Hiked Fertilizer Subsidies Unlikely to Boost Company Margins, Reports Show
New Delhi [India], April 2 (ANI): Despite recent increases in subsidy rates by the central government, fertilizer manufacturers' gross margins may not enhance as they did during the last fiscal year 2024-25, according to assertions made by brokerage firm Anand Rathi.
The brokerage firm contends that significant hikes in international retail market costs, along with the weakening of the rupee, are primarily responsible for these forecasts.
According to Anand Rathi, rough estimates indicate that the gross margins for H1 of 2025-26 are expected to be around 32%, compared to 35% during the corresponding period the previous year, assuming current conditions persist in both wholesale and retail markets.
Meanwhile, it thinks the sector will probably gain from residual stock carried over into H1 of 2025-26.
"We consider this to have a neutral to positive impact on the compound fertilizer sector," stated Anand Rathi.
"The government’s increased subsidy per tonne for H1 FY26 is likely to cause a minor reduction in the gross margins for most types of compound fertilizers. Moving forward, we anticipate that the industry will concentrate on producing more NPK fertilizer over DAP, since the former is expected to be more beneficial for profit margins," the report noted.
The brokerage firm informed the farmers that they do not anticipate significant effects on the agricultural sector due to increased retail prices, since the government is expected to maintain higher subsidies for inflationary expenses.
On March 28, the Union Cabinet, led by Prime Minister Narendra Modi, endorsed the Department of Fertilizers' suggestion to establish nutrient-based subsidy (NBS) rates for the kharif season 2025 (April-September) concerning phosphatic and potassic fertilizers.
The financial needs for the Kharif season are estimated at around Rs 37,216.15 crore, roughly Rs 13,000 crore higher than what was required for the Rabi seasons of 2024-25.
India experiences three distinct crop-growing periods: summer, kharif, and rabi. The kharif season involves planting crops from June through July, relying heavily on the monsoons for water; these crops are then typically gathered around October-November. For the rabi cycle, seeds go into the ground starting in October-November and yield harvests beginning in January based on how long they take to mature. Crops grown over the summer period occur between the end of the rabi and start of the kharif seasons. (ANI)