India's Subsidised Imports — Fertilisers Explode +76% (FY25 vs FY26)

INDIA'S IMPORT EXPENSE: SUBSIDISED COMMODITIES (FY 2024-25 → FY 2025-26)

Top-Line Summary

DETAILED BREAKDOWN: THE 12 WATCH CATEGORIES

1. MINERAL FUELS & OILS (HS 27)

Status: Demand-side subsidy (keeps domestic prices artificially low)

Breakdown by commodity:

• Crude Oil: $134,717M (66.2% of fuels) — down 5.8% YoY
• LNG: $13,338M (6.6%) — down 10.4% YoY
• Coking Coal: $11,768M (5.8%) — down 3.2% YoY
• Other petroleum products: $43,592M (21.4%) — down 6.5% YoY

Subsidy cost to Government: Estimated ₹50,000–70,000 crore/year (not separately quantified; but historical data suggests 2.5–3% of crude cost absorbed via fuel subsidy scheme)

Note: Price declined YoY despite subsidy — global crude fell from ~$85/bbl (FY25) to ~$78/bbl (FY26).

2. PEARLS, GEMS & JEWELLERY (HS 71)

Status: Process-trade (re-export flow) — not import-substitution candidate

Breakdown:

• Gold (≥99.5% purity): $46,861M (42.8% of gems) — massive inflow
• Unwrought forms (other): $24,859M (22.7%) — silver, platinum, etc.
• Silver (≥99.9%): $10,849M (9.9%)
• Diamonds: $10,247M (9.4%)

Subsidy status: NONE — this is 100% re-export flow (import rough → export polished/finished). Not a consumption import; a transient trade flow. This flags this as "not an import-substitution gap."

3. ELECTRICAL MACHINERY (HS 85)

Status: Strong PLI protection (ISM 2.0, ₹76,000cr; 14-sector PLI)

Breakdown (top 5):

• Digital ICs: $17,543M (16.7% of HS85) — up 15.8% YoY
• Electrical parts for phones/telegraphy: $15,810M (15.1%) — up 14.4%
• Memory chips: $6,793M (6.5%) — up 53.4% (AI-accelerator demand)
• Printed circuits: $5,389M (5.1%) — up 21.1%
• Semiconductors (discrete): $4,082M (3.9%) — up 9.2%

Cost to Government: PLI disbursement recorded at ~₹35,354 crore total as of March 2026 (about 18% disbursal rate of ₹1.97 lakh crore approved outlay, up from ~₹28,748cr/15% as of December 2025 per this blog's own more recently updated PLI-programme post) — but that's incentive subsidy, not tariff protection. Actual tariff is 0–10%, minimal protection. The May 2026 compressor QCO quota is the real lever here.

Trend: Growing faster than other categories (+18.35%) — reflects shift toward semiconductors, AI chips, and component localization under PLI.

4. MACHINERY & MECHANICAL APPLIANCES (HS 84)

Status: Minimal scheme protection (Plug-and-Play infra only)

Breakdown (top 5):

• Laptops: $6,203M (8.4% of HS84) — up 12.3%
• Digital processing units (CPUs): $4,958M (6.7%) — up 38.1% (server/AI infra)
• Turbo-jets (aircraft engines): $3,453M (4.7%) — up 4.6%
• Gas turbines: $2,847M (3.8%) — up 8.9%
• Pumps for liquids: $2,721M (3.7%) — down 5.1%

Subsidy: None identified — this is general capital-goods import. Infrastructure concessions exist via BHAVYA (₹33,660cr for 100 plug-and-play parks) but not tariff-based protection.

5. ORGANIC CHEMICALS (HS 29)

Status: Partial PLI (Bulk Drugs/APIs covers subset)

Breakdown (top 5):

• Terephthalic acid: $1,469M (5.8%) — down 8.1% (textile fiber softness)
• Styrene: $1,134M (4.5%) — down 13.7% (plastics precursor)
• Methanol: $1,086M (4.3%) — up 18.3% (fuel/solvent)
• Acetic acid: $869M (3.4%) — down 4.9%
• Acetone: $758M (3.0%) — down 12.5%

Subsidy: PLI Bulk Drugs (₹6,940cr) covers ~41 of 53 critical APIs. 70% of critical bulk-drug APIs still depend on China imports — the companion analysis flags this as a missed opportunity.

6. PLASTICS (HS 39)

Status: GAP — No dedicated scheme

Breakdown (top 5):

• PVC resin: $1,633M (7.3%) — down 23.2% (surprising)
• Polypropylene: $1,372M (6.2%) — up 19.1%
• Plastic articles (misc): $1,228M (5.5%) — up 15.4%
• Polyethylene: $1,138M (5.1%) — flat
• Polyester resin: $868M (3.9%) — down 7.1%

Subsidy: ZERO — this analysis correctly IDs this as a tier-1 import gap with no scheme. One of the largest unprotected imports ($22.2bn, flat YoY at +0.54%) with only ~7.5% tariff, no PLI, no mission.

7. ANIMAL/VEGETABLE FATS & OILS (HS 15)

Status: NMEO-Oilseeds mission (₹10,103cr) + 40% tariff (highest in watch-list)

Breakdown (top 5):

• Crude palm oil: $9,053M (45.7% of oils) — up 41.4% (major jump)
• Soya bean oil: $5,257M (26.6%) — up 12.8%
• Sunflower oil: $3,255M (16.5%) — down 11.2%
• Groundnut oil: $703M (3.6%) — up 12.8%
• Other vegetable oils: $509M (2.6%) — down 22.7%

Subsidy burden on Government: Estimated ₹15,000–20,000 crore/year (demand-side subsidy to hold retail prices; consumer sees lower prices despite import surge). Domestic production remains stuck at 43% self-sufficiency, despite NMEO mission running since Aug 2021.

The key finding: NMEO-Oilseeds (₹10,103 crore mission to hit 72% self-sufficiency by 2030) is THE highest tariff in this list (40%) — yet India remains 57% import-dependent. Tariff alone insufficient.

8. IRON & STEEL (HS 72)

Status: 12% safeguard duty (stepping to 11%) + PLI Specialty Steel (₹55,993cr total)

Breakdown (top 5):

• Steel waste/scrap: $2,408M (15.3%) — down 21.3% (less recycling demand)
• Stainless steel waste: $1,890M (12.0%) — up 6.1%
• Semi-finished stainless: $1,239M (7.9%) — up 60.9% (specialty grade)
• Flat-rolled steel (non-alloy): $1,204M (7.6%) — down 8.5%
• Other flat-rolled steel: $1,198M (7.6%) — down 14.0%

Tariff + Policy: 12% safeguard duty (highest among non-oil imports) + PLI disbursal ~₹3,862 crore (very low, D-grade). Paradox: duty targets Japan/Korea, but they're the FDI sources (JFE-Nashik, POSCO-JSW). A GNEP game-theory frame explains this — the duty forces JVs, not just exports.

9. OPTICAL/MEDICAL INSTRUMENTS (HS 90)

Status: Partial PLI (Medical Devices, ₹3,420cr)

Breakdown (top 5):

• Measuring/checking instruments: $1,311M (8.5%) — up 11.6%
• Automatic regulating apparatus: $687M (4.5%) — up 23.8%
• Surgical instruments: $615M (4.0%) — up 20.8%
• Optical instruments: $511M (3.3%) — up 6.8%
• Thermometers: $497M (3.2%) — down 5.1%

Subsidy: PLI Medical Devices covers a subset; no comprehensive tariff protection. Growing faster than most (+11% YoY) — reflects pandemic aftershock + COVID-related diagnostic equipment restocking.

10. FERTILISERS (HS 31)

Status: Demand-side subsidy ONLY until NIPU-2026 (approved 15 Jul 26, 16 days before the data cutoff)

Breakdown (top 5):

• DAP (Diammonium phosphate): $4,872M (33.4%) — up 75.8% (global spike)
• Fertiliser-grade urea: $3,869M (26.5%) — up 148% (massive!)
• Urea in solution: $1,287M (8.8%) — up 56.0%
• Ammonium sulphate: $1,070M (7.3%) — up 37.8%
• Potassium nitrate: $757M (5.2%) — up 28.1%

Subsidy burden: Estimated ₹1.5–1.7 lakh crore/year (urea ~₹1.19L cr + NBS ~₹49,000 cr, FY25-26) (government-administered "Nutrient-Based Subsidy" scheme). The headline finding: fertiliser is the fastest-growing import (+76% in one year) with the highest growth rate in the entire watch-list. Fertiliser-grade urea up 148% — extraordinary.

Why the spike?

• Global fertiliser prices recovered post-2022 urea shock
• Rock phosphate (DAP input) remains 86% import-dependent; India has very little economically viable domestic phosphate rock
• Government holds domestic prices below import parity via direct subsidy payments to farmers/retailers

NIPU-2026 (Cabinet-approved 15 Jul 2026) targets 8–9 new gas-based urea plants to reduce this gap; but DAP remains an import forever (geological constraint).

11. INORGANIC CHEMICALS (HS 28)

Status: GAP (no dedicated scheme; proposed Chemicals PLI still at formulation)

Breakdown (top 5):

• Gold compounds: $4,012M (28.3%) — up 67% (jewelry/dental demand)
• Phosphoric acid: $2,674M (18.9%) — up 26.3% (fertiliser chain)
• Rare-earth oxides & salts: $1,582M (11.2%) — up 58.1% (critical materials)
• Noble metal solutions (Pt, Rh, Pd): $1,294M (9.1%) — up 35.1%
• Aluminum oxide: $891M (6.3%) — down 19.6%

Subsidy: ZERO — the companion analysis flags this as a tier-1 import gap. $14.2bn, and +86% growth since FY2018-19 (+24.63% year-on-year), with only 7.5% tariff and no scheme.

12. AIRCRAFT & SPACECRAFT (HS 88)

Status: No production scheme; UDAN subsidy (demand-side only)

Breakdown (top 3):

• Large aeroplanes (unladen >15T): $11,641M (84.5%) — down 6.1% (fewer jetliner imports)
• Aircraft parts: $561M (4.1%) — down 2.3%
• Helicopters (>2000 kg): $494M (3.6%) — up 847% (only 4 units = high value per unit)

Subsidy: UDAN subsidy (Viability Gap Funding for routes) is demand-side, not production incentive. No manufacturing PLI; C-295 final assembly (Tata-Airbus) + some MRO work, but 84.5% of imports are finished aircraft imports with minimal domestic content.

COST TO GOVERNMENT — SUBSIDY BURDEN BY COMMODITY

Estimated Annual Subsidy Cost (FY 2025-26):

KEY FINDINGS FROM THE TRADESTAT DATA

1. Fertilisers exploded +76% in one year — urea up 148%, DAP up 75.8%. Government subsidy bill spiked correspondingly. NIPU-2026 (approved 3 days before data cutoff) is the emergency response.

2. Mineral fuels actually fell −6.88% — but still $203.4bn/year, 26.2% of total imports. Lower global crude prices mean subsidy saved money, but import bill remains massive.

3. Edible oils up +12.4%, palm oil surging +41.4% — despite 40% tariff (highest in watch-list) and NMEO mission running 5 years, India still 57% import-dependent. Shows tariff alone insufficient.

4. Electrical machinery surging +18.35% — fastest-growing category among watch-list, after fertilisers (+75.98%) and inorganic chemicals (+24.63%). PLI + ISM 2.0 ramping, but domestic production still lags demand.

5. Plastics ($22.2bn) growing +0.54% with ZERO scheme — the standout gap in the analysis. No PLI, no mission, minimal tariff.

6. Gems/Jewelry ($109.4bn) up +23% — not a subsidy target — it's re-export flow. The companion analysis correctly excludes from import-substitution calculus.

7. Aircraft ($13.8bn) flat; Aircraft parts strategy failing — Tata-Airbus C295 assembly exists but 84.5% of imports are finished aircraft. No indigenous manufacturing PLI.

8. Inorganic Chemicals +24.63%, rare-earths +58% — second-fastest growth after fertilisers. No scheme, no tariff protection.

Bottom line: The 12 subsidised categories account for roughly $632.8 billion/year against India's official $775bn FY2025-26 merchandise import bill (PIB: imports $774.98bn, exports $441.78bn, deficit $333.19bn). The government's direct + indirect subsidy cost to support these imports is estimated at ₹2.2–2.8 lakh crore/year (depending on global prices), most of it absorbed into fuel & fertiliser price controls rather than explicit budgetary outlay.

Source: TradeStat EIDB provisional data, analysed 31 Jul 2026. Research synthesis — not investment advice.

About this article: Researched, written and edited by Umashankar Triplicane Dwarakanathan, with AI research assistance; every figure is meant to trace to the primary source cited. See the Editorial Policy for how sourcing, AI use and corrections work.