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Amid the government of India’s continued policy-level support to the industry by way of the healthy subsidy budget, credit rating agency, India Ratings and Research (Ind-Ra) has maintained a neutral outlook for the fertilizer sector for FY24. A neutral outlook is also on the back of moderation in the raw material prices across urea and nutrient-based fertilizers starting 4QFY23, coupled with the likelihood of a continued healthy demand in view of the GoI’s focus to increase farmer income.

According to the report, the fertilizer sector sales grew 15% year on year (YoY) during April 2022-February 2023, on the back of higher availability of funds with farmers due to various policy measures, and the stable farm gate prices maintained by fertilizer companies as a response to the higher subsidy allocation during FY23 to counter the increase in raw material prices.

Ind-Ra further noted that the sector saw a supplementary budget allocation of Rs 363.3 billion in March 2023, over and above the revised estimates of Rs 2,150 billion, leading to a lower-than-expected subsidy outstanding compared to its earlier expectations. This coupled with a continued decline in natural gas and other raw material (phosphoric acid, rock phosphate, Sulphur, etc.) prices could lead to a stable year-end subsidy balance in FY24.