Forbes India
The fertiliser subsidy bill for FY27 could be more than double of what the Union Budget had estimated, a government source said on Tuesday, as the West Asia crisis and Strait of Hormuz disruptions drive up prices. The Ministry of Chemicals and Fertilizers has reportedly sought Rs 3.4 lakh crore in subsidies for FY27 against the budgeted amount of Rs 1.7 lakh crore.The budget for FY27 assumed the allocated amount would cover rabi crops in 2026 and kharif crops in 2027, with fertiliser costs for the current kharif season already accounted for. However, the subsidy on each bag of urea has risen from Rs 2,900 in post-Covid times to about Rs 4,500 after the West Asia conflict. The government does not expect the price pressures to ease in the near term. However, it does not plan to seek additional funds through a supplementary demand for grants in the upcoming Monsoon Session of Parliament, the source said. India is also ramping up domestic production to ease the situation.Fertiliser is just one of the segments where strain is visible. To shield consumers from rising crude oil prices after the war broke out, the government helped state-owned oil marketing companies (OMCs) absorb some of the price rise. This helped retail prices remain unchanged for nearly three months even as crude prices surged. The Ministry of Finance has supported OMCs with around Rs 1.23 lakh crore in 78 days. “That is revenue foregone for us,” said the official.Also Read: GST collections rise 3.2 percent to Rs1.94 lakh crore in MayOMCs have now started raising fuel prices at the pump but are still incurring losses of around Rs 650 crore per day. The source said the government will not extend further support to them.On the broader economy, the official said growth momentum remains intact with all high-frequency indicators showing domestic demand is robust. “There are external headwinds, including a potential El Niño.” But the Centre is prepared, the official added. “The budget for FY27 was prepared taking into account all uncertainties.”To shore up revenues, the government is accelerating its divestment programme, with a target of Rs 80,000 crore for FY27, 136 percent higher than FY26’s revised figure of Rs 33,800 crore. “We hope the divestment target is exceeded,” the official said.
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