The Union Cabinet on Wednesday approved the National Investment Policy for Urea-2026 for Atmanirbhar Bharat (NIPU-2026), paving the way for fresh investments in gas-based urea manufacturing plants as the government seeks to reduce India's dependence on imports and strengthen long-term fertiliser security.
The decision was taken by the Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi.
The new policy replaces the New Investment Policy (NIP)-2012, which expired in 2019, and introduces a revised financial framework aimed at making new urea projects more attractive while improving transparency and reducing government subsidy costs.
New Incentives for Investors
According to the government, NIPU-2026 will facilitate the establishment of new gas-based urea manufacturing units across the country, helping India move closer to self-sufficiency in urea production. Compared with the 2012 policy, the new framework introduces several key reforms, including the separation of fixed and variable costs to improve transparency, the introduction of a Return on Equity (RoE) band ranging from 12 per cent to 16 per cent, and measures to mitigate foreign exchange risk by converting fixed costs into Indian rupees after four years based on prevailing exchange rates.
The government estimates that these changes will result in savings of more than Rs. 250 crore for each new urea plant established under NIPU-2026 compared with projects approved under the earlier NIP-2012.
Why the Policy Matters
India remains one of the world's largest consumers of urea, but domestic production continues to fall short of demand, making imports necessary every year.
The Department of Fertilizers said the country currently has 33 operational urea manufacturing units with a total reassessed installed capacity of 269.42 lakh metric tonnes (LMT). Despite substantial capacity additions over the past decade, domestic output is still insufficient to meet national demand, leaving a gap that is bridged through imports.
The ministry noted that it has received several proposals for setting up new urea plants, making a fresh investment policy necessary after the expiry of the earlier framework.
Building on the 2012 Policy
The original New Investment Policy-2012 was introduced to revive investment in India's urea sector through greenfield, brownfield, expansion and revival projects. Under that policy, six new urea plants were established, including four through joint ventures promoted by public sector companies and two by private firms. The policy remained open for new investments until October 2019.
Push for Fertiliser Security
NIPU-2026 comes amid the government's broader strategy to improve fertiliser security following heightened concerns over global supply disruptions and volatile energy prices during the past year. India relies heavily on imported natural gas for urea production and also imports substantial quantities of finished urea to bridge the domestic supply gap. Geopolitical tensions in West Asia have underscored the importance of expanding indigenous manufacturing capacity.
Earlier this year, the government had also approved a new ammonia-urea complex at Namrup in Assam and announced measures to increase gas availability for fertiliser plants, while maintaining that adequate fertiliser stocks were available for farmers.
The government said NIPU-2026 forms part of its broader Atmanirbhar Bharat initiative aimed at strengthening domestic manufacturing capacity, improving supply security and ensuring uninterrupted availability of fertilisers for Indian farmers.