India faces rising fertiliser costs and overuse issues as global market disruptions and domestic pressures force a rethink of longstanding farm support policies, threatening food security and fiscal stability.
India’s dependence on urea is now colliding with a tougher global fertiliser market, forcing New Delhi to balance farm support with a swelling subsidy bill. According to Business Today, Indian growers use more urea than the US and Brazil combined, yet pay just $2.80 for a 45-kilogram bag, far below the government’s procurement cost. The subsidy, introduced after the food shortages of the 1960s, helped lift India from chronic grain dependence to food surplus status and underpinned its rise as the world’s leading rice exporter.
But the economics have turned sharply less comfortable. Business Today said India paid almost twice pre-war prices in an April tender after supply routes through the Strait of Hormuz were disrupted, while higher natural gas import costs have also lifted the expense of domestic fertiliser production. A government official told the publication that the fertiliser subsidy bill could exceed $31 billion in the current financial year, far above the Rs 1.71 trillion budgeted, with the Indian Council for Research on International Economic Relations warning it could climb to Rs 3.32 trillion if tensions in West Asia persist.
At the same time, the government is trying to curb the overuse that has become embedded in Indian farming. Prime Minister Narendra Modi said in May that it was “essential” to reduce chemical fertiliser consumption and urged farmers to cut it by as much as half, while the agriculture ministry mounted a nationwide campaign through June to promote soil testing and lower application rates. Agriculture Minister Shivraj Singh Chouhan has warned that excessive fertiliser use can damage beneficial microorganisms in the soil, reduce yields over time and raise costs.
The pressure is visible on the ground. Farmers quoted by Business Today said previous attempts to scale back urea use had hurt yields, making them reluctant to risk their next harvest for long-term soil gains. Sukhbir Ram said his cooperative had supplied only three bags of urea per acre for rice, less than he said he needed, while Prem Chand, a farmer in Haryana, said his priority was protecting income in the next season. Industry veteran Josh Linville of StoneX said farmers everywhere tend to seek the highest possible output unless the rules force them to change.
Shortages are becoming more acute during the peak monsoon planting period, when demand for fertiliser is highest. The publication reported that some cooperatives have been instructed to ration sales, with some states limiting purchases to 50 bags a month per buyer, and the government is trialling a new pre-booking system in 40 districts. This comes against a weaker rainfall backdrop: India’s meteorological department has said June was the driest in 12 years and expects rainfall to remain below normal through September. Food inflation, already running at about 5.5% last month, faces further upside risk if fertiliser supplies stay tight and the monsoon disappoints, according to Nomura’s Sonal Varma.
Meanwhile, the government has continued to support other fertilisers even as it looks to rein in urea demand. Reuters-affiliated business outlets reported that the Union Cabinet approved a higher nutrient-based subsidy of Rs 41,534 crore for phosphatic and potassic fertilisers for the 2026 kharif season, up from Rs 37,216.15 crore a year earlier, with the rates running from April 1 to September 30, 2026. The move shows that while ministers want to encourage more efficient use, they are not yet prepared to withdraw support from farmers facing already fragile input costs.
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