Key Highlights
• Fertiliser prices have surged sharply due to the ongoing West Asia crisis, increasing pressure on government finances.
• The Ministry of Chemicals and Fertilizers has reportedly sought a 100% increase in fertiliser subsidy allocation.
• Fertiliser subsidy requirements could rise beyond the ₹1.77 lakh crore provision made in the FY27 Budget.
• Oil marketing companies are reportedly facing daily losses of ₹500–600 crore due to elevated crude oil prices.
• The government says domestic economic growth remains strong, with April-May performance matching the previous quarter’s 7.8% growth rate.
• Fertiliser prices have risen from around ₹2,900 to ₹4,500 per 45-kg bag amid global supply disruptions.
• The government plans to maintain capital expenditure and expects to exceed its ₹80,000 crore divestment target.
Government seeks additional subsidy support while maintaining economic growth momentum and capital expenditure plans
The ongoing geopolitical tensions in West Asia are creating fresh economic challenges for India, particularly through rising fertiliser and energy costs. According to government sources, the Ministry of Chemicals and Fertilizers has sought a substantial increase in subsidy support as global fertiliser prices continue to rise following disruptions in international supply chains.
Sources indicate that the ministry has requested an additional allocation equivalent to the existing fertiliser subsidy provision of ₹1.77 lakh crore included in the Union Budget for FY2026-27. The move comes as the government remains committed to shielding farmers from rising input costs rather than passing on the burden through higher fertiliser prices.
The pressure on subsidy expenditure has intensified as fertiliser prices have increased significantly since the escalation of tensions in West Asia. According to official sources, the price of a 45-kilogram fertiliser bag has risen from approximately ₹2,900 before the crisis to nearly ₹4,500 currently. At the same time, the number of international suppliers has reportedly declined, with several global exporters withdrawing from the market amid uncertainty and supply disruptions.
In addition to fertilisers, higher crude oil prices are placing pressure on public finances. Government sources stated that oil marketing companies (OMCs) have been absorbing a significant portion of the increase in global crude prices. During the initial phase of the price surge, the government reportedly refrained from collecting approximately ₹1.23 lakh crore in excise duties from OMCs to limit the impact on consumers.
However, officials indicate that the government may have limited room to extend further support to fuel retailers. According to sources in the petroleum sector, OMCs are currently facing daily losses estimated at ₹500–600 crore due to elevated crude oil prices.
Gold imports have emerged as another area of concern. The government has already increased import duties to discourage excessive gold purchases and manage external account pressures. Nevertheless, officials acknowledge that India’s strong cultural preference for gold limits the effectiveness of restrictive measures.
Despite these external challenges, senior Finance Ministry officials maintain that India’s domestic economy remains resilient. Preliminary assessments suggest that economic activity during April and May 2026 has remained broadly in line with the strong performance recorded during the January-March quarter of FY2025-26, when the economy expanded by 7.8%.
Officials point to healthy trends across key indicators including automobile sales, power generation, exports, and manufacturing activity. These sectors have reportedly continued to demonstrate strength despite global uncertainties.
The government is also focusing on boosting domestic fertiliser production to reduce dependence on imports and strengthen supply security. Efforts are underway to encourage local manufacturing and improve long-term resilience against international supply disruptions.
Finance Ministry sources further emphasised that capital expenditure plans remain intact despite rising subsidy requirements and external pressures. The government expects divestment proceeds to exceed the FY2026-27 target of ₹80,000 crore, providing additional fiscal support.
Additionally, policymakers have established a ₹1 lakh crore Economic Stabilisation Fund to address potential economic shocks arising from the ongoing regional conflict. Officials also noted that remittance inflows from Indians working overseas remain stable, providing an important buffer for the economy.
While global uncertainties continue to create challenges, policymakers remain confident that strong domestic demand, infrastructure investment, and stable economic fundamentals will help India navigate the evolving external environment
