India’s fertiliser sector is navigating near-term uncertainty following the recent US-Iran conflict, which has pushed up global urea and ammonia prices due to rising gas costs and supply chain disruptions. However, industry experts believe the broader outlook remains resilient, supported by government intervention and stable demand.
Urea producers are particularly exposed to rising natural gas prices, a key input in production. Analysts estimate that a $1 per MMBtu increase in gas prices could raise the government’s subsidy burden on domestically produced urea by ₹45–50 billion. This is likely to prompt higher subsidy allocations from the Government of India to protect industry margins.
In contrast, non-urea fertilisers such as phosphates have seen relatively stable input costs so far. Key raw materials like rock phosphate and phosphoric acid continue to be sourced largely from Africa and China, limiting immediate disruption. However, ammonia and sulphur—critical inputs—remain vulnerable, with nearly 70% and 90% of India’s requirements respectively sourced from the Middle East.
Despite these risks, the industry appears well-positioned to manage supply challenges. Inventory levels remain comfortable at around 71 days, compared to 60 days a year ago, while the upcoming two months are typically an off-peak period for demand. Companies are also exploring alternative sourcing options from countries such as Russia and China in case disruptions persist.
Government support is expected to play a crucial role. Drawing from past experience during the Russia-Ukraine conflict, when subsidy rates were significantly increased, analysts expect a similar response through higher nutrient-based subsidy (NBS) rates if input costs remain elevated.
Meanwhile, strong kharif demand is anticipated. Higher global prices may discourage imports and accelerate the liquidation of existing inventory, boosting domestic sales volumes.
Overall, the sector is expected to remain stable, with phosphatic fertiliser players likely to benefit from favourable demand-supply dynamics in the coming months.
