Why in the News?

• India's fertiliser subsidy burden is likely to double to nearly Rs. 3.4 lakh crore in 2026-27 due to surging global prices caused by the West Asia conflict and the closure of the Strait of Hormuz.

What’s in Today’s Article?

• About Fertilisers (Basics, India’s Dependence, Subsidy Mechanism, etc.)
• News Summary (Causes of Surge, Fiscal Implications, Govt Response, Significance, etc.)

About Fertilisers and India's Dependence

• Fertilisers are essential agricultural inputs that supply nutrients, primarily nitrogen (N), phosphorus (P), and potassium (K), to crops, supporting higher yields and food security. India's agriculture is heavily dependent on fertilisers, particularly:

• Urea: The most widely used nitrogen-based fertiliser, primarily used for crops like rice, wheat, and sugarcane.
• Di-Ammonium Phosphate (DAP): A phosphate-based fertiliser.
• Muriate of Potash (MOP): A potassium-based fertiliser.
• Nitrogen-Phosphorus-Potassium (NPK) Complex Fertilisers: Multi-nutrient fertilisers.

• India is one of the largest importers of fertilisers in the world. Major exporters include China, Russia, Morocco and Gulf nations (Oman, Qatar, Saudi Arabia, UAE, Bahrain)
• Before the West Asia war, the Gulf nations accounted for around 40% of India's urea imports.

Fertiliser Subsidy Regime in India

• The Indian government heavily subsidises fertilisers to make them affordable for farmers and maintain food security. The subsidy system operates under two main frameworks:
• Urea Subsidy

• Urea is sold at a fixed Maximum Retail Price (MRP) of around Rs. 268 per 45-kg bag.
• The difference between the production/import cost and the MRP is borne by the government as a subsidy.

• Nutrient-Based Subsidy (NBS) Scheme

• Launched in April 2010 for non-urea fertilisers (DAP, MOP, complex fertilisers).
• The government provides a fixed subsidy per kg of nutrient content (N, P, K, and Sulphur).
• Manufacturers can fix the MRP based on market conditions.

• Direct Benefit Transfer (DBT)

• Since 2018, fertiliser subsidy has been routed through the DBT mechanism.
• Sales are recorded through PoS (Point of Sale) machines at retail outlets.
• Subsidy is released to companies based on actual sales to farmers.

News Summary

• According to top government sources, India's fertiliser subsidy burden is likely to reach Rs. 3.4 lakh crore in 2026-27, an almost 100% increase compared to the Budget estimate of Rs. 1.7 lakh crore.
• The cost of a fertiliser sack has surged from around Rs. 2,900 post-COVID to around Rs. 4,500 now, while the government continues to sell it at a subsidised price of around Rs. 300 per sack.

Causes of the Surge

• Global Supply Crunch
  • The West Asia conflict and the closure of the Strait of Hormuz, a critical waterway, have caused massive disruptions:

• India's latest urea purchases were at a cost-plus-freight price of $935-$959 per tonne.
• This is more than double the year-ago figure of $410-$420 per tonne.
• Global suppliers, including China, are holding on to their stock due to the Iran war.

• China's Export Ban
  • In mid-March 2026, China banned the export of fertilisers to secure domestic supplies, removing a critical source of supply for India.

Shift to Russia and Alternative Sources

• Given the supply crunch, the government is exploring alternative sources:

• India's urea imports from Russia rose to 13.99 LMT from 9.23 LMT.
• Imports from China surged to 21.24 LMT in the first 11 months of 2025-26 from just 0.99 LMT in all of 2024-25 (before the ban).
• The government is now planning to tap Russia to meet more of its import requirements.

Fiscal Implications

• Subsidy Spending Trends

• 2024-25: Rs. 1.73 lakh crore on fertiliser subsidy.
• 2025-26 (Revised Estimate): Raised to Rs. 1.86 lakh crore from initial Rs. 1.68 lakh crore.
• 2025-26 (Actual): Rs. 2.11 lakh crore, Rs. 24,920 crore more than the revised estimate, 22% higher than 2024-25.
• 2026-27 (Budget Estimate): Rs. 1.71 lakh crore, likely to balloon to Rs. 3.4 lakh crore.

• April 2026 Expenditure
  • The Controller General of Accounts data shows the Centre spent Rs. 22,033 crore as subsidy in April 2026 for urea and nutrient-based fertilisers, roughly 13% of the full-year estimate in just one month.
• Pressure on Fiscal Deficit
  • The fiscal pressure from the fertiliser subsidy is compounded by:
    • Rs. 1.23 lakh crore lost in revenue foregone due to the Rs. 10 per litre excise duty cut on fuel.
    • Under-recoveries of public sector oil marketing companies (OMCs), earlier Rs. 1,000 crore a day, now around Rs. 650 crore.
  • April 2026 fiscal deficit surged to a 26-month high of Rs. 3.62 lakh crore, accounting for 21.4% of the entire 2026-27 target.

• The "3 Fs" Challenge
  • Finance Minister Nirmala Sitharaman highlighted the "3 Fs" that require focus amid rupee pressure:

• Fertiliser: heavily imported, surging prices.
• Fuel: crude oil dependence, elevated global prices.
• Foreign exchange to buy gold: a significant import bill.

• All three items must be paid for in foreign currency, putting pressure on the rupee.

Concerns Over Diversion

• Current Stock Position
  • Despite the price pressures, the government has stated that the overall stock position is "comfortable" for the kharif season:

• Kharif fertiliser requirement (2026): 383.9 LMT
• Current stocks: 197.56 LMT (51% of requirement)
• Usual stock level: About 33%, so current stocks are significantly higher
• Farmer purchases so far: 86.65 LMT (just under 23% of total requirement)
• Government Response
  • The government has instructed states to:
    • Provide fertiliser based on the actual requirement plus a reasonable buffer.
    • Strengthen monitoring at retail outlets.
    • Use PoS data to track unusual purchase patterns.

Significance and Implications

• For Farmers

• Continued subsidised access to fertilisers despite the global price surge.
• Risk of supply disruptions if imports are not secured.
• Need for soil health awareness and balanced fertiliser use.

• For Government Finances

• Massive fiscal burden affecting other priorities.
• Pressure on fiscal deficit targets.
• Trade-offs with other welfare and capital expenditure.

• For India's External Sector

• A higher import bill puts pressure on the current account deficit.
• Foreign exchange outflows are affecting the rupee.
• Need to diversify import sources.

• For Agricultural Policy

• Long-term concerns about fertiliser subsidy sustainability.
• Need for promoting organic and natural farming.
• Importance of soil health management.
• Push for nano fertilisers and precision agriculture.

Why in News?

• To strengthen foreign currency inflows and improve external sector liquidity, the RBI has introduced a special dispensation allowing banks to mobilise fresh FCNR(B) deposits with maturities of 3–5 years until September 2026.
• Additionally, banks can swap these deposits with the RBI at concessional terms, effectively eliminating the cost of hedging foreign exchange risk.
• Experts estimate that the move could potentially attract $50–70 billion in foreign capital, although its success will depend largely on the interest rates offered by banks.

What’s in Today’s Article?

• What are FCNR(B) Deposits?
• Reasons Behind Introducing New Facility
• Reasons for FCNR(B) Deposits Currently Being Less Attractive
• Working of RBI’s New Swap Facility
• Additional Regulatory Relaxations
• Trends in NRI Deposits During FY26
• Conclusion

What are FCNR(B) Deposits?

• Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits are fixed-term deposits maintained by:
  • Non-Resident Indians (NRIs)
  • Overseas Citizens of India (OCIs)
  • Persons of Indian Origin (PIOs)
• Key features:
  • Deposits are held in foreign currencies such as the US Dollar (USD), Pound Sterling (GBP), Euro (EUR), Japanese Yen (JPY), Australian Dollar (AUD), and Canadian Dollar (CAD).
  • Such deposits protect depositors from exchange-rate fluctuations.
  • Interest earned is exempt from income tax in India for eligible non-residents.
  • Interest rates are linked to international benchmark rates.

Reasons Behind Introducing New Facility:

• Sharp decline in FCNR(B) inflows:
  • FCNR(B) inflows fell by 86% in FY26, and fresh inflows dropped to $946 million from $7.1 billion in FY25.
  • Outstanding FCNR(B) deposits stood at $33.8 billion at the end of March FY26.
  • The decline reflects - expiry of earlier regulatory incentives, lower returns compared to overseas deposit options, and strong competition from US dollar deposits abroad.
• RBI’s objective:
  • To boost foreign currency inflows.
  • Strengthen forex reserves and external sector resilience.
  • Provide banks with a cheaper source of overseas funding.
  • Enhance liquidity without significantly increasing borrowing costs.

Reasons for FCNR(B) Deposits Currently Being Less Attractive:

• Lower interest rates offered by Indian banks:
  • For example, SBI offers 3.35% [3–4 years FCNR(B) rate], HDFC bank offers 3.65%, and ICICI bank offers 3.0%.
  • In contrast, SBI offers about 6.3% on comparable domestic fixed deposits. HDFC and ICICI offer around 6.5% on rupee deposits.
• Competition from overseas markets:
  • US dollar deposits abroad provide higher returns.
  • For example, Merrick bank offers ~4.2% annualised percentage yield (APY), Morgan Stanley offers ~4.3% APY, and SBI's US Certificate of Deposit (CD) offers ~3.85%.
  • Therefore, unless Indian banks raise FCNR(B) rates by around 100 basis points (1%), NRIs may have little incentive to transfer funds to India.

Working of RBI’s New Swap Facility:

• Concessional hedging support: The RBI has allowed banks to swap FCNR(B) deposits with the central bank at concessional terms.
• Mechanism:
  • Banks sell US dollars to the RBI and simultaneously agree to buy them back at maturity.
  • Swap transactions will occur at the same exchange rate in both legs.
  • The swap is undertaken at par, removing exchange-rate risk.
• Operational conditions:
  • Facility available for deposits mobilised up to September 30, 2026.
  • The swap window remains open until October 16, 2026.
  • Banks may access the facility once every week.
  • Minimum transaction size: $1 million.
  • Settlement is based on the FBIL Reference Rate.
• Significance: The arrangement transfers most of the hedging burden from banks to the RBI, reducing costs and enabling banks to offer more competitive FCNR(B) rates without hurting profitability.

Additional Regulatory Relaxations:

• To encourage mobilisation of foreign currency deposits, RBI has also exempted these deposits from:
  • Cash Reserve Ratio (CRR): Portion of deposits banks must maintain with RBI as cash reserves.
  • Statutory Liquidity Ratio (SLR): Portion of deposits maintained in liquid assets such as cash, gold, or government securities.
• These exemptions improve banks’ deployable resources and lower the cost of raising FCNR(B) funds.

Trends in NRI Deposits During FY26:

• Overall NRI deposit flows: Total NRI deposit inflows declined to $14.41 billion from $16.16 billion in FY25.
• NRI deposits comprise: FCNR(B) deposits, Non-Resident External (NRE) accounts, and Non-Resident Ordinary (NRO) accounts.
• Shift towards rupee deposits:
  • Despite the fall in FCNR(B) inflows, NRIs increasingly preferred rupee-denominated deposits.
  • NRE deposits: Outstanding balances increased by $7.94 billion. Total outstanding reached $98.56 billion.
  • NRO deposits: Increased by $5.53 billion. Outstanding balances reached $33.33 billion.
  • Consequently, total outstanding NRI deposits rose marginally from $164.68 billion to $165.65 billion.

Conclusion:

• The RBI’s FCNR(B) deposit scheme represents a targeted external-sector intervention aimed at attracting foreign currency resources and strengthening financial stability.
• The success of the initiative will ultimately depend on whether lenders can offer sufficiently attractive returns to compete with global dollar deposit markets and revive NRI participation.

About Project 18 Programme:

• Project 18 (P-18) Indian Navy’s Next-Generation Destroyer (NGD) programme.
• It is overseen by the Indian Navy’s Warship Design Bureau (WDB) in collaboration with Mazagon Dock Shipbuilders Limited (MDL) and Garden Reach Shipbuilders & Engineers (GRSE).
• Conceived as a successor to the Visakhapatnam-class (P-15B) destroyers, the P-18 class will be a fleet of advanced, multi-role stealth destroyers.
• Features:
  • With an estimated displacement exceeding 13,000 tonnes, the P-18 will rank among the largest destroyers ever operated by the Indian Navy.
  • Under international classification, warships above 10,000 tonnes fall into the cruiser category — a segment that India currently does not possess. Project 18 will mark India’s entry into this class of warships.
  • They will use an advanced electric propulsion system powered by gas turbines and diesel generators.
  • It is also expected to incorporate extensive automation throughout the ship, reducing crew requirements by an estimated 25 to 30 percent compared to existing platforms.
  • Each ship will feature 114 vertical launch systems capable of firing a range of India’s homegrown missiles, such as:
    • BrahMos and BrahMos Next Generation
    • Long-Range Land-Attack Cruise Missiles (LR-LACM)
    • Precision-Guided Long-Range Surface-to-Air Missiles (PGLRSAM)
    • Short-Range Surface-to-Air Missiles (SRSAM)
    • Supersonic Missile-Assisted Release of Torpedo (SMART)
  • The ships will be able to carry unmanned underwater vehicles and kamikaze drones, used for surveillance, detecting mines, and attacking submarines.
  • Advanced radar systems will give the ships 360-degree awareness and the ability to detect threats up to 500 kilometres away.

About Shiveluch Volcano:

• It is one of the largest and most active volcanoes located on Russia’s Kamchatka Peninsula, one of the most intense volcanic regions in the world.
• It is a stratovolcano—a steep-sloped volcano composed of alternating layers of solidified ash, hardened lava, and volcanic rocks.
• The summit is truncated by a broad 9-km-wide caldera. The lava dome complex was constructed within the large open caldera.
• Many lava domes occur on the outer flanks.
• Frequent collapses of the dome complex have produced debris avalanches; the resulting deposits cover much of the caldera floor.

About Wangchhu Hydroelectric Project:

• It is a 570 MW run-of-river hydropower project being built on the Wangchu River/basin in Chukha District, Bhutan.
  • The Wangchu River (also called Raidāk River in India) is a significant tributary of the Brahmaputra
• It is being developed by Wangchhu Hydroelectric Power Limited (WHPL), a joint venture company formed by India’s Adani Power Limited (APL) and Bhutan’s state-owned Druk Green Power Corporation Ltd (DGPC).
• DGPC holds a controlling 51% stake in the venture, with Adani Power owning the remaining 49%.
• The project will follow a Build, Own, Operate, Transfer (BOOT) model.
• Under the BOOT framework, Adani Power will construct, operate, and manage the project for a fixed period before transferring ownership to the Bhutanese government.
• The facility will function as a peaking run-of-river plant, helping Bhutan manage seasonal fluctuations in hydropower generation.
• The facility will feature four turbines, each rated at 142.5 MW, producing roughly 2,478.93 GWh annually.
• It is designed to meet Bhutan’s peak winter electricity demand while exporting surplus power to India during the summer months.

About Maharaja Chhatrasal:

• Maharaja Chhatrasal (4 May 1649 – 19 December 1731) was a medieval Indian warrior who fought against the Mughal Emperor Aurangzeb and established his own kingdom in Bundelkhand.
• He belonged to the Bundela clan of Rajputs, born under Mughal supremacy but died as an independent king of an independent kingdom.
• Maharaja Chhatrasal started a revolt at the age of 22 and formed a kingdom of his own at the age of 26 against Mughal dominance.
• During the first ten years of his revolt, he conquered a large tract of land between Chitrakoot and Panna on the east and Gwalior on the west.
• His victory march continued as far as Malwa, Punjab, Rajasthan, establishing the Bundela kingdom.
• Some of the Mughal generals who were defeated by him were Rohilla Khan, Kaliq, Munawwar Khan, Sadruddin, Sheikh Anwar, Sayyid Latif, Bahlol Khan and Abdus Ahmed.
• Alliance with the Marathas:
  • In 1729, Chhatrasal sought help from Peshwa Baji Rao I against the Mughal commander Muhammad Khan Bangash.
  • Baji Rao I defeated Bangash and helped Chhatrasal retain his kingdom.
  • In gratitude, Chhatrasal granted a portion of his territory to the Marathas, strengthening Maratha influence in central India.
  • As a sign of appreciation for the Peshwa, Chhatrasal gave his daughter Mastani as a bride to Baji Rao I.

• He was not only a great warrior but an able administrator too; his governance ensured his kingdom would always have a full treasury.
• Highly respected for his sense of honour and love for his people, he was given the title of 'Maharaja' by Sant Prannath.

About Bovista colorata:

• Bovista colorata, commonly known as the yellow puffball mushroom, is a species of puffball fungus belonging to the family Agaricaceae.
• It is generally found in grasslands, open fields, meadows, and disturbed soils.
• Bovista colorata has a spherical shape and striking yellow fruiting body.
• Unlike conventional mushrooms that produce spores through gills beneath a cap, puffball fungi develop spores inside a closed spherical fruiting body.
  • As the mushroom matures, the internal tissue transforms into a fine powdery mass of spores, which are dispersed through wind, raindrops, or physical disturbance, allowing the species to spread over considerable distances.
  • Puffball species play an important ecological role as decomposers, aiding nutrient recycling, carbon cycling and soil formation.
  • Some species are also known for their nutritional value and bioactive compounds with potential medicinal properties.

About Aurora Borealis:

• It is popularly called as ‘northern lights’.
• The phenomenon is called ‘northern lights’ because they are concentrated around the North Pole or the magnetic pole in Earth’s northern hemisphere.
• They are frequently seen in Norway, Sweden, Finland, Iceland, Canada, Alaska, and Greenland. 
• Aurora Borealis’ is the scientific name for these lights in the night sky in the northern hemisphere.
• The ones in the southern hemisphere are called ‘Aurora Australis’ or ‘southern lights.’
• Formation of Auroras:
  • It is due to activity on the surface of the Sun.
  • The star continuously releases a stream of charged particles, mainly electrons and protons, and magnetic fields called the solar wind.
  • As the solar wind approaches the Earth, it is deflected by the planet’s magnetic field, which acts like a protective shield.
  • However, some of the charged particles are trapped in the magnetic field and they travel down the magnetic field lines at the north and south poles into the upper atmosphere of the Earth.
  • These particles then interact with different gases present there, resulting in tiny flashes that light up the night sky.
  • When solar wind particles collide with oxygen, a green colour light is produced. Interaction with nitrogen produces shades of blue and purple.
  • Auroras expand to midlatitudes when the solar wind is extremely strong.
    • This happens when the activity on the Sun’s surface goes up, leading to solar flares and coronal mass ejections (CMEs), which are essentially extra bursts of energy in the solar wind.
    • In such cases, the solar wind is so intense that it can result in a geomagnetic storm, also known as a magnetic storm — a temporary disturbance of the Earth’s magnetic field.

About Food Safety and Standards Authority of India:

• It is a statutory institution formed by the Ministry of Health and Family welfare, Government of India under the Food Safety and Standards Act, 2006.
• Mandate: FSSAI is responsible for setting food standards, regulating the manufacture, storage, distribution, sale, and import of food, and ensuring the availability of safe and wholesome food for human consumption.
• Functions of Food Safety and Standards Authority of India:
  • Standards Development: It formulates standards for various food products, ensuring they are safe for consumption.
  • Food Safety Management Systems: It provides guidelines for businesses to implement effective food safety management practices.
  • Licensing and Registration: FSSAI manages the licensing process for food businesses, ensuring they comply with food safety regulations.
  • Surveillance and Monitoring: Regular inspections and audits are conducted to assess compliance with food safety standards.
  • Consumer Awareness: Initiatives to educate the public about food safety, hygiene, and nutrition are a key focus area.
  • Accreditation: The FSSAI is also responsible for the accreditation of food testing laboratories throughout India.

About Gallantry Awards:

• It recognises acts of exceptional bravery, courage and devotion to duty by the Armed Forces and security personnel.
• Ministry: The Ministry of Defence seeks recommendations twice annually from the Armed Forces and the Ministry of Home Affairs for Gallantry Awards in India.
• These gallantry awards are announced twice in a year - first on the occasion of the Republic Day and then on the occasion of the Independence Day.
• History of Gallantry Awards:
  • Three gallantry awards, namely Param Vir Chakra, Maha Vir Chakra and Vir Chakra, were instituted by the Government of India on 26th January, 1950.
  • Thereafter, the other three gallantry awards, i.e. the Ashoka Chakra Class-I, the Ashoka Chakra Class-II and the Ashoka Chakra Class-III were instituted in 1952.
  • These were later renamed in January 1967 as Ashoka Chakra, Kirti Chakra, and Shaurya Chakra, respectively.
• Order of precedence: The order of precedence of these awards is the Param Vir Chakra, the Ashoka Chakra, the Mahavir Chakra, the Kirti Chakra, the Vir Chakra and the Shaurya Chakra.
• These awards are divided into two main categories based on whether the act of bravery occurs in the presence of the enemy or in peacetime situations.
  • Wartime Gallantry Awards: Param Vir Chakra, Maha Vir Chakra, and Vir Chakra
  • Peacetime Gallantry Awards: Ashoka Chakra, Kirti Chakra, and Shaurya Chakra are awarded for courageous actions during peacetime.