Subsidies And More: How India Sells A Bag Of Urea For Rs 300 When Others Sell It For Rs 3,000

Last Updated:May 11, 2026, 14:13 IST

Over the last few years, urea prices have been hit by the Russia-Ukraine war, supply chain disruptions, rising LNG costs, and now the Iran war, but not for Indian farmers.

Prime Minister Narendra Modi has repeatedly used one striking comparison while speaking about India’s economic resilience during the ongoing West Asia crisis: while a bag of urea costs nearly Rs 3,000 in many countries, Indian farmers continue to get it for around Rs 300.

He said it again in Hyderabad on May 10 while appealing to citizens to conserve fuel, avoid wasteful imports and prepare for the impact of global energy disruptions triggered by the US-Iran war. “Our government is working tirelessly to navigate these challenges. In other countries, a bag of urea costs around Rs 3,000, but our farmers are getting it for just Rs 300," PM Modi said.

The statement reflects one of the Indian government’s biggest and least understood economic interventions, the massive fertiliser subsidy system that shields farmers from global price shocks.

Why urea prices have surged globally

Urea is a nitrogen fertiliser made primarily using natural gas. When gas prices rise globally, fertiliser prices also shoot up.

Over the last few years, prices have been hit by the Russia-Ukraine war, supply chain disruptions, rising LNG costs, and now the Iran war and Strait of Hormuz crisis that has again rattled energy markets.

India has also faced pressure from the crisis. Earlier this year, officials described the situation as “very vulnerable" as disruptions in LNG supplies affected domestic urea production and forced the government to line up imports.

In many countries, farmers directly bear these international price increases. That is why urea prices abroad can touch Rs 2,500 to Rs 3,000 per bag.

How Is India Selling Urea For Rs 300?

The answer to this lies in India’s subidies. A standard 45-kg bag of urea is sold in India at a government-controlled price of roughly Rs 266-300. But the actual cost of producing or importing that same bag can be several times higher. The difference is paid by the Centre directly to fertiliser companies.

In simple terms, if producing or importing one bag costs Rs 2,800, and the farmer pays Rs 300, the remaining Rs 2,500 is borne by the government. This is why India’s fertiliser subsidy bill routinely runs into lakhs of crores of rupees annually.

The ‘Atmanirbhar Bharat’ factor

Subsidies alone are not the full story. India’s ability to maintain cheap urea prices also depends heavily on domestic production. Over the last decade, the government revived several fertiliser plants and pushed for greater self-reliance in urea manufacturing under the broader “Atmanirbhar Bharat" push.

Since 2014, the Centre has focused on reviving dormant units and commissioning new ones under the larger Atmanirbhar Bharat strategy. While speaking Parliament last month, PM Modi had stressed how his government had revived six major urea plants that had remained shut for years.

Government data shows the revival and commissioning of these units since 2018:

• Ramagundam in Telangana
• Gorakhpur in Uttar Pradesh
• Sindri in Jharkhand
• Barauni in Bihar
• Chambal Fertilisers’ Kota unit in Rajasthan
• Matix plant in Panagarh, West Bengal

These projects involved investments worth more than Rs 60,000 crore and sharply increased India’s domestic urea capacity.

The impact has been significant. India’s domestic urea production increased from around 22 million tonnes in 2011-12 to over 31 million tonnes by 2023-24.

Without these plants, India would have been forced to import much larger quantities at elevated global prices, increasing both subsidy costs and vulnerability to supply disruptions.

Domestic production also cuts freight and shipping expenses, foreign exchange outgo, and delays caused by global logistics disruptions.

This is why the government has repeatedly linked fertiliser self-reliance to national economic security. The push is continuing. In December last year, PM Modi had laid the foundation stone for a new Rs 10,600-crore ammonia-urea plant in Namrup, Assam, which is expected to produce 12.7 lakh metric tonnes annually.

The Nano Urea Push

Alongside conventional urea production, the government has also aggressively promoted nano urea as an alternative. PM Modi has repeatedly described nano urea as a major innovation that can reduce import dependence and lower fertiliser usage. He has said a bottle of nano urea can potentially replace an entire bag of conventional urea in certain applications.

Why It Matters

For India, fertiliser is tied directly to food security and inflation control. A sharp increase in fertiliser prices would raise farming costs, increase food prices, and worsen rural distress.

That is why successive governments have avoided passing the full burden of global price shocks on to farmers. PM Modi highlighted this while speaking about the larger economic pressures caused by the West Asia crisis and the need for austerity in fuel consumption.

News explainers Subsidies And More: How India Sells A Bag Of Urea For Rs 300 When Others Sell It For Rs 3,000

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