Fertiliser sector set for up to ₹90,000 crore capex revival under NIPU-2026: ICRA

India’s fertiliser sector is set to enter a fresh capital expenditure cycle, with the industry expected to commit ₹80,000-90,000 crore towards new urea projects over the next six months following the government’s notification of the New Investment Policy for Urea-2026 (NIPU-2026), rating agency ICRA said.

The new investments are expected to improve India’s urea self-sufficiency from 2030-31 and reduce the country’s dependence on imports. Plants coming up under the new policy are likely to take around 3.5-4 years to commission.

India’s urea import dependence has been rising amid a lack of capacity additions in recent years, steady growth in consumption and the retirement of some existing capacities. The country imported around 27% of its urea requirement in 2025-26, with domestic capacity at 30.6 million tonnes per annum (MMTPA) against demand of around 39.9 million tonnes.

However, ICRA said the economics of new projects have been tightened under NIPU-2026, mainly through lower notified realisations. For delivered gas prices of up to $6.5 per million British thermal units (mmBtu), the floor and ceiling realisations for greenfield and revival units have been set at $281 and $296 per tonne, respectively, compared with $305 and $335 per tonne under the earlier NIP-2012.

The policy has also narrowed the return window to 12-16% return on equity (RoE), compared with 12-20% under NIP-2012. According to ICRA, the lower realisations could reduce EBITDA by ₹250-280 crore for a standard 1.27-MMTPA unit compared with the earlier policy.

“Despite this, the debt coverage and return metrics are expected to remain comfortable for the project proponents,” said Girishkumar Kadam, senior vice-president and group head at ICRA. He added that controlling capital expenditure and maintaining capacity utilisation above 95% would be critical for project viability.

ICRA expects the cumulative debt service coverage ratio (DSCR) of a greenfield project to remain comfortable at 1.26 times over the eight-year policy period.

The capex revival, however, could increase demand for natural gas. Imported LNG accounted for around 85% of the fertiliser sector’s gas consumption in 2025-26, up from 64% in 2020-21. Each new 1.27-MMTPA urea plant is expected to require around 2.2 million standard cubic metres per day (mmscmd) of gas, equivalent to about 0.6 million tonnes of LNG.

ICRA said diversification of gas sourcing contracts will therefore be crucial, particularly after the fertiliser pool gas price rose to around $19/mmBtu in April 2026 from about $13/mmBtu earlier amid the West Asia crisis.

The capex cycle is also expected to benefit gas transmission companies, LNG terminals, gas traders, EPC contractors and manufacturers of critical equipment such as high-pressure process vessels, heat exchangers, reactors and ammonia converters.