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Source: Times Of India

Context

The Iran-Israel dispute has received global attention for its influence on oil prices, but a less visible and equally important issue is arising in fertiliser supplies, posing a substantial risk to India's farming and food security.

India’s Deep Vulnerability to External Shocks in Fertiliser Sector

• Agriculture-Driven Economy: India’s economy is significantly driven by agriculture, making fertiliser security critical for national food security.
  
  

Heavy Import Dependence

• Urea: India imports approximately 20% of its urea requirements.
  
  
• Diammonium Phosphate (DAP): Around 60% of India’s DAP needs are met through imports.
  
  
• Muriate of Potash (MOP): India is 100% import-dependent for MOP, a vital soil nutrient.
  
  

Dependence on the Middle East

• India’s fertiliser security is inextricably linked to the Middle East, sourcing both finished fertilisers and natural gas (essential for urea production).
  
  
• Major suppliers include Qatar, Saudi Arabia, and Oman.
  
  

Strategic Vulnerability – Strait of Hormuz

• In 2023, nearly 20–25% of India’s total fertiliser imports came from Gulf countries, primarily through the Strait of Hormuz.
  
  
• This narrow maritime chokepoint is highly volatile; any disruption, like the threat posed by Iran’s parliament, could:
  
  
• Severely impact India’s supply chain
  
  
• Escalate global fertiliser prices
  
  
• Directly affect Indian farmers’ affordability and productivity

Fertiliser Security Risks for India Amid Geopolitical Conflicts

• Disruption of Import Routes: India is heavily dependent on fertiliser imports from Gulf nations such as Qatar, Saudi Arabia, and Oman. These pass through the Strait of Hormuz, a geopolitically sensitive maritime route.
  
  
• Example: A naval blockade due to Iran-Israel tensions can delay urea and DAP shipments, disrupting availability during critical sowing seasons.
  
  
• Volatile Global Prices: Geopolitical conflicts lead to a surge in prices of natural gas, the main input for urea.
  
  
• Example: A spike in natural gas prices raises the cost of domestic urea production, inflating India’s already high fertiliser subsidy bill.
  
  
• Dependence on Conflict Zones: India imports 100% of MOP (Muriate of Potash), including from Belarus and Israel—both prone to instability.
  
  
• Example: Escalation in Iran-Israel tensions can hamper MOP imports, affecting potash-dependent crops like sugarcane and cotton.

Unaddressed Lessons from the Russia-Ukraine Crisis

• Lack of Strategic Buffer Stocks: Despite 2022 supply chain shocks, India has not instituted a buffer stock policy or minimum stocking norms for key fertilisers like DAP and MOP.
  
  
• Example: During the Kharif season, India holds only 30–45 days of stock, insufficient to cushion external shocks.
  
  
• Failure to Diversify Import Sources: India still relies on unstable regions despite past disruptions.
  
  
• Example: After the Russia-Belarus supply cuts, India’s high dependence on Israel and Jordan for DAP continues, risking repetition.
  
  
• Reactive Policymaking: Policy responses are short-term, focusing on emergency imports rather than long-term resilience.
  
  
• Example: Despite opportunities post-2022, nano, bio, and organic fertilisers remain underdeveloped, keeping India reliant on synthetic fertilisers and high subsidies.

Consequences of Disruptions in Fertiliser Supply

• Threat to Food Security: Immediate impact on agricultural production, directly endangering national food security.
  
  
• Farmer Distress: Rising global fertiliser prices, particularly for DAP and MOP, increase retail costs under the nutrient-based subsidy (NBS) scheme.
  
  
• Small and marginal farmers bear the brunt, leading to reduced productivity, shift in cropping patterns, and potential social unrest.
  
  
• Support schemes like PM-KISAN offer limited financial relief.

Nutrient-Based Subsidy (NBS) Scheme

• Aims to promote balanced fertilisation and efficient nutrient use.
  
  
• Government fixes per-kg subsidy rates for N, P, K, and S, while companies sell at market price minus subsidy.
  
  
• Urea is excluded from NBS and sold at controlled prices with full subsidy.

Rising Fiscal Burden

• Government absorbs international price shocks to keep urea affordable.
  
  
• The fertiliser subsidy bill could exceed ₹2.5 lakh crore, constraining investment in long-term agricultural infrastructure.

Way Forward

• Strategic Reserves: Establish large-scale reserves to stabilise domestic supply and enhance global negotiating power.
  
  
• Diversify Supplier Base: Move beyond MoUs to real investments in resource-rich nations like Morocco, Canada, Jordan, and Israel.
  
  
• Flexible Contracts & Logistics: Secure long-term agreements and explore alternative shipping routes to bypass geopolitical risks.
  
  
• Boost Domestic Production:
  
  
• Achieve 90% self-sufficiency in urea via reviving plants like Gorakhpur and Sindri.
  
  
• Reduce dependence on imports for phosphatic and potassic raw materials.
  
  
• Modernise ageing plants and invest in R&D.
  
  
• Proactive Planning: Shift from reactive to resilience-based policy approach.
  
  
• Promote Alternatives: Support adoption of nano urea, biofertilizers, and organic inputs.
  
  
• Improve Subsidy Delivery: Speed up disbursement and raise awareness on sustainable practices.

Practice Question: Q. Evaluate the gaps in India’s fertiliser policy and suggest reforms.