Page 182 - CW E-Magazine (25-2-2025)

Special Report

India’s 2025 Budget: Signal for chemicals and fertilisers

sector to stand on its own

he Indian chemical and fertili- potassic (P&K) fertilisers, while urea
ser sector has faced signifi cant subsidies remain stable. When seen SUDEEP MAHESHWARI &
Theadwinds over the last 12-18 in conjunction with the government’s VISWANATHAN RAJENDRAN
months driven by depressed global ambition to drive privatization of certain Partners, Kearney
demand, China dumping, etc. This has public sector fertiliser companies, we
resulted in margin pressure for most see this as a signal that the government Crop protection: No major incen-
of the Indian players. Industry was increasingly wants to push towards tives; global competitiveness critical
expecting Production Linked Incentives modernisation and effi ciency to reduce to survive market headwinds
(PLIs), support for R&D, and other subsidy burden. The Budget does not introduce any
measures to support domestic produc- direct incentives for agrochemical players,
tion. While the fertiliser sector conti- The reduction in P&K fertiliser despite industry bodies advocating
nues to get subsidy support, the Union subsidies may not automatically create for tax deductions on R&D expenses,
Budget 2025-26 has stayed away from a domestic manufacturing opportunity, lower GST on agrochemicals, and PLI
any sector-wide incremental incentives. as India remains dependent on imports scheme extensions. With these propo-
We see this as a signal to the sector for key raw materials like phosphoric sals left unaddressed, companies in this
to stand on its own and drive towards acid and potash. While the cut signals space will need to compete in a chal-
global competitiveness. the government’s intent to rationalise lenging global market with limited
fi scal support, its impact on local pro- government support. Companies will
Fertilisers: Continued push towards duction depends on global raw mate- have to focus on operational excellence
self-suffi ciency and subsidy reduction rial price volatility and trade policies. and cost optimisation to stay competitive.
The Budget refl ects the Indian If raw material prices remain high,
Government’s continued push for self- domestic producers may remain cautious The impact of a 20% reduction in
suffi ciency, reducing subsidies while about capacity expansion. Additionally, crop insurance funding from last year
managing impact on farm input costs. It farmers could bear higher costs if com- will be interesting to watch. While small
plans for an additional 12.7-lakh tonnes panies pass on the subsidy reduction, farm owners may cut back on inputs
per annum urea plant in Assam. The potentially impacting demand further. due to increased fi nancial risk, others
trend of subsidy reduction from the last Therefore, a shift toward self-reliance might increase their use of pesticides as
budget continues this year as well – the in these fertilisers would require long- a protective measure against potential
present budget reduces fertiliser subsi- term feedstock securities and stronger crop losses. Agrochemical companies
dies further, mainly in phosphatic and backward integration strategies. will need to position their products as
cost-effective and essential for yield
maximization to navigate this shift.

The Budget also includes a marginal
increase in agricultural R&D funding,
with some focus on crop science, pest-
resistant varieties, and stress-resistant
seeds. While this refl ects a long-term
approach to improving productivity, the
incremental nature of the funding sug-
gests no immediate large-scale impact
on the agrochemicals sector.

Battery & electronics chemicals:
Strong support for EVs likely to
catalyse this segment
The Budget introduces signifi cant

182 Chemical Weekly February 25, 2025

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