Fertilizer subsidy bill may spike to ₹2 trillion

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₹2 trillion this financial year as higher consumption and costlier natural gas drive it past initial estimates of ₹1.75 trillion, experts at rating agencies said. In the first six months of FY24, fertilizer subsidies have already crossed 63% of the full-year allocation. Out of the ₹1.12 trillion fertilizer subsidy spent this year, about ₹67,926 crore went into urea and ₹42,200 crore into P&K (phosphatic and potassic) fertilizers.

The war in West Asia may keep natural gas prices elevated, driving fertilizer prices higher, and an expected increase in rabi acreage may lead to higher consumption of fertilizers. “The overall fertilizer subsidy for FY24 is to be higher by 13-14% over the budgeted estimates as an increase in consumption is expected to continue in the rabi season owing to the anticipated increase in acreage under crops like wheat, mustard and potato, to name a few," said Pushan Sharma, director, research, Crisil Market Intelligence and Analytics. Urea contributes 53-55% of the total fertilizer consumption during the rabi season.

Fertilizer consumption rose 13-14% during the 2023-24 kharif season, with urea up 6-7% and non-urea up 23-24%, according to Crisil. Urea accounted for 65% of the total fertilizer subsidy for kharif this year, and non-urea for the balance 35%. The war in West Asia is also expected to push up prices of natural gas and liquefied natural gas (LNG), Sharma added.