The ongoing West Asia conflict could disrupt India’s fertiliser supply chain at a critical time for the kharif season, with domestic production of urea and complex fertilisers likely to decline 10–15% and the government’s subsidy burden rising by `20,000–25,000 crore, Crisil Ratings said in a report.
The assessment comes amid disruptions in key imported inputs such as LNG and ammonia, critical to fertiliser production.
“The ongoing issues in West Asia could disrupt the fertiliser supply chain at a crucial time for the kharif season. Disruption in LNG and ammonia supplies continuing for about three months could cut domestic urea and complex fertiliser production by 10–15%,” said Anand Kulkarni, director, Crisil Ratings.
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India’s fertiliser sector remains highly import dependent, amplifying the risks from geopolitical disruptions. Urea accounts for 45% of fertiliser consumption, while complex fertilisers such as DAP and NPK constitute about one-third. Import dependence remains significant, with ~20% of urea and one-third of complex fertilisers sourced from overseas.
The reliance is even higher for key raw materials. Natural gas —which makes up ~80% of the raw material cost of urea — along with ammonia and phosphoric acid for complex fertilisers, is largely imported due to limited domestic availability.
80% Dependency
West Asia plays a dominant role in this supply chain. It accounted for ~40% of fertiliser imports in the first nine months of FY26, while 60–65% of LNG and 75–80% of ammonia imports used in domestic production come from the region.
The disruption has already pushed up input costs. Prices of ammonia have increased ~24% since the start of the conflict, while international urea prices have risen ~50%, reflecting tightening global supply conditions.
Lower availability of inputs is expected to reduce capacity utilisation, affecting profitability. Crisil said that a 25–30% decline in capacity utilisation could increase energy consumption by 10–15%, eroding operating margins, particularly for urea manufacturers.
At the same time, higher input costs and imported fertiliser prices are expected to increase working capital requirements and push up government subsidy outgo.
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Fiscal Firefighting
“Factoring in the elevated input costs and imported fertiliser prices for a quarter, the overall subsidy budget is likely to increase by 12–15% from initial estimates of ₹1.71 lakh crore for fiscal 2027,” said Nitin Bansal, associate director, Crisil Ratings.
Despite the pressure on profitability, Crisil said credit profiles of fertiliser companies are expected to remain supported by strong liquidity and the government’s track record of timely subsidy disbursement.
Near-term supply risks may be partly mitigated by policy measures and existing buffers. The government has directed allocation of 70% gas to urea manufacturers, while fertiliser inventories equivalent to around three months of demand could cushion immediate supply disruptions.
However, the report cautioned that prolonged disruption in supplies from West Asia could have wider implications, particularly for domestic production and availability during the kharif season.
The ability of fertiliser manufacturers to source raw materials from alternative markets and the extent of government intervention will be critical if the disruption persists, Crisil said.
TOPICSfertiliserThis article was first uploaded on March twenty-six, twenty twenty-six, at twenty-seven minutes past ten in the night.