Budget 2025: Fertiliser industry eyes subsidy allocation, schemes for rural economy

Fertiliser players are eyeing the government's subsidy allocation for the sector.

Fertiliser stocks have sprung back into action in the run up to the Union Budget 2025, with the market once again speculating on the quantum of subsidies for the sector. These stocks often draw attention ahead of every Budget, as investors eye government spending on rural programs, which could drive agricultural demand and positively impact fertiliser companies.

Building on these expectations, several fertiliser stocks have witnessed strong buying momentum this month, as the market anticipates the government to maintain or potentially increase its subsidy allocations for the sector.

Names like Chambal Fertilisers and Chemicals, Gujarat State Fertilizers & Chemicals, Madras Fertilizers, Mangalore Chemicals & Fertilizers, Rama Phosphates, and Paradeep Phosphates have surged up to 12 percent in January thus far.

Global financial major Bank of America Securities believes that while subsidies are unlikely to decline materially, lower crude oil prices, along with some moderation in food inflation on average can provide some wiggle room. Despite that, the firm does not expect any material rationalisation on subsidies, and if anything, forecasts it to be earmarked for a marginal rise.
Meanwhile, if the government unveils higher spending on rural infrastructure, subsidies, or agricultural reforms in the upcoming Budget, it could boost demand for fertilisers and potentially drive up their stock prices further.

Analysts at Goldman Sachs expect the government's expenditure on rural, welfare, transfer schemes and subsidies to be around their pre-pandemic trends of around 3 percent of the GDP in the upcoming budget.

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"Given the reduced majority of the NDA (National Democratic Alliance) in the 2024 elections, there might be some re-allocation in expenditure towards rural transfers and welfare spending," the brokerage said.

BoFA echoed a similar sentiment as the firm also expects increased spending on existing welfare schemes like the PM-Kisan Samman Nidhi Yojana (cash transfer to farmers), and MSME support schemes.

"A potential 10 percent increase in support for improving roads to connect remote villages and upgrade roads is being planned. The government could increase the amount of cash transfer to farmers, which is currently at Rs 6,000 per year, paid in three installments," BoFA wrote in a note.

Moreover, the research firm also sees the possibility of the government pushing for organic production and natural farming to improve exports for the agriculture sector.

Also Read | Budget 2025: Agri industry hopes for measures to boost farmer incomes, bolster rural infrastructure

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