India's Fertilizer Supply at Risk as Iran Conflict Disrupts Global Trade

Introduction: A Looming Crisis for Indian Agriculture

The escalating conflict in the Middle East, centered around Iran, has sent shockwaves far beyond regional security, directly impacting global supply chains. For India, the world's second-largest fertilizer consumer, the disruption in the Strait of Hormuz—a critical artery for global energy and trade—poses a significant threat to its agricultural sector. With the crucial Kharif sowing season approaching, concerns are mounting over the availability and cost of essential fertilizers, which are heavily dependent on raw materials transiting through the conflict zone.

The Supply Chain Under Pressure

India's fertilizer economy is deeply intertwined with global markets. The country's dependence on imports is substantial: approximately 20% for urea, nearly 50% for di-ammonium phosphate (DAP), and 100% for muriate of potash (MOP). Furthermore, domestic production relies heavily on imported feedstock. Nearly 85% of the natural gas used in urea manufacturing is imported, primarily as Liquefied Natural Gas (LNG), a significant portion of which passes through the Strait of Hormuz. The conflict has disrupted these LNG shipments, creating a shortage of the primary raw material for urea plants.

This dependency extends to other key inputs. A full closure of the Strait could impact 44% of the global sulfur supply and a significant portion of phosphates, much of which India sources from Saudi Arabia and other Gulf nations. According to an analysis by the Indian Council for Research on International Economic Relations (ICRIER), when accounting for intermediate inputs, India's effective dependence on global fertilizer supply chains rises to nearly 70%, exposing the nation's food security to geopolitical shocks.

Domestic Production Feels the Pinch

The ripple effects are already being felt within India. Mumbai-based Alkyl Amines Chemicals announced the suspension of manufacturing for methyl and ethyl amines at three sites, citing an inability of its suppliers to provide ammonia due to force majeure conditions. The disruption of LNG has forced domestic urea plants to operate at reduced capacities, with some reports indicating they are running at only 60% capacity. This reduction in domestic output further tightens the supply situation just as farmer demand is set to peak.

Impact on Prices and Subsidies

The global market has reacted swiftly to the supply crunch. Prices for fertilizers like urea have jumped over 40% in Southeast Asia and 20-30% in other markets. This price surge directly impacts India's substantial fertilizer subsidy program. The government had budgeted ₹1.71 lakh crore for fertilizer subsidies in the 2026–27 fiscal year, a figure that now appears insufficient. Research firm CRISIL has warned that the combination of higher international prices and reduced LNG availability will push the subsidy requirement well above the budgeted amount. This situation echoes the 2022 crisis following the Russia-Ukraine war, which saw the subsidy bill balloon significantly.

Government Assurances and Strategic Responses

Amid growing concerns, the Indian government has maintained that the country has sufficient fertilizer reserves for the upcoming Kharif season. As of March 10, 2026, national stockpiles stood at approximately 18 million tons, a 37% increase from the previous year. Officials are actively working to mitigate the impact, prioritizing gas allocations to ensure fertilizer makers receive at least 70% of their average LNG requirements.

India is also exploring alternative supply sources to reduce its reliance on the Gulf region. Discussions are reportedly underway with China to secure urea cargoes, and the government is reaching out to other potential suppliers, including Russia, Morocco, Indonesia, Malaysia, and Egypt. However, replacing the sheer volume from the Gulf region at short notice remains a significant challenge.

The View from the Ground

For farmers like Deshpal Dahiya, the geopolitical tensions translate into tangible worries about their livelihood. The prospect of a fertilizer shortage during the summer sowing season raises fears of reduced crop yields and a potential food security crisis. Fertilizer retailers have also expressed concern about potential shortages of key nutrients like DAP and urea, which are critical for crops such as rice. While current stocks may provide a temporary buffer, the timing of availability is crucial, as Kharif crops require fertilizer application within a narrow window.

Long-Term Policy Recommendations

The current crisis has highlighted the strategic need for India to enhance its fertilizer supply security. The ICRIER has proposed several policy reforms to build long-term resilience. These include diversifying import sources for both raw materials and finished products to reduce over-dependence on a few countries. Other recommendations involve encouraging Indian companies to make overseas investments in fertilizer minerals and production assets and accelerating domestic exploration for resources.

Furthermore, experts suggest critical reforms to the subsidy mechanism. One proposal is the direct transfer of fertilizer subsidies to farmers' bank accounts, coupled with a gradual price deregulation. This could promote more balanced nutrient use and reduce dependence on import-heavy fertilizers like urea. An alternative suggestion is to bring urea under the Nutrient Based Subsidy (NBS) scheme, which currently applies to phosphate and potash fertilizers, to rationalize its use.

Conclusion: A Call for Strategic Resilience

While the Indian government's current stockpile provides a cushion against immediate shortages, the ongoing conflict in the Middle East serves as a stark reminder of the vulnerabilities in the country's agricultural supply chain. A prolonged disruption could strain government finances, increase costs for farmers, and ultimately impact food security. The crisis underscores the urgent need for India to move beyond short-term fixes and implement strategic, long-term policies to decouple its agriculture from geopolitical volatility and secure a more resilient food production system.