Subsidy Shock: DAP, MOP Prices Soar, Straining India's Budget

India's substantial fertilizer subsidy program is under pressure as import prices for crucial nutrients like Di-Ammonium Phosphate (DAP) and Muriate of Potash (MOP) have sharply increased. This price surge for DAP and MOP is largely offsetting the benefit derived from declining urea prices, which are the most commonly used fertilizer in the country.

Data reveals that DAP prices have risen by 15.37% to $931 per tonne, and MOP prices have climbed 9.74% to $383 per tonne. Conversely, imported urea prices have seen a marginal decrease of 5.89% to $447 per tonne. This divergence in price trends is critical for India, which depends heavily on imports, sourcing 60% of its DAP and 15% of its urea and NPK fertilizers from global markets.

Experts estimate that these cost pressures could elevate the total fertilizer subsidy outgo to around ₹2.5 trillion in the current fiscal year, exceeding previous projections for FY26 and FY27. This projection comes despite ongoing government expenditure, with nearly 56% of the annual fertilizer subsidy estimate already disbursed by mid-August of FY27.

Further complicating the situation are escalating costs for key fertilizer manufacturing ingredients. Ammonia prices have surged 58% year-on-year, and sulphur prices have jumped dramatically by 275% to $1,050 per tonne. These price hikes for essential raw materials will directly impact the production costs of phosphatic and complex fertilizers for major Indian manufacturers.