Iran War Impact: Diversify import sources, implement direct fertilizer subsidy to transfer policy reform for fertilizer supply security, says ICRIER

India should diversify the sources of its fertilizer raw material and final product imports to reduce excessive dependence on a limited set of countries to strengthen fertiliser supply security, suggests a new policy brief published by Delhi based think tank Indian Council for Research on International Economic Relations (ICRIER).

Complementary measures proposed by ICRIER researchers to strengthen fertilizer supply security include encouraging overseas investments in fertiliser minerals and production assets, accelerating domestic exploration of fertiliser resources, and rationalising regulatory and pricing frameworks to improve efficiency in nutrient use.

The policy brief has been prepared in the backdrop of rising concerns over disruptions to supplies of natural gas, ammonia, sulphur and finished fertilisers that originate in or transit through the Gulf region, in particular the trade that passes through the Strait of Hormuz, a narrow maritime corridor that handles a significant share of global oil, LNG and fertiliser shipments.

In 2024–25, India consumed about 70.7 million metric tonnes (MMT) of fertiliser products, equivalent to roughly 33 MMT of nutrients (nitrogen (N), phosphorus (P) and potash (K) nutrients). Yet despite its sizeable domestic industry, India’s fertiliser economy remains deeply embedded in global supply chains. According to the policy brief, India’s import dependence remains significant—around 20 percent for urea, nearly 50 percent for di-ammonium phosphate (DAP), much of it sourced from the Gulf region, and almost 100 percent for muriate of potash (MOP), largely imported from Russia and Canada. Even domestic production depends on imported feedstock to a large extent as nearly 85 percent of the natural gas used in urea manufacturing is imported, while about 90–95 percent of phosphatic rock phosphate and half of the phosphoric acid are sourced from abroad. “Once the import content of intermediate inputs is accounted for, India’s effective dependence on global fertiliser supply chains rises to nearly 68–70 percent, leaving the fertiliser sector, and by extension the country’s food security, highly exposed to geopolitical disruptions and supply shocks”, the policy brief said.

Stating that strengthening fertiliser supply security must become a strategic policy priority against this backdrop, the researchers sought policy reforms such as the direct transfer of fertiliser subsidies to farmers and gradual price deregulation of macro nutrients to promote balanced fertiliser use and overdependence on import heavy fertilizers. If this seems too bold a reform in the short run, the researchers suggested an alternative to put quantitative restrictions on sales based on farm size, cropping patterns, and recommended nutrient doses issued by State Agricultural Universities (SAU). This can be done with the help of AgriStack that government has been building for quite some time, they pointed out. A third option suggested by the researchers is to bring urea under the Nutrient Based Subsidy (NBS) scheme. “ Either carry out full-fledged price reforms ensuring in advance DBT to farmers, or put quantitative restrictions in accordance with SAU recommendations, or bring urea also under NBS. Together, these measures can enhance the resilience of India’s fertiliser supply chains and safeguard the stability of its food production system in an increasingly uncertain geopolitical environment”, they said.

The policy brief was prepared by ICRIER researchers Ashok Gulati, Ritika Juneja, Sachchida Nand and Emil Thomas Johny.