Nutrient-Based Subsidy (NBS) Approval for FY26

The Union Cabinet has approved the Nutrient-Based Subsidies (NBS) for the first half of the financial year 2025-26 (H1FY26) with a significant allocation of ₹37,216 crore.

Key Highlights

• The per-kg subsidy on phosphorus (P) has witnessed a sharp increase of over 41% compared to the rabi season of FY25.
• Despite the increase, companies are still expected to incur a loss of approximately ₹1,000 per tonne on imported Di-Ammonia Phosphate (DAP) due to current landed prices.

Subsidy Statistics

• The Revised Estimate (RE) for fertiliser subsidies for FY25 is over ₹1.91 trillion, up from a Budget Estimate (BE) of ₹1.68 trillion.
• The increase in expenditure is primarily due to a ₹9,310 crore spike in non-urea fertiliser subsidy.
• The full-year subsidy for non-urea fertiliser in FY26 is pegged at ₹49,000 crore, with ₹37,216 crore allocated for kharif crops.

Government Stance and Industry Impact

• The Modi government has maintained no increase in retail DAP prices, absorbing the subsidy burden.
• The phosphorus subsidy hike subsumes the special incentive of ₹3,500 per tonne previously given outside the NBS.
• This adjustment benefits all phosphorus-containing products, including various NP and NPK grades.

Expert Insights

• Girishkumar Kadam from Icra noted that: 
  • The subsidy for DAP is increased to ₹27,800 per tonne for the kharif season 2025, up from ₹25,411 per tonne during the rabi season of FY25.
  • The recent increase in input and finished fertilizer prices led to negative margins of about ₹4,000 per tonne on imported DAP, expected to reduce to around ₹1,000 per tonne with revised subsidies and rupee appreciation.
  • Improved profitability is anticipated for phosphatic fertilizer players with increased subsidies for other NPK grades.