Budget 2024: Govt likely to stick to Rs 1.64 lakh crore fertiliser subsidy in FY25

Fertiliser companies have struggled with weak prices, muted demand and an influx of low-cost Chinese inventory in the global market through FY24, but are now seeing green shoots of recovery.

The upcoming Union budget on July 23 is likely to keep the fertiliser subsidy at approximately Rs 1.64 lakh crore as estimated in the interim financial statement of the government, which is a significant reduction of over 13 percent from the previous year’s expenditure of Rs 1.89 lakh crore, a government official said.

“The fertiliser subsidy allocation is likely to remain more or less the same in the Union budget as urea imports will be significantly lower this year with a boost in nano urea, and the global input prices are expected to be stable,” the official told Moneycontrol on condition of anonymity.

“Fertiliser input costs have dropped significantly from their 2022-23 peaks. Key inputs for fertiliser production saw substantial price declines from their 2022-23 records. Compared to 2023, prices are expected to average lower in 2024 and 2025. However, a resumption of China’s exports and lower-than-expected crop prices could contribute to further declines in fertiliser prices,” a blog post on the April edition of the Commodity Markets Outlook, a flagship report published by the World Bank, said.

India has seen significantly high fertiliser subsidy expenditures in the past few years, coming in at at over Rs 2.5 lakh crore in 2022-23, due to volatile global fertiliser prices.

The government is now moving towards slashing fertiliser subsidy allocations with a focus on nano urea, PM PRANAM (PM Programme for Restoration, Awareness, Nourishment and Amelioration of Mother Earth) that incentivises lower consumption of chemical fertilisers and the department of fertilisers' market development assistance (MDA) scheme, which promotes composting and alternative fertilisers.

The government is also aiming at bringing down the urea imports bill substantially by one-third in FY25 to Rs 21,000 crore from Rs 31,000 crore in 2023-24. In fact, the government has said that it aims to bring the urea import bill to zero by the end of 2025 by achieving self-sufficiency in urea production. Urea accounts for 55-60 percent of the total fertiliser consumption.

"Our agenda is very clear. By the end of 2025, Modiji (referring to Prime Minister Narendra odi) will end the country's import dependency on urea,” then fertiliser minister Mansukh Mandaviya had said in April.

By 2025-26, eight nano urea plants with a capacity of 44 crore bottles equalling 195 lakh tonnes of conventional urea will be commissioned, the government had said in a statement in June 2023. Liquid nano urea is a nitrogenous fertiliser that can improve the efficiency of crop nutrients.