The fertiliser subsidy is anticipated to reach an all-time high of Rs 1.65 lakh crore this financial year, due to an unusual spike in the cost of raw materials and fertilisers globall, compared to the budget projection of Rs 1.05 lakh crore, according to Crisil report.

Crisil said, India's fertiliser subsidy is projected to reach a new high of Rs 1.65 lakh crore, and an additional subsidy as well as a change in the nutrient-based subsidy (NBS) rates are required to keep fertiliser companies' credit profiles intact. "Our forecast includes a 3% year-over-year increase in fertiliser demand and a moderated price of raw materials and fertilisers in the second half of this fiscal year. The subsidy bill could rise to Rs 1.8-1.9 lakh crore if demand is higher than planned or input prices do not fall even in the second half " the report read. The government has paid an additional Rs 1.2 lakh crore in the last two fiscal years and enhanced the planned subsidy, it said.

The sharp spike in raw material prices, however, has negated this, and another intervention may be required in 2022-23, according to the Crisil analysis. "Urea may contribute more than 85% of the subsidy arrears. Because of the Russia-Ukraine conflict, pooled gas prices - a mix of domestic gas and imported LNG considered for billing to fertiliser plants - increased by more than 75% last fiscal year and are likely to stay high for the majority of 2022-23 "Nitesh Jain, director of Crisil Ratings, said.

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