Fertiliser Subsidy Rises Far Above Budget Estimate 2026–27

Introduction

This increase highlights the government’s efforts to protect Indian farmers from fluctuations in global fertiliser prices and ensure the timely availability of essential agricultural inputs at affordable rates. The rising subsidy requirement also raises concerns about the government’s overall expenditure on fertilisers, as actual spending may exceed the budget estimate of ₹1.71 lakh crore for FY 2026–27. For agriculture-based economies like India, affordable fertilisers are essential for maintaining agricultural productivity, ensuring food security and supporting farmers’ incomes.

Key Highlights of the Fertiliser Subsidy Increase 2026–27

The major developments related to fertiliser subsidies are:

• Rabi 2026–27 subsidy: The Union Cabinet approved ₹62,370.02 crore in fertiliser subsidy.
• Increase over previous Rabi season: The allocation increased by ₹24,417.73 crore.
• Kharif 2026 subsidy: The government allocated ₹41,533.81 crore.
• Combined subsidy: The subsidy for both seasons has crossed ₹1 lakh crore.
• Budget estimate: The Union Budget provided ₹1.71 lakh crore for fertiliser subsidies in FY 2026–27.
• Major reason: Higher international prices of urea, phosphatic and potassic (P&K) fertilisers, along with rising natural gas prices.

Why Has the Fertiliser Subsidy Increased?

The increase in fertiliser subsidy is mainly associated with rising international prices and the higher cost of fertiliser production.

1. Rising Global Fertiliser Prices

• India depends significantly on imports for several fertiliser products and their raw materials.
• International prices of urea and phosphatic and potassic (P&K) fertilisers have increased, making fertiliser procurement more expensive.
• When global prices rise, the government may need to provide additional financial support to ensure that farmers continue receiving fertilisers at affordable prices.

2. Increase in Natural Gas Prices

• Natural gas is an important raw material and energy source in the production of nitrogenous fertilisers, particularly urea.
• An increase in natural gas prices raises the overall cost of fertiliser manufacturing.
• As production becomes more expensive, the government may have to provide additional subsidies to protect farmers from higher retail prices.

3. India’s Dependence on Fertiliser Imports

India imports a considerable share of its fertiliser requirements and essential raw materials.

This makes the domestic fertiliser sector vulnerable to:

• International price fluctuations.
• Supply chain disruptions.
• Geopolitical tensions.
• Changes in global energy prices.
• Currency exchange rate movements.

Consequently, an increase in international fertiliser prices can directly increase the government’s subsidy burden.

4. Protecting Farmers from Rising Input Costs

• Fertilisers are essential agricultural inputs required to maintain soil fertility and improve crop productivity.
• If fertiliser prices increase significantly, farmers may face higher cultivation costs.
• To prevent this, the government provides subsidies to fertiliser companies so that farmers can purchase fertilisers at comparatively affordable prices.

What Is Fertiliser Subsidy?

• A fertiliser subsidy is financial assistance provided by the government to make fertilisers affordable and accessible to farmers.
• The government bears a portion of the actual cost of fertilisers, reducing the amount farmers have to pay.
• In India, fertiliser subsidies are mainly provided through two broad arrangements:

1. Urea subsidy.
2. Nutrient-Based Subsidy (NBS) for non-urea fertilisers.

• The primary objective is to ensure the availability of essential nutrients for agricultural production without placing an excessive financial burden on farmers.

What Is the Nutrient-Based Subsidy (NBS) Scheme?

• The Nutrient-Based Subsidy (NBS) Scheme is a government policy introduced in April 2010 to provide subsidies on non-urea fertilisers based on their nutrient content.
• Under this scheme, the government fixes subsidy rates for each kilogram of specified nutrients contained in fertilisers.
• The four major nutrients covered under the NBS framework are:

1. Nitrogen (N)
2. Phosphorus (P)
3. Potash (K)
4. Sulphur (S)

• The subsidy is provided to fertiliser companies, allowing them to sell fertilisers to farmers at comparatively affordable prices.

How Does the NBS Scheme Work?

The NBS mechanism works through the following process:

• Step 1: Fixing Nutrient-Based Subsidy Rates
  • The government announces subsidy rates for the four specified nutrients.
• Step 2: Fertiliser Production and Import
  • Fertiliser companies manufacture or import eligible non-urea fertilisers containing these nutrients.
• Step 3: Subsidy Payment
  • The government provides the applicable subsidy to fertiliser companies according to the eligible nutrient content and prescribed rates.
• Step 4: Affordable Fertiliser for Farmers
  • Farmers purchase the fertilisers at the notified or market-determined prices, depending on the applicable policy.
  • This system helps reduce the financial burden on farmers while supporting the availability of essential agricultural nutrients.

Difference Between Urea Subsidy and Nutrient-Based Subsidy

An important distinction in India’s fertiliser policy is the difference between the urea subsidy and the NBS scheme.

What Are the Four Major Nutrients in Fertilisers?

Plants require different nutrients for healthy growth and agricultural productivity.

These nutrients play an important role in maintaining soil fertility and improving crop yields.

Impact of Rising Fertiliser Subsidy on the Indian Economy

The rising fertiliser subsidy has both positive and negative implications for the Indian economy.

Positive Impacts

• 1. Protection of Farmers’ Income
  • Subsidies help farmers purchase fertilisers at affordable prices despite fluctuations in international markets.
• 2. Support for Agricultural Production
  • Timely availability of fertilisers supports crop growth and agricultural productivity.
• 3. Strengthening Food Security
  • Affordable agricultural inputs help maintain foodgrain production and contribute to India’s food security.
• 4. Protection Against Global Price Shocks
  • Government support reduces the immediate impact of international price increases on domestic farmers.

Challenges and Concerns

• 1. Rising Fiscal Burden
  • Higher fertiliser subsidies increase government expenditure and may create pressure on public finances.
• 2. Import Dependence
  • Dependence on imported fertilisers and raw materials exposes India to global market uncertainties.
• 3. Imbalanced Use of Fertilisers
  • The difference in subsidy arrangements for urea and non-urea fertilisers can encourage excessive nitrogen use compared with phosphorus and potash.
• 4. Soil Health Concerns
  • Imbalanced fertiliser application may contribute to declining soil health, nutrient deficiencies and environmental problems.
• 5. Opportunity Cost of Government Spending
  • Higher expenditure on fertiliser subsidies may reduce the fiscal space available for other developmental priorities, including irrigation, agricultural research, rural infrastructure and agricultural technology.

What Is the Way Forward?

To make India’s fertiliser sector more sustainable, the government needs to focus on long-term reforms.

• Promote balanced fertiliser use: Encourage farmers to apply fertilisers according to soil requirements.
• Strengthen Soil Health Cards: Promote soil testing and nutrient-based recommendations.
• Reduce import dependence: Increase domestic production and develop alternative sources of fertiliser raw materials.
• Promote nano-fertilisers: Encourage appropriate and scientifically validated alternatives that improve nutrient-use efficiency.
• Expand organic and natural farming: Promote sustainable agricultural practices wherever suitable.
• Improve fertiliser efficiency: Encourage precision farming, fertigation and efficient nutrient management.
• Strengthen domestic manufacturing: Invest in fertiliser production technologies and infrastructure.

A balanced fertiliser policy should protect farmers while ensuring efficient utilisation of public money and maintaining long-term soil health.

Conclusion

The increase in fertiliser subsidies for the Rabi 2026–27 season reflects the challenges faced by India’s agricultural sector due to rising global fertiliser and energy prices. Although higher subsidies help protect farmers from international price shocks, they also increase the government’s fiscal burden.

In the long run, India needs to move towards balanced fertiliser consumption, improved nutrient-use efficiency, greater domestic production and sustainable agricultural practices. The objective should not only be to make fertilisers affordable but also to ensure that Indian agriculture remains productive, economically viable and environmentally sustainable.

Frequently Asked Questions (FAQs)

Q1. What is the fertiliser subsidy approved for Rabi 2026–27?

The Union Cabinet approved ₹62,370.02 crore in fertiliser subsidy for the Rabi 2026–27 season.

Q2. Why has the fertiliser subsidy increased in 2026–27?

The increase is mainly due to rising international prices of urea and P&K fertilisers and higher natural gas prices used in fertiliser production.

Q3. What is the Nutrient-Based Subsidy Scheme?

NBS is a government scheme introduced in April 2010 that provides subsidies on eligible non-urea fertilisers based on their nutrient content.

Q4. Which four nutrients are covered under NBS?

Nitrogen (N), Phosphorus (P), Potash (K) and Sulphur (S).

Q5. Who receives the subsidy under the NBS scheme?

Fertiliser companies receive the subsidy from the government, helping them supply eligible fertilisers to farmers at affordable prices.

Q6. Does the NBS scheme cover urea?

No. Urea is covered under a separate government-administered subsidy framework.

Q7. What is the main concern associated with increasing fertiliser subsidies?

The major concern is the growing fiscal burden on the government, along with import dependence and the risk of imbalanced fertiliser consumption.