Rising Urea, LNG Prices Could Push Fertiliser Subsidy Burden Beyond Rs 3 Lakh Crore

New Delhi, May 26 (KNN) India's fertiliser subsidy burden could exceed Rs 3 lakh crore in FY27, substantially higher than the Budget Estimate of Rs 1.71 lakh crore, as the ongoing West Asia crisis continues to push up global prices of urea, LNG and other key fertiliser inputs.
 
The subsidy requirement, which was earlier projected to remain below Rs 2 lakh crore before the geopolitical tensions escalated, has surged sharply due to rising import costs and concerns over supply disruptions through the strategically important Strait of Hormuz.
 
If current market conditions persist throughout the Kharif season, the subsidy bill may cross Rs 3 lakh crore, a government official said. 

The official indicated that in the event of continued elevated prices and supply-chain disruptions extending into the Rabi season, the subsidy outgo could potentially reach Rs 3.5 lakh crore.
 
West Asia Crisis Drives Sharp Increase In Urea And LNG Costs
 
Global urea prices have witnessed an unprecedented rise during the crisis. Within approximately 40 days, prices climbed nearly 65 percent from around USD 482 per tonne in late February 2026 to nearly USD 795 per tonne in early April. 
 
More recently, urea import tenders floated by Indian Potash Limited reportedly discovered prices ranging between USD 935 and USD 959 per tonne, reported Businessline.
 
The increase in LNG prices has further intensified cost pressures. LNG, which serves as the principal feedstock for urea production, rose from approximately USD 10.4 per MMBtu in late February to around USD 17.4 per MMBtu by early May, after peaking at nearly USD 25.4 per MMBtu during early March.
 
Government Seeks Immediate Solutions
 
The issue of fertiliser security also came under discussion during the release of a policy paper titled Ensuring India's Fertiliser Security Amid Rising Geopolitical Risks, authored by agricultural economist Ashok Gulati and others from Indian Council for Research on International Economic Relations (ICRIER).
 
K V Raju, Member of NITI Aayog, urged ICRIER to provide actionable recommendations that can be implemented immediately rather than long-term proposals.
 
Raju emphasised that with Kharif sowing set to begin, policy recommendations must focus on addressing immediate challenges facing the current agricultural season. 
 
He also called for concrete alternatives to offset disruptions in fertiliser imports from West Asia, questioning whether suppliers from countries such as Russia, Canada, Australia and parts of Africa could effectively bridge the supply gap.
 
Industry observers note that rising fertiliser subsidies could place additional pressure on government finances even as authorities seek to shield farmers from the impact of surging global commodity prices and geopolitical uncertainty.
 
(KNN Bureau)