Urea Price Crash Opens a Window for Fertiliser Reforms in India

Global urea prices have fallen sharply, and this drop has reopened a debate about reforming India's fertiliser subsidy system. In mid-February 2026, a state-owned company contracted about 1.3 million tonnes of urea imports at a landed price of around 508 to 512 dollars per tonne. Within two months that figure had nearly doubled to about 935 to 959 dollars per tonne for a separate tender. But by early June 2026, bids in a fresh tender fell to as low as about 445 to 449 dollars per tonne, even below the levels seen before recent global tensions.

Several factors caused the fall. China partly eased its export restrictions, and fears of a long supply disruption faded. Weather also played a part. El Nino conditions were developing in the Pacific Ocean, and forecasters expected them to strengthen. If El Nino reduces farming activity in major crop-growing regions, world demand for fertiliser softens, easing prices further.

This matters greatly for India because the country imports much of its fertiliser, both as finished product and as raw materials. In 2025-26, India imported about 27.2 billion dollars worth of fertilisers and inputs, and the figure could climb higher this year. On top of the import bill, the government also pays a large subsidy. The fertiliser subsidy for 2026-27 had been projected to reach around 3.4 lakh crore rupees, far above the budgeted figure of about 1.71 lakh crore rupees.

The lower prices give the government some breathing room, but experts warn it may only be temporary. They argue this is a good moment to rethink how farm support is given. India's current system relies heavily on product-specific subsidies, both on inputs such as fertilisers, water, and electricity, and on crops through minimum support prices.

One reform idea is to shift from these subsidies towards direct income support paid straight to farmers. The thinking is that farmers would then grow crops the market actually wants and would use scarce resources like water and energy more carefully, because they would face their true cost. Supporters say such reforms would nudge farming towards efficiency, rather than repeating short-term fixes that delay the real problem.