Middle East conflict threatens India's fertiliser production, subsidy costs to rise

India's fertiliser production is projected to decline significantly due to ongoing conflicts in the Middle East, a key source of raw materials like phosphoric acid and ammonia, and finished fertilisers. This disruption is expected to increase the working capital requirements for industry players and place a substantial burden on the government's fertiliser subsidy program as it attempts to mitigate the impact on the agricultural sector. The rising costs of raw materials and imported fertilisers are the primary drivers of these concerns. ## Latest Update The latest reports confirm that the disruption in the supply chain of phosphoric acid and ammonia is a primary driver for the expected production hit and cost escalation. Crisil Ratings indicates that the Indian government's fertiliser subsidy bill could see an additional burden of ₹20,000-25,000 crore. ## Timeline * **2026-03-26:** Crisil Ratings projects a 10-15% dip in India's fertiliser production if Middle East tensions persist, potentially adding ₹20,000-25,000 crore to the fertiliser subsidy bill. * **2026-03-26:** Crisil Ratings reports India faces a potential ₹20,000-25,000 crore increase in its fertiliser subsidy bill due to West Asia turmoil disrupting raw material and fertiliser imports; domestic production may fall by 10-15 percent. ## What to Watch * Escalation of geopolitical tensions in the Middle East could further exacerbate supply chain disruptions and price increases. * Monitor the Indian government's response and any policy changes related to fertiliser subsidies and import regulations. * Assess the potential impact on crop yields and food prices in India if fertiliser shortages occur.