Budget 2026: Fertilizer industry urges duty cuts and GST relief
What's the story
The Fertiliser Association of India (FAI) has proposed reforms in the Union Budget for 2026-27. The association has called for a reduction or exemption of basic customs duties on key raw materials like ammonia, phosphoric acid, sulphuric acid, rock phosphate, and sulfur. It also wants relief from Agriculture Infrastructure and Development Cess as well as resolution of issues arising from inverted GST duty structures that lead to unutilized input tax credit accumulation.
Tax incentives
FAI advocates for tax incentives and compliance relief
On the direct tax front, the FAI has asked for restoration of weighted deductions for research and development (R&D) and farmer education. It also wants incentives for downstream fertilizer projects, accelerated depreciation on energy-efficient equipment, and relief from compliance and litigation burdens. The association stressed on balanced fertilization to protect soil health, given the price disparities between urea and P&K fertilizers have created an imbalanced N:P:K consumption ratio.
Subsidy reform
Inclusion of urea in nutrient-based subsidy framework
The FAI has suggested bringing urea under the nutrient-based subsidy framework. It also advocates for promoting innovative fertilizer products, bio-fertilizers, and integrated nutrient management. The association believes these steps would help correct price distortions and support sustainable farming practices. It has also emphasized sustained policy support to encourage new investments in indigenous phosphatic and potassic fertilizer capacity, backward integration projects, and strategic overseas sourcing.
Market volatility
Impact of geopolitical tensions on fertilizer production costs
The FAI has pointed out that sustained volatility in international prices of key fertilizer inputs such as rock phosphate, phosphoric acid, ammonia, potash, and sulfur has increased production costs and import dependence. This is due to geopolitical tensions, supply chain disruptions and export restrictions by major producing countries. While timely government interventions have helped secure availability, continued uncertainty in global markets has impacted investment sentiment.
Security balance
Calls for balanced approach to ensure fertilizer security
FAI Director General Suresh Kumar Chaudhari has stressed that sustained fertilizer security depends on balancing affordability for farmers, financial viability for manufacturers, and investment continuity. He said "predictable subsidy frameworks, rational taxation, and timely policy interventions are essential to ensuring uninterrupted nutrient availability while supporting efficient and sustainable fertilizer use." The industry has urged the government to consider targeted policy and fiscal measures to strengthen India's fertilizer security.