Volatile gas may upset fertilizer subsidy math

Volatility in natural gas prices due to the Russia-Ukraine war is expected V to add a dash of uncertainty to India's budget estimations for the next year, potentially upending calculations for fertilizer subsidies, two people familiar with the government discussions said.

The Centre's fertilizer subsidy has more than doubled from ₹1.05 trillion initially estimated for this fiscal to ₹2.15 trillion so far. By the end of March, this could even go up further to around ₹2.5 trillion or more, one of the people cited above said, seeking anonymity.

However, for the year starting 1 April, the government plans to initially set the budget estimate for fertilizer subsidies at a lower level in the range of around 1 trillion-but will raise the allocation as the year progresses depending on the requirement, the person said.

Two-thirds of India's annual fertilizer subsidy goes towards urea, the most commonly used soil nutrient produced from natural gas. Domestic producers have been facing a gas shortage due to the conflict in Eastern Europe.