Budget 2025 likely to set aside Rs 1.7 lakh crore for fertiliser subsidy

A good monsoon often increases fertiliser demand

The Budget for the financial year 2025-26 is expected to allocate Rs 1.7 lakh crore towards fertiliser subsidies, a marginal increase from the Rs 1.64 lakh crore budgeted in FY25, sources said.

The second Budget of Modi 3.0 is likely to promote organic alternatives through increased allocation for market development assistance (MDA) scheme, the sources said.

“2025-26 expected budget allocation for fertiliser subsidy is likely at Rs 1.7 lakh crore. A good monsoon often increases fertiliser demand but this depends on multiple factors, including weather conditions,” a government official told Moneycontrol on condition of anonymity.

The revised fertiliser subsidy for FY 2024-25 is also expected to be around Rs 1.7 lakh crore, he added.

The MDA scheme, which was launched in 2023 to promote organic fertiliser, is set to receive an increased allocation of Rs 150 crore, up from Rs 100 crore in FY25. However, due to lower-than-expected demand for organic fertilisers, the utilisation of the MDA budget has been reduced in the Revised Estimates of the current fiscal year, they said.

What is MDA programme?

“The government provides a subsidy under the MDA scheme. Though Rs 100 crore was allocated for MDA in FY 2024-25, much less has been utilised as demand was lower. For 2025-26, the allocation, however, is likely to increase to Rs 150 crore, reflecting expectations of higher demand as awareness about organic fertilisers grows,” another government official told Moneycontrol, wishing not to be identified.

The MDA scheme is designed to promote the use of organic fertilisers and manure as part of India's broader strategy for sustainable agriculture. The scheme aims to reduce reliance on chemical fertilisers by encouraging the production, sale and use of organic fertiliser.

Under the scheme, subsidies of Rs 1,500 per metric tonne are provided for Fermented Organic Manure (FOM), Liquid Fermented Organic Manure (LFOM), and Phosphate Rich Organic Manure (PROM). Fertiliser marketing companies claim subsidies for these products through the Integrated Fertiliser Management System portal.

The scheme aligns with India’s goal of shifting towards environmentally friendly agricultural practices and promoting soil health.

Efforts to promote organic and alternative fertilisers are part of the government’s strategy to reduce dependency on chemical fertilisers like urea and NPK. The use of nano urea and nano DAP is also being encouraged to reduce the subsidy burden.

One bag of 45 kg urea costs around Rs 22,500, but farmers pay Rs 242, with the remaining cost borne by the government. Nano urea and organic fertilisers could help reduce the subsidy bill in the long term, the second official told Moneycontrol.

The global geopolitical situation, particularly the Middle East crisis, has affected the availability of Di-Ammonium Phosphate (DAP). As a result, efforts have been intensified to promote alternatives like NPK and single phosphate fertilisers. The estimated consumption of DAP fertilisers during 2023-24 was around 10.81 million metric tonnes, according to the Fertiliser Association of India.

“In the wake of the DAP shortage, there were efforts to transition to alternative fertilisers like NPK and single phosphate to balance demand,” the official added.