India, a nation whose economic bedrock remains deeply rooted in agriculture, faces a persistent and critical vulnerability in its reliance on global markets for essential crop nutrients. Despite significant strides in domestic fertilizer production capacity, particularly for urea, the country remains heavily dependent on imports of key raw materials and finished products, a predicament starkly highlighted by recent geopolitical instabilities and supply chain disruptions. This structural dependence poses not only economic challenges but also strategic risks to food security for its vast population.
The core of India’s import dependency stems from a fundamental mismatch between its agricultural demand and the availability of critical raw materials. India stands as the world’s second-largest consumer of fertilizers, essential for maintaining soil health and boosting crop yields across diverse agro-climatic zones. However, domestic geological endowments are severely lacking in crucial inputs such as natural gas (a primary feedstock for urea), phosphate rock, and potash. Consequently, the nation imports approximately 60% of its diammonium phosphate (DAP) requirements, and around 15% of its urea and nitrogen, phosphorus, and potassium (NPK)-based fertilizer demand. This also necessitates the import of intermediate products like phosphoric acid and ammonia, further entrenching the reliance on global supply chains. Even the domestic production of urea, which forms the largest share of India’s fertilizer output, is contingent on imported natural gas, making it susceptible to the volatility of international energy markets. As Anand Kulkarni, Director at Crisil Ratings, noted, "Domestic availability is limited for raw materials and intermediaries such as liquefied natural gas (LNG), phosphate rock and ammonia."
Successive policy interventions have aimed to bolster indigenous production, yet the structural nature of the problem has ensured continued import reliance. The New Investment Policy (NIP) of 2012 sought to incentivize the establishment of new urea plants, while the New Urea Policy (NUP) of 2015 focused on maximizing domestic production efficiency. These measures demonstrably increased urea output from 22.5 million tonnes in FY2014-15 to an estimated 30.6 million tonnes by FY2024-25. For phosphatic and potassic fertilizers, the Nutrient-Based Subsidy (NBS) scheme, introduced in 2010, allowed companies to import these nutrients freely under the Open General Licence regime, aiming to ensure their availability to farmers at affordable prices. The government also pursued long-term import agreements with key supplier nations, such as Saudi Arabia for DAP, to enhance supply security. While these policies have cushioned farmers from global price shocks, they have not fundamentally altered the import-reliant nature of the sector. Instead, they have created a substantial fiscal burden, with fertilizer subsidies projected to be ₹1.71 trillion for FY2026-27, a slight decrease from ₹1.86 trillion in FY2025-26, but still representing a significant drain on public finances.
The geopolitical landscape further exacerbates India’s fertilizer vulnerabilities. The recent conflict in West Asia, for instance, has vividly exposed the risks inherent in the geographic concentration of India’s import basket. West Asia accounts for nearly half of India’s DAP imports and approximately two-thirds of its urea imports. In FY2024-25, countries like Saudi Arabia, the United Arab Emirates (UAE), Qatar, and Oman were pivotal suppliers, with Oman, Saudi Arabia, UAE, and Bahrain collectively contributing about 70% of India’s urea imports. A prolonged disruption in critical maritime routes, particularly through the Strait of Hormuz, could severely tighten global supply, leading to price surges that would inevitably translate into higher subsidy costs for the Indian exchequer and potentially impact farmer access. While India has proactively built substantial buffers ahead of the crucial Kharif planting season, ensuring adequate stocks of 18.01 million tonnes of total fertilizers as of March 10, a 36.6% increase from the previous year, this strategy merely buys time. Policymakers are actively diversifying sourcing, expanding purchases from nations like Indonesia, Belarus, Morocco, Jordan, Russia, and China, to mitigate future regional supply shocks and enhance resilience.
India’s domestic production capacity presents a complex picture of strengths and glaring weaknesses. Urea production dominates the domestic landscape, accounting for approximately 55% of total consumption, with an import dependence of around 15%. NPK fertilizers constitute about 20% of consumption, with a similar level of import reliance. However, DAP stands out as the Achilles’ heel, representing about 16% of total consumption but burdened by an import dependency nearing 60%. This disparity primarily reflects the near absence of indigenous phosphate rock reserves, a critical raw material for DAP production. The lack of domestic phosphate resources leaves India uniquely exposed to the vagaries of international markets for this vital nutrient.
Looking ahead, addressing this deep-seated dependence will necessitate a multi-pronged approach encompassing significant capacity expansion, technological innovation, and structural regulatory reforms. Past policies, such as NIP 2012, successfully added about 7.6 million tonnes of urea capacity across six plants, demonstrating that targeted investment can yield results. The next phase, however, demands a more transformative shift towards alternative production pathways and a modernized regulatory framework.
One promising avenue lies in the adoption of ‘green ammonia’ and ‘coal-to-urea’ technologies. Green ammonia, produced using renewable energy, offers a pathway to reduce reliance on imported natural gas and significantly lower the carbon footprint of fertilizer production. While nascent, the potential for green ammonia to stabilize profits for complex fertilizer manufacturers could attract substantial investment, as highlighted by Crisil Ratings’ Kulkarni. Similarly, coal gasification for urea production, leveraging India’s abundant coal reserves, could reduce dependence on LNG, though it presents its own set of environmental and technological challenges. Beyond these, a renewed focus on building indigenous technological capabilities is paramount. Rajib Chakraborty, National President of the Soluble Fertilizer Industry Association, emphasizes the need for structural reforms to empower Indian manufacturers, particularly Micro, Small, and Medium Enterprises (MSMEs), to move beyond conventional technologies and invest in research and development for superior, home-grown agricultural inputs. He advocates for modernizing the Fertilizer (Control) Order (FCO) to allow greater flexibility in introducing new formulations and production methods, which could spur domestic R&D and broaden the spectrum of nutrient solutions available to farmers.
The broader economic implications of fertilizer import dependence are profound. It directly impacts India’s balance of payments through substantial import bills, strains government finances through escalating subsidies, and creates inflationary pressures on food prices if global input costs spike. Moreover, it exposes millions of farmers to market volatility, affecting their profitability and livelihood security. Achieving greater self-reliance in fertilizers is not merely an economic imperative but a strategic necessity for India’s long-term food security, agricultural sustainability, and macroeconomic stability. The path forward requires sustained investment in R&D, fostering domestic innovation, strategically diversifying international partnerships, and progressively transitioning towards more sustainable and domestically sourced production methods. Only through such comprehensive reforms can India truly cultivate a future where its agricultural prosperity is not perpetually tethered to global market whims.
