to urea units as part of the retention pricing mechanism by the end of this fiscal. He added that the new policy regime will be a key development to watch and will have an important bearing on the profitability of urea units going forward.

Gogia noted, "Fertiliser sales volumes are expected to grow at a steady 1%-3% year-on-year in FY2027, broadly in line with long-term trends."

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