Global Energy Supply Shock and Its Impact on Indian Fertiliser Production
The conflict involving the United States-Israel and Iran has led to a significant global energy supply shock, especially noted with the closure of the Strait of Hormuz since February 28. This situation severely impacted the global energy markets, but its effects on India, particularly in the fertiliser sector, have been mixed.
Impact on Urea Production
- India's urea production decreased from 24.7 lakh tonnes in March 2025 to 17.5 lakh tonnes in March 2026.
- The decline was mainly due to disrupted LNG supplies, critical for urea production.
- Despite initial setbacks, domestic production improved to 71.5 lakh tonnes in April-June 2026, marking a 5.4% increase compared to the same period in the previous year.
Government Actions
Proactive measures by the Indian government mitigated the impact of the energy shock on the fertiliser sector:
- The government encouraged diversification of LNG sources, leading to increased imports from the US, Oman, Nigeria, Angola, Congo, Indonesia, Trinidad, and Norway.
- Efforts in urea imports were visible through tenders floated by Indian Potash Ltd and National Fertilizers Ltd, securing substantial quantities at competitive prices.
- The government absorbed the higher import costs to prevent any adverse effects on farmers.
Challenges with DAP and Complex Fertilisers
While the urea supply was stabilized, issues persisted with di-ammonium phosphate (DAP) and complex fertilisers:
- Domestic production for these fertilisers declined and imports reduced.
- Key raw materials like phosphoric acid and sulphur saw significant price hikes.
- Phosphoric acid prices rose from $1,055 per tonne (Jan-Mar 2025) to $1,700 (Jul-Sep 2026), while sulphur prices increased from $150-250 to around $1,100 per tonne.
- Ammonia prices showed some easing after peaking at $850-900 per tonne in May.
Future Considerations
To address ongoing challenges, the government must focus on securing sulphur supplies and potentially increasing subsidies for DAP and NPKS fertilisers.
El Niño and Fertiliser Demand
- The El Niño-induced monsoon deficiency led to a 4.7% reduction in the area sown under kharif crops.
- This resulted in reduced fertiliser demand compared to previous surplus monsoon years.
- Despite these challenges, there have been no major shortages reported in the current kharif season.
With upcoming state elections, the government is expected to maintain stability in fertiliser supply to ensure smooth agricultural operations.
