Chemicals – Sector Update – Fertilizer industry awaiting mid-season NBS subsidy hike
Published on 27 Aug 2026
The West Asia crisis has led to a sharp increase in fertilizer raw-material costs, with sulfur, ammonia, rock phosphate and phosphoric acid prices rising significantly compared to last year. Given India’s high import dependence on these inputs, the sharp increase in costs is putting pressure on DAP/NPK manufacturers’ margins. While the government has increased NBS support for kharif’26 by ~10%, the higher subsidy is not sufficient to fully offset the rise in raw-material costs, creating a viability gap.
Companies like Paradeep Phosphates (PPL) benefited in Q1FY27 from lower-cost inventory and price hikes, which supported higher EBITDA/t. However, margins could come under pressure in Q2FY27 as higher raw material costs flow through. The key near-term trigger for the sector is a possible mid-season NBS hike. A higher subsidy would support DAP/NPK economics and ease margin pressure, while no revision could force companies to absorb higher costs or reduce production of unviable grades.
