CAG initiates first in-depth audit of fertiliser subsidy since 2011

With fertiliser subsidy threatening to touch almost ₹3 trillion in financial year 2026-2027 (FY27), the Comptroller and Auditor General (CAG) is conducting the country’s first pan-India performance audit on fertiliser subsidy since 2011, with a special focus on prevention of urea diversion for non-agricultural purposes and assessment of its actual demand.

The report, expected to be released by the end of next year, is being conducted for two financial years, starting FY27.  The audit will cover only urea, not of P and K fertilisers, namely Di-ammonium phosphate (DAP) and NPKS grades.

The two-year audit plan, the fieldwork of which has started since May-June 2026, will focus on 169 districts spread across 15 states.

“Of the 169 districts, officials explained 149 are those which have a higher urea consumption than the national average of 180 kilograms per hectare and also higher than the respective state’s average national consumption. Four districts are those which are suggested by experts and 16 districts are those which have been suggested by the Union department of fertilisers,” a senior official explained.

Uttar Pradesh has the maximum number of districts with fertiliser consumption exceeding the national average of 180 kgs per hectare, followed by 16 each in Tamil Nadu and Bihar, 14 in Punjab and Gujarat and 12 in Telangana.

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“Of the 16 districts added for the comprehensive performance audit by the Centre, five each are in Karnataka and Rajasthan and two each in Madhya Pradesh, Maharashtra, and West Bengal,” the official said.

The audit will investigate whether urea is being diverted to produce explosives and assess efficacy of the neem-coated urea scheme was.

“It will also specifically look at urea diversion in border areas which could be due to smuggling and cross-border transit,” the official said.

Recently, a government analysis showed that fertiliser off-take dipped by a whopping 37.56 per cent in select border districts of the country between kharif 2025 and 2026 as soon as sales started getting linked with farmer IDs, crop requirement and land records through the Agri Stack or other similar state platforms.

“The audit will also examine the Central government policies in 2022-23 and 2024-25 that lead to a spike in urea imports in India and also import transactions since the past 5 years,” the official explained.

The CAG has also identified 13 urea plants for detailed scrutiny out of the total of 36 plants.

“In the first year (2026-27), the audit will comprise three themes, namely, demand-assessment of urea and subsidy framework, second integrated fertiliser management system (this will be an audit from the IT point of view) and third domestic urea production and energy efficiency in urea plants,” a senior official explained.

In the second year (2027-28), the audit will cover import of urea (which has touched almost 10 million tonnes in 2025-26), movement of urea and efficiency of the fertiliser control order, the official said.

“There is an economic logic to diversion as well as we have tentatively found out that urea for agriculture usage is priced at ₹600 per quintal while that for industrial usage is priced anywhere between ₹2,400-₹7,000 per quintal. This is a ready recipe for diversion,” the official added.

India had targeted self-sufficiency in urea production by 2025-26 through systemic policy initiatives and enhanced indigenous capacity, but that target remains unmet as the country’s urea import in 2025-26 was 10.35 million metric tonnes (MMT), a steep increase from the 5.6 MMT urea import of 2024-25.

Domestic production fell over the period, from 31.4 MMT in 2023-24 to 30.7 in 2024-25 and 29.33 in 2025-26. Consumption in 2025-26 rose to 39.66 MMT.

Fertiliser Subsidies (in Rs crore) 

*Actuals

**Budget Estimate

***Revised Estimate

NOTE: #Percentage change is between RE of FY-26 over BE of Fy-27

## percentage change between BE of Fy-27 and BE of Fy-26

& Percentage change between RE of Fy-26 and BE of Fy-26

Source: Budget Papers Urea Production, Consumption and Import (in million tonnes) 

 Source: CAG