Fertiliser Ministry Seeks Higher Subsidy As Iran War Pushes Up Costs

Rising global commodity prices triggered by the conflict involving Iran are beginning to affect India's subsidy calculations, with the fertiliser ministry reportedly seeking a much larger financial allocation for the current fiscal year.

According to government officials, the ministry has approached the Centre for a substantial increase in the fertiliser subsidy budget as higher import costs show little sign of easing.

The fertiliser subsidy for the current fiscal year stands at ₹1.71 lakh crore. However, a senior official in the fertiliser department expects the subsidy bill to cross ₹3 lakh crore.

Costlier Imports Add To Pressure

India depends heavily on overseas supplies to meet its fertiliser requirements.

The country imports key products such as urea and di-ammonium phosphate (DAP) and also relies on liquefied natural gas (LNG), an important raw material used in domestic urea production.

With global energy and commodity prices moving higher amid geopolitical tensions, the government's fertiliser bill is expected to rise sharply. Officials indicated that authorities are simultaneously working on expanding domestic production capacity to reduce long-term dependence on imports.

The view within the administration is that international prices may remain elevated for some time, making additional budgetary support necessary.

Energy Costs Create A Bigger Challenge

The impact is not limited to fertilisers alone.

India imports a significant portion of its crude oil requirements, making the economy sensitive to prolonged disruptions in global energy markets. Higher fuel prices can also feed into fertiliser production costs, adding another layer of pressure.

Officials said the government has already extended financial support to oil refiners and fuel retailers to cushion the impact of rising global prices and prevent a sharp increase in domestic fuel rates during the initial phase of the conflict.

Economists have cautioned that a prolonged period of expensive energy and fertilisers could affect inflation, government finances and overall economic growth, particularly if weather conditions become unfavourable.

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Government Maintains Focus On Growth

Despite the possibility of additional spending, the government does not appear inclined to reduce planned capital expenditure.

Officials believe domestic demand remains resilient and continue to see the economy on a stable footing.

Sources:

The Economic Times

Reuters