Fertilizer sales (of granular variety) in the 2025-26 fiscal are likely to remain unchanged at the current fiscal’s level, even as there is an increase in the offtake of nano-liquid fertilizers, India Ratings and Research (Ind-Ra), which has maintained ‘neutral’ outlook for the fertilizer sector in FY26, has said.

Sales of all fertilizers put together increased 7.3 per cent to 525.92 lakh tonnes (lt) during April-December of the current fiscal from 490.12 lt a year ago. This included a rise in sales of urea by 6.4 per cent to 300.26 lt from 282.08 lt, muriate of potash (MOP) by 31.6 pert cent to 16.78 lt from 12.75 lt and complex by 27.1 per cent to 122.65 lt from 96.49 lt. But di-ammonium phosphate (DAP) sales dipped by 12.7 per cent to 86.23 lt from 98.8 lt. Complex fertilizer is a combination of nitrogen (N), phosphorous (P), potash (K) and sulphur (S) nutrients.

India Ratings has maintained a neutral outlook for the fertilizer sector for the next fiscal, driven by the government’s continued policy-level support by way of the healthy subsidy budget of ₹1.64 lakh crore this fiscal, which is likely to remain at similar levels next fiscal, a company statement said.

Stable raw material prices

It is expected that there will be relative stabilisation in raw material prices across urea and nutrient-based fertilizers, coupled with a likely continued healthy demand in view of the government’s focus to increase farmer income through various policy measures and the stable farm-gate prices. The sector, over the past 2-3 years, has seen supplementary budgetary allocations, as and when the prices for key input materials had increased to enable availability of fertilizers and maintain economic viability with producers and importers, Ind-Ra said.

“Ind-Ra expects the credit profile of fertiliser players to remain comfortable in FY26, backed by the continued policy-level support with adequate subsidy allocations and timely subsidy payouts; gas and input prices also are expected to remain largely stable, leading to stability in profitability across the sector. Given the stability in gas and input prices, the subsidy requirement for both urea and NPK segment is expected to remain like FY25 levels. Overall, the credit profile is likely to remain stable”, said Bhanu Patni, Associate Director, Corporate Ratings.

He said the company expects the average pooled gas price to remain moderate at $13-14/MMBtu next fiscal (9MFY25: $15/MMBtu), led by a moderation in the Henry Hub Prices and of corresponding linked imported LNG. Also because of continued softening in the average prices of crude oil, lower prices on term LNG contracts based on the slope of Japan Crude Cocktail/Brent are expected while a continued ceiling on administered price mechanism prices cooling off of spot LNG prices may also help in moderation in average pooled gas price.

RNLG share

It said RLNG formed 87 per cent of the total consumption by the fertilizer sector in the first eight months of FY25 against 86 per cent a year ago. The RLNG share has increased, led by a rise in the use of natural gas, it said. Operationalisation and ramp-up of new urea plants and diversion of any incremental domestic gas being produced towards the higher priority city gas distribution and power sector led to the increase in the gas requirement by the fertilizer sector.

Led by the stability in natural gas and input prices, Ind-Ra estimates the nutrient-based subsidy (NBS) and urea subsidy requirements next fiscal to remain at the current fiscal’s levels. Furthermore, changes to the proportion of revenue earned are expected to be made up from the subsidy and it does not anticipate changes to farm-gate prices of the crop nutrients.

Published on January 30, 2025