A CRISIL report states that the West Asia conflict has exposed India’s heavy dependence on fertiliser imports and raw materials, triggering concerns over availability, rising costs and food security. With over 40% imports from the region and gas-linked production constraints, supply risks are mounting. The government is prioritising fertiliser allocation, but long-term solutions lie in diversification, domestic capacity expansion and green alternatives.
After Rural Voice flagged concerns over a potential fertiliser crisis, rating agency CRISIL has released a detailed report highlighting how the ongoing West Asia conflict is exposing deep structural vulnerabilities in India’s fertiliser sector, including heavy import dependence, fragile supply chains and strong energy linkages with serious implications for agriculture and food security. The report underscores that India relies heavily on West Asia for fertilisers and key inputs, with 40-42% of total imports sourced from the region. The dependence is particularly acute in urea, with nearly 64.8% of imports coming from West Asia, which also accounts for over one-third of diammonium phosphate (DAP) imports, making it a critical supplier. (Read Rural Voice report here. See Video Explainer)
The CRISIL report says that the disruption in the region has not only affected finished fertiliser imports but also the availability of essential raw materials such as liquefied natural gas (LNG), ammonia, sulphuric acid and rock phosphate. These inputs are crucial for domestic fertiliser production, which itself is significantly import-dependent.
India’s fertiliser manufacturing ecosystem remains structurally exposed, with around 69% of the value chain reliant on foreign sources. Imported feedstock alone contributes about 44.5% of the total value used in fertiliser production. In the case of urea, natural gas constitutes nearly 80% of the raw material cost, underlining the sector’s vulnerability to energy shocks.
The crisis has intensified pressure on input costs, as global LNG prices surge and supply disruptions persist. Fertilisers account for 31% of India’s LNG consumption, making the sector one of the largest consumers of gas. Any disruption in LNG availability directly impacts domestic production capacity.
Despite government intervention, including prioritised gas allocation to the fertiliser sector – now raised to 95% of previous consumption levels – concerns remain over potential production shortfalls. Even with such measures, the report warns that supply constraints could emerge if disruptions persist.
On the supply front, India currently has fertiliser stocks sufficient for about 2.5 months. However, a prolonged conflict could hinder further procurement, particularly affecting availability for the rabi season. While fertiliser supplies are being prioritised for the ongoing kharif crop, any shortfall in subsequent seasons could impact crop yields and overall food output.
The implications extend beyond agriculture. Rising fertiliser prices are expected to increase India’s import bill and widen the current account deficit. Additionally, higher costs may strain government finances due to increased subsidy requirements, while also contributing to inflationary pressures.
The agriculture sector faces a dual challenge – higher input costs and potential supply shortages. Lower fertiliser availability could affect farm productivity, while elevated prices may reduce usage, further impacting yields. This raises concerns over rural incomes and food price stability.
India’s fertiliser consumption pattern also adds to the challenge. Urea dominates usage, accounting for about 45% of total fertiliser consumption, leading to nutrient imbalance and overdependence on gas-based production. This structural issue exacerbates vulnerability during global disruptions.
Long-term structural reforms
To address these risks, the report highlights the urgent need for long-term structural reforms. These include diversifying import sources beyond West Asia, strengthening long-term supply agreements for key raw materials, and expanding domestic production capacity.
There is also a growing push towards alternative solutions such as green ammonia and integration with the National Green Hydrogen Mission. Several fertiliser companies have already entered into long-term agreements for green ammonia supply, which could reduce dependence on imported natural gas over time.
Additionally, exploring domestic reserves of phosphate and potash, and promoting balanced fertiliser use beyond urea, are seen as critical steps towards achieving fertiliser security.
The report underscores that fertiliser security is intrinsically linked to food security in India, given the country’s large population and dependence on agriculture. Any disruption in fertiliser availability can have cascading effects on crop production, inflation and economic stability.
As geopolitical uncertainties persist, the West Asia crisis serves as a stark reminder of the need to build resilient and self-reliant supply chains in the fertiliser sector. Without timely intervention and structural reforms, India’s agricultural growth and food security could face significant risks in the years ahead.
