Fertilizer demand in India is poised to recover during the rabi season after a sluggish kharif season, driven by higher government subsidies aimed at improving the affordability of complex fertilizers. S. Sankarasubramanian, chairman of the Fertiliser Association of India (Fai) and CEO of Coromandel International Ltd, expects urea consumption to remain stable and di-ammonium phosphate (DAP) demand to match last year's levels. However, water stress in southern India due to a deficient monsoon may limit the recovery, particularly for nutrient-rich NPKS fertilizers in regions like Karnataka and Telangana.
As of last week, water levels in India’s 178 reservoirs were down 27% from a year ago, raising concerns about irrigation and hydropower supply. India, the world's second-largest fertilizer consumer and largest urea importer, has a seasonal requirement of 19.9 million tonnes of urea for the 2026-27 rabi season, along with 5.5 million tonnes of DAP and 1.64 million tonnes of muriate of potash (MOP). Complex NPKS fertilizers account for another 7.9 million tonnes. Despite a slower start to sowing, forecasts suggest El Niño could turn neutral by year-end, potentially easing its impact on the season.
The expected recovery follows a weak kharif season, where urea consumption fell 4% to 18.5 million tonnes, DAP remained flat at around 4.4 million tonnes, and NPKS consumption dropped 22% to 6 million tonnes. Sankarasubramanian attributed the decline to delayed availability, higher prices, and deficient rainfall. The revised nutrient-based subsidy (NBS) rates for the rabi season are expected to support demand by moderating prices and improving the economics of domestic production.
On the supply side, fertilizer availability remains comfortable despite geopolitical uncertainties. Diversification of imports, preferential natural gas allocation, and government support for domestic manufacturers have helped secure supplies. A 20% subsidy announced in August to offset higher sulphur costs has also supported domestic production. Fertilizer subsidies remain a significant component of the government's support to the farm sector, with expenditure crossing ₹2.17 trillion in fiscal year 2026.