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India’s urea imports in FY25 was 5.64 million tonne (MT) against 7.1 MT in FY24 as shipments from China fell to 0.1 MT from 1.86 MT a year ago. This fiscal, there were hardly any imports from China. As of August 1, urea stock was down by about 57%. Against the estimated requirement of 18.53 MT of urea for the 2025 kharif season, pro-rata requirement for April 1-August 4 was 12.44 MT, per fertilsers ministry data. Again, opening stock of Di-ammonium phosphate (DAP) on June 1 was1.24 MT against 3.3 MT a year ago. Several states including Uttar Pradesh, Rajasthan, Madhya Pradesh, Andhra Pradesh, Telangana and Karnataka have reported shortage of fertilisers.
Fertilisers are classified as sole fertilisers (includes urea and muriate of potash or MOP), mixed fertilisers (DAP and nitrogen, phosphorus and potassium or NPK), and those that contain micronutrients.
Why India is import dependent?
While 87% of the annual urea demand —38.79 MT in FY25 — is met locally, India imports a significant volume of natural gas for making urea — 30 out of 32 urea units use natural gas. Of the annual 10-11 MT of DAP demand, 60% is met through imports. Domestic manufacturing of DAP also depends on imported rock phosphate. Potash is 100% imported. In case of DAP, NPK and MOP, imports were 10.38 MT against the consumption of 21.12 MT. Experts say India’s fertiliser import dependence is over 90% if imports of raw materials are included.
Entities such as National Fertilizers and Indian Potash (IPL) have floated tenders to import 2 MT of urea each. India has signed a long-term pact for supply of about 2 MT of fertilisers annually from Russia, Israel, Belarus and Jordan. In July, an agreement was signed between Saudi Arabia’s Maaden and Indian companies IPL, Kribhco and CIL for supply of 3.1 MT of DAP annually for five years, starting FY26.
Price controls & subsidy bills
Since 2012, the retail urea price has been Rs 242 per 45 kg bag, even as the cost of production is over Rs 2,600 a bag. While the government covers the cost difference via subsidy to the manufacturers, the low retail price has led to overuse of urea, leading to decline in soil health. Agriculture minister Shivraj Singh Chouhan has alluded to diversion of urea for non-agricultural purposes given the low prices, which has added to the spike in demand.
Retail prices of P&K fertilisers, including DAP, were ‘decontrolled’ in 2010 with the introduction of a ‘fixed-subsidy’ regime as part of the Nutrient Based Subsidy mechanism. So, fertiliser companies are dependent on the fixed subsidy announced bi-annually and can’t raise retail prices following any price spikes globally. This affects procurement viability. Global DAP prices are up by 23% since April while retail price is stuck at Rs 1,350 per 50 kg bag for the last many years. Fertiliser subsidy in FY25 was revised to Rs 1.91 lakh crore from the Budget estimate of Rs 1.68 lakh crore. For FY26, Rs 1.67 lakh crore has been allocated as subsidy.
DBT to farmers more efficient
The subsidy regime has been disincentivising fetiliser companies to ramp up production as well as imports, leading to shortages during critical sowing seasons. The industry has been urging the government to roll out direct benefit transfers (DBT) to the farmers. “Instead of subsidising via the industry, the government should go for DBT to the farmers who would buy soil nutrients at the market price while the subsidy is directly transferred to their bank accounts,” SC Mehta, chairman of Fertiliser Association of India, recently told FE. This would make the industry more market oriented and ensure efficiency.
Sale of all subsidised fertilisers to farmers or buyers is currently made through 0.26 million point of sale (PoS) devices installed at outlets. Beneficiaries are identified through Aadhaar number, Kisan Credit Card and other documents. Subsidies are released on the basis of sales made by the retailers to the farmers. However, the ministry’s move to roll out DBT across select pilot districts through capping of sale of fertilisers based on land holdings has been a non-starter.
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Need to liberalise fertiliser industry
Several exports have been urging for complete de-control of the sector so that companies invest in innovations and focus on reduction in costs as well as securing contracts for mining of the raw materials. Currently, the entire value chain of fertilisers is completely controlled by the government. Even import of urea is restricted to public sector undertakings. If imports are liberalised, the companies would play a more active role in securing fertilisers well in advance. The thrust on promotion of micro-nutrients would boost balanced use of fertilisers. Industry sources say fertiliser utilisation is going up while the crop yield has plateaued. The government must encourage the fertiliser industry to make strategic investments abroad — right from mining to finished products —by formulating a long-term policy.