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Context

India's heavy dependence on West Asian fertilizer imports, transported via the Strait of Hormuz, makes its food security and economy vulnerable to regional geopolitical turmoil. 

How Much India is Dependent on Fertilizer Imports?

While India is approaching Urea self-sufficiency, its extreme dependence on imports for phosphatic and potassic nutrients remains a structural vulnerability.

Immediate Economic Consequences of Supply Disruption

Surging Logistics Costs

Geopolitical risks drive up freight costs and war-risk insurance premiums. Red Sea issues recently tripled shipping costs on some routes, and similar disruptions in the Hormuz region are projected to raise India's fertilizer import costs by 25-30%.

Increased Subsidy Burden

The government shields farmers from price shocks via a massive subsidy program (₹1.64 lakh crore allocated in Budget 2024-25). 

• Higher global prices directly increase the subsidy bill, straining fiscal health. 
• The subsidy for imported urea is higher than for domestic urea.

Impact on Domestic Production

Disruption in LNG supplies from the Gulf directly threatens India's domestic urea manufacturing.

• Gas is the main feedstock, and shortages can lead to production shutdowns and price hikes.

Cost-Push Inflation

Higher input costs for agriculture can lead to increased food prices, creating broader cost-push inflation that affects the entire economy.

Government Initiatives for 'Aatmanirbharta'  

Promoting Alternative Fertilizers: PM-PRANAM

The PM Programme for Restoration, Awareness, Nourishment and Amelioration of Mother Earth (PM-PRANAM) scheme, launched in 2023, aims to reduce the consumption of chemical fertilizers. 

• It incentivizes states to adopt alternatives by offering them a portion of the subsidy savings achieved.

Technological Interventions: Nano Fertilizers

Focusing on efficient nutrient delivery, Indian Farmers Fertiliser Cooperative Limited (IFFCO) has launched Nano Urea and Nano DAP.

• High Efficiency: Nano Urea boasts a nutrient use efficiency of over 80%, far superior to conventional fertilizers.
• Reduced Consumption: One 500ml bottle of Nano DAP is designed to replace a 50kg bag of traditional DAP.
• Economic & Environmental Benefits: This innovation reduces import needs, lowers storage and logistics costs, reduces the farmer's input cost, and minimizes environmental pollution.

Boosting Domestic Production

Under the 'Aatmanirbhar Bharat' initiative, the government is focused on reviving closed fertilizer units and establishing new plants to increase domestic production capacity and cut down on the higher subsidy paid for imported fertilizers.

Way Forward

Diversify Import Sources

Reduce over-reliance on the Gulf region by strengthening long-term contracts with stable suppliers like Russia, Canada, and exploring partnerships in Africa and South America.

Invest in Overseas Assets

Acquire stakes in overseas fertilizer plants and mines to create a captive supply source. The Oman India Fertiliser Company (OMIFCO) is a successful model to replicate. A recent MoU with Russia to establish a urea plant is a positive step.

Enhance Domestic Innovation

Investing in modernizing plants and scaling up the production and adoption of next-generation fertilizers like Nano Urea, Nano DAP, and Sulphur-Coated Urea.

Build Strategic Reserves

Develop a policy for maintaining strategic reserves of critical fertilizers like DAP and MOP, similar to the strategic petroleum reserves, to cushion against sudden supply shocks.

Promote Sustainable Agriculture

Strengthen schemes like the Soil Health Card to encourage balanced nutrition, promote organic manure and bio-fertilizers, and support the cultivation of nitrogen-fixing crops like pulses to reduce overall chemical fertilizer demand.

Conclusion

The threat of a "Hormuz choke" highlights India's deep fertilizer vulnerabilities, making long-term food security dependent on diplomatic diversification, strategic overseas investments, domestic manufacturing enhancement, and aggressive agricultural innovation for self-reliance.

Source: THEHINDUBUSINESSLINE