Fertiliser Subsidy Could Increase as Global DAP Prices Surge by 13% Since April

Since April, global prices for di-ammonium phosphate (DAP) have surged by 13%, now sitting at $652 per tonne, sparking worries regarding India’s fertilizer subsidy obligations. Domestic production has failed to keep pace with demand, and disruptions in Red Sea trade routes have further complicated imports. Consequently, the government might consider increasing subsidies for the fiscal year 2026 to stabilize DAP prices for farmers.

Global DAP prices, the second most utilized fertilizer following urea, have increased notably, surpassing $652 per tonne from the earlier range of $550 to $560 per tonne earlier this year. Should DAP prices remain elevated in the forthcoming weeks, fertilizer subsidies for FY26 are likely to rise, as the government aims to maintain steady maximum retail prices. Industry insiders have indicated to FE that India’s DAP needs are largely met through imports, hence any increase in international prices will lead to higher import costs for domestic companies.

Currently, the costs incurred for landed DAP imports are exceeding the subsidies granted by the government as well as the retail prices. Phosphatic and potassic (P&K) fertilizer prices, including DAP, were decontrolled in 2010 as a part of the nutrient-based subsidy (NBS) system. Nevertheless, in practice, recent years have seen an open-ended subsidy approach similar to that employed for urea.

Sources from the industry suggest that, akin to the previous fiscal year, the government is likely to provide supplementary subsidies beyond the initially announced NBS rates during the kharif and rabi seasons. For the current kharif season, the subsidy on DAP has been raised to Rs 27,799 per tonne under the NBS framework. Meanwhile, the maximum retail price (MRP) of DAP has remained constant at Rs 27,000 per tonne or Rs 1,350 for a 50 kg bag for the past few years. This situation translates to a total subsidy and MRP reimbursement of Rs 54,799 per tonne for companies, while the landed cost has surpassed Rs 55,000 per tonne, not including customs duties and various handling charges. “Should DAP global prices continue to escalate, importing fertilizer would become a significant loss-making endeavor,” warned a source. However, officials have asserted that the MRP of DAP will remain frozen to shield farmers from global price fluctuations in soil nutrients.

India’s annual domestic DAP production ranges from 4.5 to 4.8 million tonnes (MT), while demand hovers between 10 to 11 MT. The country’s DAP import primarily comes from West Asia and Jordan, with domestic demand for muriate of potash (MoP) met entirely by imports from nations like Morocco, Saudi Arabia, Belarus, Canada, and Jordan. The Indian government has established long-term agreements with Morocco and Saudi Arabia to secure about 2 million tonnes annually from each nation.

Since the start of the year, DAP imports have been hampered by the ongoing Red Sea crisis, leading to rerouted ships covering an additional 6,500 km around the Cape of Good Hope, resulting in added delivery times of 14 to 45 days to reach Kandla port. “The subsidy will be disbursed to fertilizer corporations according to the confirmed and published rates, ensuring these essential products remain accessible to farmers at reasonable prices,” stated an official note.

Typically, the government announces updates on subsidies through the NBS twice each year prior to the sowing seasons for kharif and rabi crops. Nevertheless, special provisions for additional subsidies have been made to address spikes in global prices. Due to the increase in international fertilizer prices, the subsidy allocation for FY25 was amended to Rs 1.91 lakh crore, raising it from the initial budget estimate of Rs 1.68 lakh crore. For the budget estimate for 2025-26, a sum of Rs 1.67 lakh crore has been set aside for fertilizer subsidies. Since March 2018, the price of retail urea has been consistent, maintaining farmer costs at Rs 242 per 45 kg bag, even though the current production costs stand at around Rs 2,600.