The countries of global south in Asia and Africa are most adversely impacted by the US-Israel war on Iran, started on 28th February 2026. South Asian nations are particularly badly affected. The ADB estimates that a prolonged conflict could reduce economic growth in developing Asia by up to 1.3 percentage points and increase inflation by as much as 3.2 percentage points.
It is a reflection of global dominance of US that these countries have hardly mustered courage to clearly identify the countries responsible for starting the war. While Israel’s objective of complete destruction of Iran and change of regime may or may not be achieved, India and several other countries are in serious economic trouble.
West Asia accounts for nearly half of global Urea exports and around 30% of ammonia supply, both critical for crop production. QAFCO, one of the world’s largest fertiliser producers in Qatar has suspended operations due to the war. It is not known how long it will take to reach normal level of its production.
Around 45% of global sulphur exports come from Gulf producers, and Qatar accounts for roughly one-third of the world's helium supply, both of which are relevant for fertilizer production, metals processing, and semiconductor manufacturing.
Even before this war, LNG availability was restricted due to the EU’s sanctions package, which included a complete ban on LNG imports from Russia under short-term contracts from April 25, 2026, and under long-term contracts from January 1, 2027. The purchase, import, or transfer, directly or indirectly, of LNG produced or exported from Russia was prohibited.
Indian situation of Urea production
Urea accounts for 45 per cent of fertiliser consumption in India. Complex fertilisers (diammonium phosphate, or DAP, and nitrogen, phosphorus and potassium, or NPK) account for one-third, and single super phosphate (SSP) and muriate of potash (MOP) for the rest.
India is heavily import dependent for fertilisers. For Urea import is about 20 per cent of domestic consumption. For complex fertilisers, mainly DAP, about one-third of the requirement is met from imports. An ICRIER paper estimates that if the import content of LNG is also taken into account, domestic self-sufficiency in Urea was only about 46 percent in in 2024–25.
LNG is the basic raw material for domestic production of Urea. It is about 80 per cent of the raw material cost. In 2025-26, India imported nearly 26 million tonnes of liquefied natural gas (LNG) valued at $13.3 billion. Out of this is estimated by Harish Damodaran that $6.3 billion of LNG would have been imported for manufacture of Urea alone.
As a result of war on Iran, the global Urea prices have sky rocketed. In the recent tenders for 2.5 million tonnes invited by Indian Potash Limited, the price received was imports have been contracted at landed (cost plus freight) prices of $935-959. It is more than double the rates last year when they were in the range of $410-420. It means that the Government expenditure on Urea subsidy may be substantially higher than Rs 1.26 trillion budget for FY 2027.
It is however comforting that global prices have come down to about $650 per tonne by the end of May 2026 (Rural Voice).
But it must be remembered that cost of production of domestic Urea has often been higher than global prices. This is because Qatar, Saudi Arabia, and Russia have large reserves on LNG and their input cost for production of Urea is much lower.
India’s concern about Urea has guided the policy and India-Oman agreement on Urea has been highly successful. India invested in a joint venture company OMIFCO (Oman India Fertiliser Company) in Oman in 2005–2006. IFFCO and KRIBHCO have 25 percent equity each in this company.
Similar joint ventures in countries having large reserve of LNG may provide an alternative to fluctuations in global prices and provide stability to Indian market.
In 2022, there was a sharp increase in global prices primarily due to Russian invasion of Ukraine.
The present Government has also been alive to the situation of import dependence of Urea, and a New Investment Policy was announced in January 2013 to attract investment in Urea sector and to make India self-sufficient in the Urea sector. In 2015, a new Urea policy was announced to optimize and regulate the existing 25 gas-based plants already running in India.
Since then, six new Urea units have been set up, 4 through Joint Venture Companies (JVC) of nominated PSUs and only 2 by private companies.
As a result, domestic production has gone up from 22.5 million tonnes in 2014-15 to 314.07 LMT during 2023-24. During 2024-25, 306.67 LMT of Urea was produced in the country.
Since the private manufacturers must depend on subsidy from the Government, they find it unattractive to invest. In the past disbursement of subsidy has been delayed due to budgetary constraints.
It must be noted that domestic production units also depend on imported LNG and therefore prudent use of Urea by farmers is highly desirable.
Urea subsidy reform waiting a decision for decades
In 2010, the UPA Government introduced Nutrient Based Subsidy (NBS). It resulted in lowering of subsidy on phosphatic and potassic fertilisers to 45 percent and 5 percent respectively, Kharif 2025).
But the same on Urea has ballooned to 80-85 percent (Kharif 2025) due to non revision of prices since 2010-11. As a result, the application of N has gone up while the consumption of P and K has grown at a much lower rate. In some states (Punjab, Haryana, UP) the ratio of consumption is 20:5:1 (Department of Fertilisers, 24 March 2026).
Several suggestions have been offered to rationalize the consumption of N (Urea) as less than one third is absorbed by the plant and the rest contaminates underground water and air.
It is a political call which has been awaiting a decision for decades. Increase in price of Urea for farmers will increase the cost of cultivation, which will be reflected in fixation of MSP.
(Siraj Hussain is a former Secretary, Ministry of Agriculture and Farmers' Welfare, GoI)