The Indian government is likely to cut the fertiliser subsidy as global urea prices have crashed by over 50 percent, easing the burden on the exchequer. According to official data, India's urea production has increased significantly from 225 lakh tonnes in 2014-15 to 306.67 lakh tonnes in 2024-25, reducing dependence on imports.
Sharp Decline in Global Urea Prices
International urea prices have plummeted from over $600 per tonne in 2022 to below $300 per tonne in 2026, driven by oversupply and weak demand. This decline allows the government to lower subsidy outlays while ensuring farmers get affordable fertilisers.
Rise in Domestic Production
India's domestic urea production has grown steadily due to policy support and capacity expansion. The government has revived closed fertiliser plants and set up new ones under the New Investment Policy. In 2024-25, production reached a record 306.67 lakh tonnes, up from 225 lakh tonnes in 2014-15, a rise of over 36 percent.
Impact on Subsidy Budget
The fertiliser subsidy bill for 2025-26 was budgeted at around Rs 1.64 lakh crore, but lower global prices may reduce actual spending. Officials indicate that the subsidy per bag of urea could be cut by Rs 50-100, saving thousands of crores. The government aims to rationalise subsidies without passing on the full price hike to farmers.
Government's Strategy
The government is considering a dual approach: reducing subsidy rates and promoting direct benefit transfer to farmers. This would improve efficiency and curb leakage. The fertiliser ministry has proposed a new subsidy formula linked to global prices, ensuring farmers benefit from lower rates.
Industry Reactions
Fertiliser companies have welcomed the move, stating it will improve their cash flows and reduce pending subsidy claims. Farmer groups, however, have urged caution to ensure that input costs do not rise sharply. The government is expected to announce the revised subsidy rates in the upcoming budget.
Conclusion
With global urea prices declining over 50 percent and domestic production rising, India is well-placed to cut fertiliser subsidies. This will help reduce fiscal deficit while maintaining farmer welfare. The final decision will balance budgetary savings with agricultural needs.
