Why in the News?
The United States-Israel versus Iran war and the effective closure of the Strait of Hormuz triggered a severe global energy supply shock, yet India’s urea supply held up. Government-pushed diversification of liquefied natural gas (LNG) sourcing lifted urea output to 71.5 lakh tonnes in April-June 2026, up 5.4% year-on-year. The contrast is that the same proactiveness was not replicated for phosphatic fertilisers, leaving di-ammonium phosphate and complex fertilisers exposed.
What are the main fertiliser nutrients?
- Nutrient roles: Urea supplies nitrogen (N); di-ammonium phosphate (DAP) supplies phosphorus (P); muriate of potash (MOP) supplies potassium (K). Complex fertilisers blend N, P, K and sulphur (S).
- Feedstock links: Urea depends on natural gas as feedstock. DAP and complex fertilisers depend on phosphoric acid, sulphur and ammonia.
What kept urea supply stable through the shock?
- Feedstock disruption: Before the war, 53-54% of India’s LNG imports came from Qatar and the United Arab Emirates. Shipping blockades and strikes on liquefaction infrastructure broke these contracts.
- Sourcing pivot: The government pushed public firms to diversify LNG sourcing, buying more from the United States, Oman, Nigeria, Angola and others. This pivot to the spot market meant higher prices but secured supply.
- Output recovery: Urea production fell to 17.5 lakh tonnes in March 2026 from 24.7 lakh tonnes a year earlier, then recovered to 25.4 lakh tonnes by June. Cumulative April-June output of 71.5 lakh tonnes exceeded the previous year.
- Import surge: India imported 25.1 lakh tonnes of urea in April-June 2026, up from 8.4 lakh tonnes a year earlier. Higher import costs were not passed on to farmers.
Why did DAP and complex fertilisers stay tight?
- Sulphur bottleneck: Sulphur is needed to make sulphuric acid, which breaks down rock phosphate into phosphoric acid. Without both acids, there can be no DAP, single super phosphate or complex fertilisers.
- Price spike: Sulphur landed prices reached about $1,100 per tonne against a normal $150-250 range. The spike predated the war, worsened by Ukrainian drone strikes on Russian refineries.
- Phosphoric acid costs: Imported phosphoric acid prices rose from $1,055 per tonne in early 2025 to $1,700 for the July-September 2026 quarter. This steady climb squeezed domestic manufacturers.
- No diversification: Unlike urea, phosphatic fertiliser sourcing was not widened. Reduced domestic output was combined with lower imports.
What is the El Nino monsoon factor?
- Rainfall deficit: El Nino-induced monsoon deficiency left June-July all-India rainfall 12.6% below normal. Kharif sowing area fell 2.9% from last year.
- Subdued demand: Weak rainfall reduced fertiliser offtake, easing pressure on supply. This contrasts with the surplus monsoon scrambles of 2024 and 2025.
What are the challenges to fertiliser security?
- Import dependence: India depends heavily on imports for sulphur, phosphoric acid and ammonia. Concentrated West Asian sources leave it exposed to conflict.
- Subsidy pressure: Shielding farmers from higher costs inflates the fertiliser subsidy bill beyond budget estimates. Sustaining it requires additional provisions for DAP and complex fertilisers.
- Single-choke geography: Much feedstock still transits the Strait of Hormuz. A single choke point can disrupt multiple nutrients at once.
- Phosphate concentration: Few global suppliers dominate phosphoric acid and sulphur. Price-setting power rests with them during shortages.
- Election-linked stocking: Upcoming State elections raise pressure to guarantee rabi-season supply. Political timelines complicate purely economic supply planning.
Conclusion
Proactive supply-side management, chiefly LNG diversification and pre-emptive urea imports, insulated India’s nitrogen supply from the worst energy shock in decades. The unresolved vulnerability is phosphatic and complex fertilisers, where sulphur and phosphoric acid sourcing was not diversified and prices continue to climb.
Back2Basics
- Urea: Nitrogen fertiliser made from natural gas; the most consumed fertiliser in India and heavily subsidised.
- DAP: Di-ammonium phosphate, a phosphorus source dependent on imported phosphoric acid.
- Nutrient Based Subsidy: Regime under which non-urea fertilisers (DAP, MOP, complex) receive a fixed per-nutrient subsidy.
- Urea pricing: Sold at a statutory notified price with the gap met by subsidy under the Department of Fertilizers.
- Key choke point: Strait of Hormuz, the transit route for much of India’s LNG and fertiliser feedstock.
The New Urea Policy 2015:
- It aims to maximize domestic production, promote energy efficiency in manufacturing units, and rationalize government subsidy burdens.
Core Objectives
- Boost Domestic Output: Increase indigenous manufacturing capacity to reduce reliance on foreign imports.
- Energy Conservation: Set strict specific energy consumption targets for production units to lower carbon footprints.
- Subsidy Rationalization: Streamline financial support and cut down government expenditure on the sector.
Key Measures
- Neem Coating: Mandated all domestic producers to coat 100% of subsidized urea with neem oil, stopping illegal diversion to non-agricultural sectors.
- Energy Grouping: Categorized gas-based plants into distinct groups to fix realistic and progressive energy efficiency norms.
- Protected Pricing: Ensured continuous and timely supply of fertilizer to farmers without increasing the retail price
PYQ Relevance
[UPSC 2023] What are the direct and indirect subsidies provided to farm sector in India? Discuss the issues raised by the World Trade Organization (WTO) in relation to agricultural subsidies.
Linkage: UPSC has consistently examined agricultural subsidies, their fiscal implications, and India’s compliance with WTO rules. The article shows how rising global fertiliser and LNG prices increase India’s subsidy burden while the government continues to shield farmers through subsidised urea and nutrient-based support for non-urea fertilisers