Government Aims for Rs 10-15k Crore Increase in Fertiliser Allocation for FY27 Amid Ongoing Middle East Tensions

Fertilizer Subsidy Bill May Rise by Rs 10,000-15,000 Crore in FY27

Government officials are tracking the surge in prices of crude oil and fertilizers, with estimates suggesting that the fertilizer subsidy bill may rise by at least Rs 10,000-15,000 crore in FY27 if international fertilizer prices continue to rise and the rupee depreciates further.

The fertilizer subsidy outlay for FY27 has been pegged at Rs 170,799 crore, while the Revised Estimate (RE) for FY26 pegged the fertilizer subsidy at Rs 186,460 crore, which is Rs 18,573 crore higher than the Budget Estimate (BE) for the current financial year.

Global prices of urea and di-ammonium phosphate (DAP) have risen by more than $100 per tonne since the Middle East conflict began 10 days ago. India imports about 30 percent of its fertilizer requirement, with the Middle East supplying nearly 40 percent of those imports.

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Industry stakeholders have told Moneycontrol that companies have enough stocks to meet demand for the next couple of months, partly due to carryover inventory from the previous season.

Fiscal strain is not yet evident, with the ministry expecting the Centre to reach a 4.5 percent fiscal deficit as a percentage of GDP in FY26 and 4.3 percent in FY27. However, if crude oil sustains at $100 per barrel for a few months, then fiscal pressures will rise.

Higher crude oil prices may force the government to cut excise duty, but it seems unlikely as of now. Brent oil futures surged past $100 per barrel on March 9, but post the US President's remarks that the conflict may end soon, Brent futures fell down to $95 per barrel.

A Rs 2 per litre cut in petrol and diesel excise duty could result in a revenue foregone of Rs 37,000 crore for the central government. Higher prices sustaining will also lead to OMCs absorbing costs – which would result in lower dividend payouts to the government next financial year.

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