What happens when India runs out of urea

In today’s episode on 1st May 2026, we unpack how a distant geopolitical conflict could disrupt India’s fertiliser lifeline and what happens if the country runs short of urea. Sign up for FREE insurance masterclass by Ditto https://ditto.sh/2cgegs

• 0:00Speaker 00

  Hello folks, you're tuned into Finshots Daily. In today's episode, we unpack how a distant geopolitical conflict could disrupt India's fertilizer lifeline and what happens if the country runs short of urea.

• 0:14Speaker 00

  But, before we begin, here's a quick side note from Team Ditto. We're hosting a free 2-day insurance masterclass that helps you build real financial security by understanding health and life insurance the right way. If you'd like to register while the seats last, then you can do so by heading to the link in the description and saving your spot. Alright, let's get on to today's story. If there's one thing that the current US-Iran war taught us, it is that the world grossly underestimates how much we are dependent on the West Asia. The ongoing conflict involving Iran has disrupted fertilizer flows from the Gulf, a region that accounts for nearly half of global urea trade. You see, production there has dropped sharply, with weekly output falling by over 50% since the conflict began.

• 0:57Speaker 00

  On the surface, this may seem like just another commodity disruption, but urea is not just some input. It's the backbone of modern agriculture, used extensively in crops like rice, wheat and corn. And when supply tightens, the impact does not stick confined to farms. It moves through the food system and eventually shows up in grocery bills. And for India, the stakes are even higher. The country consumes roughly 400 lakh tons of urea every year, but produces only about 300 lakh tons domestically. The remaining 25% comes from imports, a large share of which originates in the Gulf. At first glance, this may suggest partial dependence, but the reality runs deeper. Because even India's domestic urea is not entirely domestic.

• 1:41Speaker 00

  Producing urea requires ammonia and ammonia is made using natural gas. In fact, natural gas is both the fuel and the primary raw material in the process. Close to 80% of the cost of producing urea comes from gas prices alone. And here lies the hidden vulnerability. Around 86% of the natural gas used by India's fertilizer plants is imported, much of it passing through the state of Hormuz. The same geopolitical choke point now under stress. So, even when India produces urea locally, it remains in dire Exposed to global disruptions. That is only one side of the problem. The other lies in how urea is prized and consumed. Farmers in India pay a fixed price of around two hundred and sixty-six rupees for a forty-five kilo bag of urea.

• 2:23Speaker 00

  The actual cost of producing or importing that bag ranges anywhere between twelve hundred and seventeen hundred rupees. The difference is absorbed by the government through subsidies, which already runs into lacs of crops annually. This pricing structure has ensured affordability, but it has also created unintended consequences. Because urea is significantly cheaper than other fertilizers, farmers tend to overuse nitrogen while underusing other nutrients like phosphorus and potassium. Ideally, crops require a balanced mix, often represented as NPK ratio of four to two is to one. In practice, India's ratio has drifted to around ten point nine is to four point one is to one. Over time, this imbalance has degraded soil health and reduced fertilizer efficiency.

• 3:06Speaker 00

  The numbers tell a striking story. In nineteen eighty, one ton of nitrogen fertilizer helped produce about thirty-five tons of food grain. Today, that figure has dropped to roughly sixteen tons. Farmers are now using more fertilizer just to maintain the same output. In effect, the system is becoming less efficient even as consumption rises. Attempts to address this through innovation have not yet delivered consistent results. Nano-Urea, for instance, was promoted as a breakthrough that could replace traditional urea with a much smaller liquid dose. But field trials have raised concerns. Some studies have reported yield declines of up to twenty percent in key crops like rice and wheat, along with a noticeable drop in protein content. That raises question not just about productivity, but also about nutritional outcomes.

• 3:47Speaker 00

  Meanwhile, global disruptions are making imports both scarer and more expensive. And this puts India in a difficult position. On one hand, we need to secure enough urea to support agricultural output. On the other hand, rising prices increase the subsidy burden on the government. The result is a double squeeze where both fiscal pressure and supply risk rise simultaneously. To address this, the government is developing a new investment policy to expand domestic capacity. The idea is not to directly fund fertilizer plants, but to create a stable framework with pricing guarantees for up to eight years. This reduces uncertainty. for private players and encourages investment. A similar policy in 2012 helped add around 76 lakh tonnes of capacity. And the hope is to replicate that success to bridge a supply gap of nearly 100 lakh tonnes.

• 4:31Speaker 00

  But even this approach has limitations. Building new plants takes time, often several years. And unless the underlying dependence on imported gas is reduced, new capacity may still remain exposed to global price shocks. This is why alternative pathways are being explored. One such option is coal gasification. Instead of relying on imported natural gas, coal can be converted into synthesis gas or syn gas for short, which can then be used to produce ammonia and eventually urea. Given India's abundant coal reserves, this offers a way to reduce import dependence. However, it comes with trade offs in terms of efficiency and environmental impact. Another longer term solution lies in green urea. This involves producing hydrogen using renewable energy and using it to manufacture ammonia.

• 5:16Speaker 00

  In theory, this could decouple fertilizer production from fossil fuels altogether. In practice, however, the technology is still expensive and not yet scalable for immediate needs. Which brings us to a more fundamental question. Should India be doubling down on urea production at all? While increasing supply may solve short term shortages, it does not address the underlying issue of overuse. In fact, more availability at subsidized prices could worsen the imbalance in nutrient usage and further degrade soil health. Challenge therefore is not just about producing more urea but about using it better. In short term, boosting domestic production is necessary. In a world where geopolitical tensions can disrupt supply overnight, reducing import dependence is a logical step.

• 5:57Speaker 00

  A well-designed policy can stabilize prices, protect farmers and provide a buffer against external shocks. But true resilience will require something more structural. It will require better nutrient management, a shift towards balanced fertilizer use and smart subsidy design that does not encourage overconsumption of one import at the cost of others. Because in the end, the risk is not just that India runs out of urea. It is that it becomes too dependent on it. All right, folks, I will see you in the next one.

• 6:26Speaker 00

  Thank you for listening to today's episode. And if you want to share your feedback or suggestions, do drop us an email to [email protected]. Until next time.