Fertiliser Ministry Seeks Doubling of Subsidy Budget to Rs 1.71 Lakh Crore for FY27
The Fertiliser Ministry has asked the government to double the subsidy allocation for the next financial year. The ministry wants Rs 1.71 lakh crore for FY27. This is a 100% increase from the current year’s budget. The request comes as global fertiliser prices rise sharply.
Why the Subsidy Bill Is Rising
The main reason for the big jump is the ongoing conflict in West Asia. This war has pushed up the cost of importing key raw materials like natural gas and phosphates. Fertiliser companies in India depend heavily on imports. When global prices go up, the government must pay more subsidy to keep fertiliser affordable for farmers.
For example, the price of urea has climbed by nearly 30% in international markets over the past six months. Similarly, DAP and potash prices have also increased. India imports about 30% of its urea and almost all of its potash. So any rise in global prices directly affects the subsidy bill.
Current Year’s Subsidy May Cross Rs 3 Lakh Crore
The ministry has warned that the subsidy bill for the current financial year could exceed Rs 3 lakh crore. This is much higher than the original budget of Rs 1.71 lakh crore set for FY26. The government may need to seek supplementary grants to cover the extra cost. If global prices stay high, the FY27 demand of Rs 1.71 lakh crore may also prove insufficient.
To put this in context, the total fertiliser subsidy was around Rs 1.62 lakh crore in FY23. It fell to Rs 1.12 lakh crore in FY24 as global prices cooled. But now prices are rising again. The government’s subsidy spending is very sensitive to global commodity cycles.
Impact on Farmers and the Economy
Fertiliser subsidy is a critical support for Indian agriculture. It keeps the cost of inputs low for farmers. Without subsidy, the price of a bag of urea could double. That would hurt crop yields and farmer incomes. But a high subsidy bill also strains the government’s finances. It leaves less money for other development projects like roads, health and education.
For example, if the subsidy bill rises by Rs 1 lakh crore, the government may have to cut spending elsewhere or borrow more. This can push up interest rates and inflation. So the finance ministry must balance the needs of farmers with overall fiscal discipline.
What Happens Next
The finance ministry will review the fertiliser ministry’s request during the budget preparation process. The final allocation will depend on global price trends and the government’s revenue position. If prices continue to rise, the government may also consider other steps like promoting alternative fertilisers or improving efficiency in the supply chain.
For now, investors should watch global energy and fertiliser prices closely. A sustained rise in subsidy could widen the fiscal deficit and affect bond yields. But it also shows the government’s commitment to supporting farmers. The final budget numbers will give a clearer picture in February next year.
