The war in West Asia and Iran’s blockade of the Strait of Hormuz, has already put India’s petroleum economy under stress. But a much larger problem could yet unfold for the country due to the hit on production and imports of fertilisers that could put at risk its agricultural sector. This does not augur well for this sector as it is facing a significant deceleration after an above average growth of 4.2% in 2024-25. According to the second revised estimates of GDP, agriculture is expected to grow by just 2.4% in 2025-26. Further, recent projections indicate that the production of rabi crops may not be able to match the previous year’s level due to the unusual weather pattern over the past two months. The disruption in fertiliser supplies could not come at a worse time, for it has heightened uncertainties for the farming communities.
Almost 33% of the of global fertiliser trade, including urea, ammonia, and sulphur, uses the Strait of Hormuz with the Gulf countries relying heavily on this route to reach their export destinations, supplies of fertilisers have become vulnerable to delays, steep increase in cost spikes, and shortages.
India has consistently been dependent on fertiliser imports, which have risen during most years in this decade. In fact, India was the third largest importer of urea in 2023, and its share in the global imports of this product has consistently been around 15% during this decade, except in 2024. Over the past five years, imports have been between 31 and 37% of the country’s total consumption, but is expected to be over 50% in 2025-26, given spurt imports. Figures for April to January 2025-26 show a 42% rise in imports over the corresponding period in the previous year, as urea imports have increased by 57%. The rise in imports could have been larger if imports of potassic fertilisers had not decreased by 16%. The government would need to monitor whether the decrease in potassic fertiliser imports adversely affects the nutrient balance.
India has traditionally been dependent on the Gulf Region for its supplies of nitrogenous fertilisers. Seventy-five percent of urea imports were sourced from this region in 2024-25, most of which came through the Strait of Hormuz. There cannot be any doubt that this large dependence on one region for meeting India’s needs of a critically important product for the fledgling agricultural sector is in itself a sign of considerable vulnerability, and this fact has been severely exposed by the war in West Asia. India has been able to partly mitigate this problem through diversification of its urea import sources, as the share of the Gulf States sharply decreased to 44% during April to January 2025-26. This has been possible through increased reliance on China and Russia, the two countries now account for 35% of urea imports. This raises questions whether import diversification could be an effective risk mitigating strategy, though it seems from the government’s recent statements in the Parliament that this is the strategy it favours for reducing the risks arising from its growing import dependence on fertilisers.
Geo-economic risks are not the only source of vulnerabilities that India’s fertiliser imports could suffer. Steep rise in the price of fertilisers have already emerged as a major threat. Since the beginning of the US' attack on Iran, urea prices have jumped to around $700 per metric tonne, up from $400 to $490 before the war began, which raises the spectre of worsening of the current account balance. As prices are expected to remain sticky at higher levels even after the end of the hostilities in West Asia, India is staring at a medium-term impact on its external payments position on this count. This implies that as long as India continues to remain heavily dependent on fertiliser imports, mere diversification of fertiliser import sources would not lessen its vulnerabilities.
It is, therefore, quite surprising that the government has not considered strengthening domestic production of fertilisers in order to reduce its import dependence. In the wake of the covid crisis and the resultant supply chain disruptions, the Production Linked Incentive (PLI) Scheme was adopted for 14 key sectors to usher in Atmanirbhar Bharat. The objective of the Scheme is to attain self-reliance and reduce import dependence in several critical sectors like pharmaceutical intermediates and key starting materials, mobile phones and a range of electronic components. The Scheme also aims at making the target sectors more competitive, through technology infusion, among others. While all the major industries are included under the Scheme, the only notable exception is the fertiliser industry. Even when production capacities this industry urgently need to be enhanced in order to enable increased sourcing of these plant nutrients from domestic production facilities.
India’s fertiliser industry has experienced a lop-sided development right from its major expansion in the 1960s, as domestic production of nitrogenous fertilisers has always been prioritised over the two other main plant nutrients, namely phosphorus and potash. Discovery of the Bombay High Gas in the 1970s provided a significant boost to production of urea in the country using this feedstock. Though the gas-based plants became increasingly dependent on imported sources of natural gas, urea production increased, though not enough to meet the burgeoning domestic demand. On the other hand, production of phosphatic and potassic fertilisers remained neglected, resulting in major nutrient imbalance, which, in turn, adversely affected crop yields and resulted in soil degradation due to excessive use of urea. This nutritional imbalance can be addressed through focused development of domestic production facilities of all the major nutrients in the country. This objective can be realised if India’s fertiliser industry is included in the PLI Scheme, ensuring its systematic development as is being attempted in the fourteen sectors that are currently included in this Scheme. This would be the guarantee for ensuring food security in these uncertain times.
(Writer is Former Professor, Jawaharlal Nehru University)