Fertiliser subsidy explained: how the nutrient-based subsidy works and why the rabi bill jumped 64%

What is the nutrient-based subsidy?

It is a fixed payment from the government for every kilogram of nutrient in a fertiliser, so that farmers can buy it at a price they can afford.

Plants need nitrogen, phosphorus, potash and sulphur. Fertilisers such as di-ammonium phosphate (DAP) and the complex NPKS grades carry these in different proportions. Under the nutrient-based subsidy, or NBS, the government fixes a rate per kilogram of each nutrient, and the subsidy on a bag follows from what is in it. The scheme has run since April 1, 2010, covers 28 phosphatic and potassic (P&K) grades, and replaced an older system in which each product had its own concession.

Companies set the retail price at a reasonable level, and the government pays the subsidy only after sales to farmers are confirmed on point-of-sale machines linked to Aadhaar.

What did the Cabinet decide?

It approved ₹62,370 crore for the rabi season, about 64% more than last year.

The rates apply from October 1, 2026, to March 31, 2027, the sowing season for wheat, pulses and oilseeds. Last rabi the figure was ₹37,952 crore, so the increase is ₹24,418 crore. Union Minister Ashwini Vaishnaw said the DAP rate “would remain the same at Rs 1,350 per bag of 50 kg each”. He linked the sharp rise in fertiliser prices to the West Asia crisis and the Russia-Ukraine war.

Vaishnaw put the rabi requirement at about 35 million tonnes. Stocks on Tuesday stood at 23.52 million tonnes against 17.35 million a year earlier, including 10.31 million tonnes of urea and 2.86 million of DAP. Stocks are a third higher than a year ago but still below the full requirement, so imports and production must cover the rest.

Why does the bill depend on prices abroad?

Because India buys much of what goes into its fertiliser from other countries.

India imports most of its DAP, nearly all of its phosphoric acid and all of its potash, according to one published analysis. When global prices rise, the same bag costs more to bring in. If the farm price is held at ₹1,350, the government’s share has to go up. That is why the subsidy for a season can change by tens of thousands of crores without any change in how much fertiliser farmers use.

This year supply routes added to the pressure. The same analysis says about half of India’s urea imports and some four-fifths of its ammonia and sulphur pass through the Strait of Hormuz, which was effectively shut when this year’s import tenders were being priced. Importers of DAP would lose money on each tonne without the government’s special support, according to ICRA, as cited there.

The chart shows the whole fertiliser bill, urea included, not only the P&K subsidy. The 2026-27 budget figure was drawn up before this year’s price rise, so the final bill may be higher.

How is urea different?

Urea is outside the NBS scheme, and its price to farmers is fixed by the government.

Urea has long been sold at a statutory price. The farm price of a 45 kg bag has been ₹242, or ₹266 with GST, since April 2018, according to the same analysis, which puts the landed cost this year at roughly ₹3,600 a bag. The government pays the difference. NBS was brought in partly to fix the imbalance that cheap urea created: farmers applied too much nitrogen and too little phosphorus and potash.

What it means for farmers and the budget

For a farmer, the effect is that the price at the counter does not move. DAP stays at ₹1,350, and makers of sulphur-based fertilisers get support equal to 20% of their actual procurement cost. For the budget, a ₹24,418 crore rise in a single season adds to a bill that depends on world prices the government does not control. The ₹62,370 crore is a tentative requirement, and the final amount depends on how much is sold.

What to watch

The new rates are already in force from October 1, so companies will be paid at them for supplies through March 31, 2027. Stocks against the 35 million tonne requirement, and the next import tender prices, will show how much further the subsidy bill climbs before the season closes.