India’s fertiliser subsidy burden could cross ₹3 lakh crore in FY27, significantly exceeding the Budget Estimate of ₹1.71 lakh crore, as escalating geopolitical tensions in West Asia continue to drive up global prices of urea, LNG and other critical fertiliser inputs. Before the latest geopolitical crisis, the subsidy requirement was expected to remain below ₹2 lakh crore. However, sharp increases in import costs and growing concerns over supply disruptions through the strategically vital Strait of Hormuz have substantially altered the outlook. If current global market conditions continue through the ongoing Kharif season, the fertiliser subsidy outgo may exceed ₹3 lakh crore. Furthermore, prolonged supply-chain disruptions extending into the Rabi season could potentially push the subsidy burden closer to ₹3.5 lakh crore.
Global Urea Prices Surge Amid Supply Concerns
The ongoing West Asia crisis has triggered an unprecedented rise in international urea prices, creating severe cost pressures for India, one of the world’s largest fertiliser importers. Within nearly 40 days, global urea prices surged by approximately 65%, rising from around $482 per tonne in late February 2026 to nearly $795 per ton in early April. More recently, urea import tenders floated by Indian Potash Limited reportedly discovered prices between $935 and $959 per ton, indicating continued volatility in global fertiliser markets.
Rising LNG Costs Add Further Financial Stress
In addition to urea prices, the sharp increase in liquefied natural gas (LNG) prices has further intensified subsidy pressures. LNG serves as the primary feedstock for domestic urea production, making its pricing critical for India’s fertiliser sector. LNG prices reportedly increased from around US$10.4 per MMBtu in late February to approximately US$17.4 per MMBtu by early May, after briefly peaking at nearly US$25.4 per MMBtu during early March. The rise in energy prices has significantly increased the cost of domestic fertiliser manufacturing as well as imports, further widening the government’s subsidy burden.
Government Explores Immediate Policy Solutions
The issue of fertiliser security recently gained attention during the release of a policy paper titled Ensuring India’s Fertiliser Security Amid Rising Geopolitical Risks, prepared by agricultural economist Ashok Gulati and researchers from Indian Council for Research on International Economic Relations (ICRIER). During the discussion, K V Raju, Member of NITI Aayog, urged policymakers and researchers to focus on immediate and actionable solutions rather than long-term proposals. He emphasised that with Kharif sowing already underway, the priority should be addressing near-term fertiliser supply challenges and ensuring uninterrupted availability for farmers.
India Evaluates Alternative Fertiliser Supply Sources
Government officials are also exploring alternative import sources to reduce dependence on West Asia amid rising geopolitical uncertainty. According to discussions at the policy event, countries including Russia, Canada, Australia and several African nations are being evaluated as potential suppliers capable of offsetting supply disruptions from the region. Industry experts believe India may increasingly diversify its fertiliser sourcing strategy to strengthen long-term supply security and reduce vulnerability to geopolitical shocks.
Rising Subsidy Burden Could Impact Fiscal Planning
As reported by knnindia.co.in, analysts note that the sharp increase in fertiliser subsidy requirements could place additional strain on government finances at a time when policymakers are attempting to shield farmers from global commodity inflation. At the same time, authorities continue balancing fiscal pressures with the need to maintain affordable fertiliser prices for the agricultural sector, which remains critical for India’s food security and rural economy.
