As World Watches Oil, Why India must watch its Fertiliser Supply

As global attention remains fixed on oil prices, particularly amidst the Iran-Israel conflict, India must urgently shift its focus to fertiliser supply—an equally critical crisis for national stability and food security. 

India’s Deep Vulnerability to External Shocks

• India’s agriculture-driven economy is highly dependent on imported fertilisers, making it extremely susceptible to external shocks. 
  • Approximately 20% of urea requirements are imported.
  • Around 60% of diammonium phosphate (DAP) is imported.
  • India imports 100% of its muriate of potash (MOP).
• Dependence on the Middle East: The nation’s fertiliser security is inextricably linked to the Middle East, with significant imports of finished fertilisers and natural gas (a crucial raw material for urea production) coming from countries like Qatar, Saudi Arabia, and Oman. 
  • In 2023, 20–25% of India’s total fertiliser imports originated from Gulf countries, predominantly via the critical Strait of Hormuz. 
  • Any disruption in this vital shipping route, as threatened by Iran’s parliament, directly imperils India’s supply chain, potentially escalating global prices and impacting Indian farmers.

Geopolitical Conflicts and Threats To Fertilisers Sector 

• Iran-Israel Conflict: This conflict threatens the supply of urea, DAP, and natural gas from Gulf countries. MOP imports are also at risk as Israel is a key source.
• Russia-Ukraine War: The 2022 conflict disrupted nitrogen, potash, and ammonia supplies, revealing India’s vulnerability. The lack of learning from this crisis is evident in the absence of a robust buffer stock policy.
  

Inadequate Preparedness and Policy Lapse

• Limited Strategic Reserves: Unlike oil or food, India maintains no large-scale strategic reserves of fertilisers. 
  • Companies like Indian Farmers Fertiliser Cooperative Limited (IFFCO), Rashtriya Chemicals and Fertilizers (RCF), and National Fertilizers Limited (NFL) hold operational stock for just 30–45 days—an insufficient buffer during critical Kharif and Rabi sowing seasons.
• Reactive Policy Making: Policies have been consistently reactive, addressing crises only after they occur. 
  • This prevents the establishment of buffer stocks or minimum stocking norms for critical imports like DAP and MOP.
• Structural Challenges: The sector faces issues like reliance on imported raw materials for phosphatic and potassic fertilisers, ageing and energy-inefficient plants, and delays in distribution from ports to farms.
• Priority of cost effectiveness: India’s fertiliser procurement strategy, although based on long-term import agreements and operated through public sector undertakings, prioritises cost-effectiveness and assured supply over resilience. 
  • This approach leaves the nation ill-prepared for global disruptions.

Consequences of Disruptions in Fertiliser Supply

• Threat to Food Security: Immediate impacts are felt in food production, endangering national food security.
• Farmer Distress: Rising global prices raise retail costs for farmers, especially for DAP and MOP under the nutrient-based subsidy scheme. Small and marginal farmers suffer most, potentially leading to reduced productivity, crop shifts, and unrest. Schemes like PM-KISAN offer only limited relief.
  • Nutrient-based subsidy scheme: To promote balanced fertilisation and efficient nutrient use by subsidising fertilisers based on their nutrient content (Nitrogen, Phosphorus, Potassium, Sulphur).
    • Mechanism: Government fixes per-kg subsidy rates for each nutrient and companies sell fertilisers at market-determined prices minus the subsidy.
    • Exclusion: Urea is not covered and remains under controlled price with full subsidy.
• Fiscal Burden: The government absorbs global price shocks to keep urea affordable, inflating the fertiliser subsidy bill to potentially over ₹2.5 lakh crore. 
  • This fiscal strain limits long-term investment in agriculture infrastructure.
    

Way Forward

• Establish Strategic Reserves: Create large-scale strategic fertiliser reserves to stabilise domestic supply and provide leverage in international negotiations. This buffer is essential to weather global supply chain disruptions.
• Supplier Base: Reduce overdependence on a few countries and Expand supplier base.
  • Example: India has to move beyond MoUs to actual investments in resource-rich countries like Morocco (70% of global phosphate reserves), Canada (potash), Jordan, and Israel.
• Contracts and Logistics Flexibility: Secure supply through long-term agreements and explore alternative shipping routes to avoid geopolitical flashpoints.
• Domestic Production:
  • Self-Sufficiency in Urea: Continue towards 90% self-sufficiency by reviving plants like Gorakhpur and Sindri.
  • Reduce Raw Material Dependence: Strategically address import dependence for phosphatic and potassic fertilisers raw materials.
  • Modernise Plants and Invest in R&D: Upgrade ageing plants with energy-efficient technologies and support research into advanced manufacturing.
• Proactive Planning: Anticipate global shocks and build resilience, rather than merely responding.
• Alternative Fertilisers: Encourage adoption of nano urea, biofertilizers, and organic inputs to reduce overreliance on synthetics and preserve soil health.
• Subsidy Delivery: Speed up disbursement and raise awareness among farmers about sustainable practices.
  

Conclusion

In the face of ongoing geopolitical tensions, India must pivot from a reactive to a proactive, resilient, and forward-looking strategy. Early and decisive action is critical to securing the future of India’s food system and national stability.