UPSC Mains
GS Paper III
Agriculture & Economy
Iran War and the Fertiliser Crisis in India
The US-Israel-Iran conflict and Strait of Hormuz closure have triggered a massive global energy shock, severely disrupting India’s LNG and fertiliser supply chains.
Phosphoric Acid Spike
$1,055 → $1,700 / tonne
Urea Imports (Apr-Jun)
25.1 lakh tonnes
Kharif Demand Cushion
Sowing down 2.9%
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Context and Background
- The ongoing US-Israel-Iran war has triggered the greatest global energy supply shock since the historic crises of 1973 and 1979.
- The Strait of Hormuz closure since February 28 has significantly disrupted global supply chains.
- India’s LNG imports were severely affected, as 53-54% of its supplies came from Qatar and the UAE.
- These LNG supply disruptions directly impacted India’s primary feedstock necessary for domestic urea production.
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Key Aspects of India’s Fertiliser Resilience
- Production Recovery: Domestic urea production initially fell to 17.5 lakh tonnes (lt) in March 2026, but recovered rapidly to 21 lt in April, rising to over 25 lt in subsequent months.
- Import Surge: India proactively imported 25.1 lt of urea in April-June 2026, a massive jump from just 8.4 lt in the same period in 2025.
- Sourcing Diversification: GAIL and IOCL successfully diversified LNG sourcing, importing more from the US, Oman, Nigeria, Angola, DRC, Trinidad, and Norway.
- Subsidy Shield: The government absorbed the higher import costs, preventing any additional subsidy burden from being passed on to farmers.
- Aggressive Tendering: The government floated multiple tenders to secure 17 lt of urea at landed prices of Rs 935-959/tonne, ensuring buffer stocks.
Demand-Side Cushion: An El Niño-induced monsoon deficiency unexpectedly aided supply management. With rainfall 12.6% below normal, the area under kharif crops fell by 2.9%, naturally subduing fertiliser demand and easing pressure on depleted stocks.
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Challenges in India’s Fertiliser Sector
The DAP Crisis
No new DAP imports have been contracted since the purchase of 13.5 lt at exceptionally high prices back in April.
Sulphur Shortage
A severe shortage of sulphur is limiting the production of sulphuric acid, which is critical for manufacturing DAP, SSP, and complex fertilisers.
Phosphoric Acid Prices
Input costs have skyrocketed, with phosphoric acid prices jumping from $1,055 per tonne in 2025 to $1,700 per tonne this quarter.
Ammonia Squeeze
The West Asia conflict has drastically tightened vital ammonia supplies from key players like QatarEnergy, Saudi Aramco, and Iran.
Subsidy Strain
Forced diversification to expensive LNG spot markets has come at a steep price, putting severe strain on national subsidy budgets.
Political Pressures
Upcoming rabi elections in Punjab, Rajasthan, and Uttarakhand may generate intense political pressure to guarantee supply regardless of global costs.
While India successfully managed the Urea crisis through rapid diversification, the real vulnerability has shifted to DAP and complex fertilisers, where raw material monopolies (Sulphur, Ammonia) are much harder to bypass.
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Way Forward for Fertiliser Supply Security
Sulphur Supply Focus
Government must urgently augment sulphur supply channels to make domestic DAP and NPKS manufacturing economically viable.
Domestic DAP Subsidy
Introduce additional, targeted subsidy provisions specifically for domestic DAP production, similar to the existing urea support mechanisms.
Diversify Beyond Urea
Actively replicate the successful import diversification strategy used for urea to secure DAP and complex fertiliser supply chains.
LNG Long-Term Contracts
Reduce reliance on volatile spot market purchases by locking in stable, long-term LNG supply contracts with a diverse set of countries.
Strategic Reserves
Build strategic national reserves of critical fertilisers and raw inputs to act as a buffer against sudden geopolitical supply disruptions.
Domestic Ammonia Capability
Invest heavily in domestic ammonia production capacity to structurally reduce long-term dependence on volatile West Asian suppliers.
