Fertilizer Sector in India, Imports and Challenges

The Fertilizer Sector in India plays a vital role in agricultural growth by ensuring nutrient supply, supporting food security, and promoting sustainable farming practices.

Table of Contents

Context: Despite being the world’s second-largest producer and consumer of fertilisers, India remains heavily dependent on imports for key raw materials and finished products. This dependence is both an economic vulnerability and an environmental concern.

Data

In FY25, imports met 47.5% of DAP demand, 124% of MOP, 15.2% of complex fertilisers, and 14.6% of urea.
Overall fertiliser imports fell 9.7% (FY25 vs. FY24), but consumption hit a record 655.94 lt, showing rising demand.
India relies on imports for about 20% of its urea, 50-60% of diammonium phosphate (DAP), and 100% of muriate of potash (MOP).
Major import partners: China, Russia, Saudi Arabia, UAE, Oman, Iran, and Egypt.

Why India is Heavily Dependent on Fertiliser Imports

Geological Constraints: India lacks significant reserves of phosphate rock and potash.
- Eg: the Entire Muriate of Potash (MOP) demand and 80% of phosphatic raw materials are imported.
Energy Dependence for Urea: Urea production depends on natural gas as feedstock.
- Eg: India imports 77% of its gas requirement for urea production (vs. 24% in 2012–13).
Rising Domestic Demand: Fertiliser consumption has more than doubled since 2012-13.
- Eg: FY25-Total sales reached a record 655.94 lakh tonnes (lt) vs. 600.79 lt in FY24 (+9.2%).
Insufficient Domestic Production Capacity: Despite being a major producer, India’s capacity is insufficient to meet demand.
Subsidy-Driven Demand: Heavy subsidies, particularly on urea, encourage overuse and inefficiency, raising import needs.

Challenges in Fertiliser Production and Self-Sufficiency

Structural Challenges

Raw Material Shortages: Lack of potash and phosphate reserves.
Import-Linked Urea: Dependent on volatile international gas prices.
Skewed Nutrient Use: Farmers in India use too much urea (nitrogen) and very little phosphorus (P) and potassium (K). This creates an unhealthy nutrient balance in the soil (current ratio 7:2.7:1 instead of the ideal 4:2:1)

Economic Challenges

Rising Subsidy Burden: Fertiliser subsidies crossed ₹2 lakh crore in 2022–23, straining fiscal space.
- Rising fertiliser subsidies reduce the government’s fiscal space, distort domestic production, increase import dependence, and delay structural reforms
Price Volatility: Geopolitical tensions (Russia-Ukraine war, West Asia) disrupt supplies and raise costs.

Governance Challenges

Fragmented Administration: Fertilisers under a separate ministry; agriculture under another → inefficiency.
Distribution Issues: Rationing, farmer queues, and diversion to non-agricultural use.

Technological Challenges

Low Productivity of Plants: Many plants are old, energy-intensive, and uncompetitive compared to global producers.
Slow adoption of alternatives: Nano Urea has promise (1 bottle = 1 bag of urea), but scaling up adoption and ensuring farmer acceptance remain challenges.

Alternatives & Missed Opportunities

Organic manure, bio-fertilisers, and green ammonia could replace up to 30% of chemical fertiliser use, but lack a policy push.
Subsidies remain skewed towards chemical fertilisers; organic alternatives cover <8% of sown area.
India produces green ammonia, but exports it, as it isn’t yet approved for farm use.

The Rising Soil Crisis

Overuse of Fertilisers: Since the Green Revolution, farmers have relied on heavy doses of urea and DAP to boost yields.
- This has led to soil fatigue in Punjab, Haryana, Uttar Pradesh, and coastal Andhra.
Nutrient Imbalance: Excessive nitrogen application has reduced soil organic carbon and micronutrients (zinc, sulphur, boron).
- Soil Health Card Scheme data shows 40% of Indian soils are deficient in organic carbon.

Rising Soil Crisis

Declining Yields: Despite more fertiliser use, the marginal productivity of fertilisers is falling (law of diminishing returns).
Soil Acidification & Water Pollution: Continuous urea/DAP use acidifies soils, lowers microbial activity, and pollutes groundwater with nitrates.
Long-Term Food Security Risk: If overuse continues, India’s most fertile soils may degrade beyond repair, threatening future productivity.

Way Forward

Diversify Sources & Secure Imports: Long-term contracts with multiple countries (e.g., Jordan, Morocco for phosphates; Canada, Russia for potash).
Boost Domestic Alternatives: Scale up nano urea, nano DAP, and biofertilisers.
- Approve green ammonia for domestic farm use.
Rationalise Subsidies: Balance subsidies between chemical and organic fertilisers.
- Direct Benefit Transfer (DBT) to farmers instead of producers.
Correct Nutrient Imbalance: Promote customised fertiliser blends based on soil health cards.
Institutional Reform: Merge the fertiliser ministry with the agriculture ministry to align production, policy, and use.
Encourage Private Sector & Innovation: Liberalise pricing and allow private players to invest in organics, biofertilisers, and new technologies.