The Core Report

#844 How War and LNG Supply Threaten India’s Fertiliser Sector | Govindraj Ethiraj | The Core Report

29 min

India's fertilizer sector faces significant pressure due to the war in West Asia, impacting LNG supply crucial for Urea production, and potential monsoon delays. The country, a major fertilizer user, grapples with import dependence for Urea and DAP, exacerbated by high subsidies on Urea leading to overconsumption and a substantial financial burden on the government. Solutions include securing long-term raw material contracts, promoting pulse cultivation, and reforming the subsidy regime to ensure agricultural security.

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✨ Key Takeaways

1

India is the world's second-largest fertilizer user, facing a 3 million ton gap for Urea and a 1 million ton gap for DAP in the Kharif season, heavily reliant on imports and raw materials like LNG, rock phosphate, and sulfur.
2

The West Asia war has disrupted LNG supply, capping domestic Urea production and contributing to a global scramble for fertilizers, with China restricting exports.
3

Urea is highly subsidized (Rs. 1800-2200 per 45kg bag), making it significantly cheaper than DAP (Rs. 266 vs Rs. 1350), leading to overconsumption, soil degradation, and a projected subsidy burden of 2.2-2.3 trillion rupees.
4

Predicted lower monsoon (El Nino from August) could delay planting, shifting fertilizer demand, but water availability is deemed more critical than fertilizer stock for crop production.
5

Policy recommendations include securing long-term raw material contracts, promoting protein crops (pulses) over corn for ethanol, and reforming the fertilizer subsidy regime to enhance long-term agricultural security.

💬 Notable Quotes

"No other country in the world subsidizes Urea as much as we are doing. Very, very high be subsidized as a result of which there are reports that Urea also espuggles out of India and you know our government has to be at the burden of subsidy."
"The availability of good monsoon is as important, even more important much more important than the availability of BAP or Urea because you see the soil retains Urea and BAP... but if there is no water then there is a real impact on production."
"Excessive consumption of urea is not only costly for the government it is also bad for the soil you know only 30 to 35% of nitrogen applied in the field remains in the field is consumed by the plant 70% goes in the air and then it contributes to global warming."