India considers $3.8 billion increase in fertilizer subsidy

India is likely to provide additional Rs 28,600 crore ($3.8 billion) to fertilizer companies as compensation for selling products at lower than market prices to farmers, people with the knowledge of the matter said.

A cabinet meeting chaired by Prime Minister Narendra Modi may approve the enhanced subsidy for winter-sown crops as early as this week, the people said, asking not to be identified as the matter is not public. The fixed subsidy on of Di-ammonium Phosphate is being raised to Rs 1,650 per bag from Rs 1,200 now.

There will be no price change for farmers, the people said, as the move follows a government directive to companies asking them not to increase retail price of some fertilizers. A finance ministry spokesperson was not available for a comment.


The ruling Bhartiya Janata Party is keen to win over farmers after facing massive backlash for the past year over new laws that allow the private businesses to procure agricultural produce directly. The farmers fear the new rules will replace the government’s guaranteed crop purchase mechanism. Their support will be crucial for Modi’s party to win key state polls next year.

The proposal is also to partly offset the increase in international prices of DAP and nitrogen, phosphorus and potassium fertilizers.

The increased fertilizer subsidy in the current financial year will boost spending to over Rs 1 lakh crore from Rs 80,000 crore allocated in the federal budget unveiled in February.