A fixed DAP price and late subsidy rates are steering farmers towards India’s scarcest fertiliser

India’s rabi fertiliser subsidy is large enough to shield farmers from this year’s global price shock. Its design is the problem. On 11 November the Cabinet approved nutrient-based subsidy rates for phosphatic and potassic fertilisers covering 1 October 2026 to 31 March 2027, at an estimated cost of ₹62,370 crore, about ₹24,418 crore more than last rabi. The rates apply to a season that began six weeks earlier. At the same briefing, Information and Broadcasting Minister Ashwini Vaishnaw said a 50 kg bag of diammonium phosphate, or DAP, would still sell for ₹1,350. Fixing the price of one product while its substitutes float, and setting the rates after the buying season has begun, pushes demand towards DAP, the fertiliser India finds hardest to source. Cabinet release on rabi 2026–27 NBS rates · PTI report of the Cabinet briefing

The scheme was built to let prices move

The Nutrient Based Subsidy scheme, in force since April 2010, pays manufacturers and importers a fixed amount for each kilogram of nitrogen (N), phosphate (P), potash (K) and sulphur (S) contained in 28 grades of fertiliser. Companies then set the retail price. The logic is that a farmer choosing between two products sees prices that reflect what each contains and what it costs to supply. Urea works the other way: its retail price is fixed and the government absorbs whatever the gap turns out to be. Cabinet release on rabi 2026–27 NBS rates

The new per-kilogram rates are steep. Nitrogen rises to ₹94.21 from ₹43.02 a year ago, an increase of about 119 per cent. Phosphate rises to ₹66.11 from ₹47.96, about 38 per cent. Sulphur rises to ₹10.42 from ₹2.87, and potash stays at ₹2.38. Business Standard reports that the package also includes special assistance for sulphur and extends the “special provisions” that apply to DAP to imported and domestic triple superphosphate and imported monoammonium phosphate. Business Standard on the rabi rates and special packages · BW Businessworld on the nutrient rates

What the rates imply for a tonne of DAP

DAP contains 18 per cent nitrogen and 46 per cent phosphate. A tonne therefore carries 180 kg of N and 460 kg of P, and the nutrient rates translate directly into a subsidy per tonne. The same calculation reproduces the ₹29,805 a tonne the government published for rabi 2025–26, which is a useful check on the method. PIB note on rabi 2025–26 NBS rates · PTI on kharif 2026 rates

Season	N rate (₹/kg)	P rate (₹/kg)	NBS per tonne (₹)	NBS per 50 kg bag (₹)
Rabi 2025–26	43.02	47.96	29,805	1,490
Kharif 2026	47.32	52.76	32,787	1,639
Rabi 2026–27	94.21	66.11	47,368	2,368

Add the farmer’s ₹1,350 a bag, or ₹27,000 a tonne, and a tonne of DAP sold at the fixed price brings its supplier about ₹74,370 from NBS and the farmer combined. Compare that with what DAP costs to land. Indian Potash Limited bought about 1.35 million tonnes in a May tender at $930–935 a tonne, cost and freight, and late-August assessments for India were $915–935. At an illustrative ₹94 to the dollar, $925 is about ₹86,950 a tonne before duty, port handling, bagging, inland freight and dealer margins. The gap of about ₹12,600 a tonne, roughly ₹630 a bag, before those domestic costs, has to come from the special DAP provisions, and the Cabinet release does not publish their rate. In practice the government has promised to cover whatever DAP costs. That makes DAP a price-controlled product inside a scheme designed for floating prices. Angel One on the May DAP tender · Fertilizer Daily on late-August DAP prices

These figures are illustrative. Actual landed costs depend on when cargoes were contracted, the exchange rate on payment and the costs of moving product inland. The direction of the result does not.

Complex fertilisers carried the risk instead

The NP and NPK “complex” grades received no such guarantee. S. Sankarasubramanian, chairman of the Fertiliser Association of India, told Business Standard that NBS rates are generally based on a six-month average of international prices and that the previous revision had not captured the sharp rise in input costs. Companies raised the prices of NP and NPK grades, which the paper reports rose by around 40–50 per cent, and cut production. Domestic output of complex fertilisers in September was 0.59 million tonnes against a target of 1.06 million tonnes, a shortfall of about 43 per cent. The FAI chairman also said the usual consumption split of roughly 60 per cent complex grades and 40 per cent DAP had tilted towards DAP over the last two seasons because of the heavy support for it. Business Standard on complex fertiliser prices and output

From a farmer’s side the choice is straightforward. Phosphate has to go in at sowing. A bag of DAP at a guaranteed ₹1,350 competes with complex bags that have become far dearer. Choosing DAP is sensible for each farmer. For the system, it concentrates demand on the product with the greatest import exposure: industry estimates put India’s import dependence for phosphoric acid and finished DAP at 80–90 per cent. When concentrated demand meets a constrained pipeline of cargoes and rail rakes, the adjustment shows up as queues rather than prices. Fertilizer Daily on DAP import dependence and the Haryana shortage

In mid-October Haryana’s agriculture department suspended Indian Potash Limited’s authorisation to sell non-subsidised fertilisers in the state, saying the company had placed DAP rakes in Jhajjar and Jind instead of prioritising Sirsa and Hisar as directed. Farmers in Sirsa and Fatehabad were queuing outside distribution centres from early morning. Queues have several causes, including rail allocation, cargo timing and dealer behaviour, so they do not prove that the price structure caused the shortage. They are what a price-capped product in excess demand looks like. The Tribune on the Sirsa shortage and IPL suspension

The tilt also works against agronomy. DAP supplies nitrogen and phosphate but no potash or sulphur. The Kakistocrat argued last month that soil testing matters only if it changes what farmers buy. A price structure that makes DAP the cheapest route to phosphate pulls the other way.

Late rates shift risk onto suppliers

The timing compounds the distortion. Rabi rates for 2025–26 were approved on 28 October 2025. Kharif 2026 rates came on 8 April for a season starting on 1 April. This year’s rabi rates arrived on 11 November for a season that began on 1 October. A company that bought cargoes in August and September for rabi sales did not know what subsidy those tonnes would earn. Selling a complex grade under that uncertainty means extending credit to the government at an unknown price. The rational response is to make and stock less of the grades whose support is uncertain and more of the grade whose price the government has promised to protect. September’s collapse in complex output is consistent with that. ANI on the 28 October 2025 rabi decision · PTI on the 8 April kharif decision

This year the weather has lent the government time. After a monsoon 13 per cent below normal, rabi sowing on 30 October covered 37.56 lakh hectares, 46 per cent less than a year earlier. Wheat covered 19,000 hectares against 3.34 lakh hectares. Delayed sowing pushes peak fertiliser demand into the weeks after the Cabinet decision. That is luck, not design. Business Today on rabi sowing to 30 October

The Budget pays, and so does the back of the queue

The fiscal cost is now clear. The kharif 2026 allocation of ₹41,533.81 crore and the rabi allocation of ₹62,370.02 crore together come to about ₹1.04 lakh crore for phosphatic and potassic fertilisers. The Budget estimate for the whole year was ₹54,000 crore, so the outlay is about 92 per cent higher. Business Standard reports industry and expert estimates that total fertiliser subsidy, including urea, could exceed ₹3 lakh crore against a Budget estimate of ₹1.71 lakh crore. That is the same shock moving onto the Budget that this site traced through fuel taxes in April. Business Standard on the FY27 subsidy bill · Crisil on the Budget split between urea and complex fertilisers

The other payers are less visible. A price cap delivers its benefit to whoever gets the bag. A farmer who cannot find DAP at ₹1,350 pays through a delayed sowing, a premium from a private dealer or a substitute product that may suit the soil less well. The subsidy per bag is identical. Access to it is not.

The case for holding the price

The strongest argument for the government’s approach is that this is a bad year to let prices move. Moisture is short, sowing is late and many farmers must buy inputs before they have any income from the crop. A visible, stable price for the most widely used phosphatic fertiliser limits panic buying and protects working capital. Switching mid-season to a different instrument, such as a per-hectare cash transfer, would need land records and payment systems that cannot be rebuilt in a few weeks. Letting DAP move towards import parity, which on the illustrative figures above would be well over ₹4,000 a bag before inland costs, could cut application exactly where it matters most for yields.

The new rates also raise support for complex grades sharply. For a common grade such as NPK 10-26-26, the implied subsidy rises from about ₹19,070 a tonne in kharif to about ₹27,230, an increase of roughly 43 per cent. The FAI expects this to bring complex prices down and rebalance demand. If that happens quickly, the distortion narrows on its own.

That is a fair case for generous support during a shock. It is a weaker case for delivering that support through an open-ended guarantee on one product and late, backward-looking rates on the rest.

Support that does not choose the product

Three changes would keep the protection while removing the steer. First, set the season’s rates before it starts, using a published formula linked to import prices with scheduled adjustments within the season, so companies know what a tonne will earn when they contract cargoes. Second, publish the DAP special package per tonne, so the true support per kilogram of phosphate can be compared across products. Third, aim for equal effective support per kilogram of each nutrient, whichever bag it arrives in. A farmer’s cheapest route to phosphate should depend on chemistry and logistics, not on which product carries a political price.

What would change the judgement

The test comes in the next two months of production and sales data. If complex fertiliser output and sales recover towards target and DAP’s share of phosphate sales falls back, the problem was mainly the late timing, and the new rates have fixed it. If DAP’s share keeps rising while complex output lags, the fixed price is doing the steering, and the next kharif decision should address the guarantee rather than only the rates.