Fertilizer subsidy, which surged to a record ₹2.55 lakh crore in 2022-23, may drop below the Budget Estimate of ₹1,75,103.37 crore in the current fiscal as the first two months of consumption indicates. However, the monsoon rainfall in next two months will be a major factor on the overall subsidy this year.

According to latest data, fertilizer subsidy during April-May was ₹25,606.43 crore — ₹16,133.36 crore for urea and ₹9,473.07 crore for potash and phosphorus — which is 14.6 per cent of the Budgetary Estimate for 2023-24.

Consumption of fertilizers has dropped nearly 2 per cent to 4.9 million tonnes (mt) during April-May from a year ago whereas urea sales have declined by 3 per cent to 3.1 mt.

“Fertilizer usage in the kharif season is linked to rainfall, though many areas have been added under irrigation over the last few years where the source is groundwater. As the monsoon is expected to cover the entire country earlier than normal, planting activities will gather pace over the next 1-2 weeks, so also the fertiliser demand,” said S K Singh, a former agriculture scientist of ICAR.

‘Normal’ monsoon

However, even though demand may be higher from last year as India Meteorological Department (IMD) has predicted ‘normal’ monsoon this year, the softening of global fertilizer prices in last few months has already brought down the subsidy outgo for the government.

The pan India rainfall deficit stands at 28 per cent of long period average during June 1-25, IMD data show.

Last month, the government said the total subsidy on fertilizer could touch ₹2.25 lakh crore during 2023-24. This includes ₹1.08-lakh crore during current kharif season.

The price of imported urea declined to $332 per tonne (F.O.B China) in May compared with an average of $361 in March and $722 in May 2022. The global price of DAP, which peaked to about $950 per tonne last year, dropped to $514 per tonne (C.F.R, Mumbai) in May. Additionally, muriate of potash declined to $422 per tonne from $590 in March 2023.

Last month, the Centre reduced the per kg subsidy amount based on the nutrients each fertiliser contains. Accordingly, for the kharif season nitrogen (N) will receive government support of ₹76.49/kg, down by 17 per cent from the 2022 kharif subsidy.

Similarly, subsidy for phosphorus (P) has been slashed by 44 per cent to ₹41.03/kg and that of potash (K) by 37 per cent to ₹15.91/kg. Sulphur subsidy, too has been cut 58 per cent to ₹2.90/kg.