West Asia conflict exposes India's fertiliser import dependence, calls for urgent policy reforms

Indian Express - Opinion · 20 Mar 2026 · 2 min read
Prelims · Economy Mains · GS3 Economy High relevance

The West Asia war has disrupted India's fertiliser and energy supplies, highlighting 68-70% import dependence and necessitating sectoral reforms to safeguard food security and fiscal stability.

Key points

Strait of Hormuz disruptions threaten 88% of India's crude oil imports (243 Mt worth $137 billion in FY25) and two-thirds of LPG supplies (31.3 Mt), with prices spiking from $66 to $120/barrel within weeks.

Urea production faces crisis as LNG shortages force 30% gas allocation cuts to fertiliser plants under the Essential Commodities Act, risking domestic output of 30 Mt against annual demand of 40 Mt.

Fertiliser import dependence reaches 55% when accounting for both direct urea imports (projected 10 Mt in FY26) and gas feedstock imports (85% of domestic production needs), with 60% sourced from Persian Gulf.

Global price volatility saw urea prices jump 35% ($484 to $652/tonne) post-conflict, while Asian LNG spot prices surged from $10 to $25/mmBtu, directly impacting India's Rs 1.7 lakh crore subsidy bill.

[GS3-Economy] The crisis exposes structural vulnerabilities in India's input subsidy regime, with leakages estimated at 20% and imbalanced NPK usage due to price distortions, requiring GS3-focused fiscal reforms.

Geopolitical risks extend beyond urea - 80% of ammonia/sulphur, 40% of DAP, and 90-95% of potassic fertilisers are Gulf-dependent, making 68-70% of total fertiliser needs vulnerable to supply shocks.

This connects to GS2-Governance through the Essential Commodities Act's selective gas allocation, demonstrating crisis management tools but underscoring need for long-term policy frameworks.

Way Forward: India should establish a $1 billion fertiliser investment fund for overseas mineral assets, implement direct benefit transfers for subsidies, and deregulate nutrient pricing to promote balanced usage while reducing fiscal leakages.

Key terms

Essential Commodities Act 1955

A parliamentary act empowering the government to control production, supply, and distribution of critical goods during shortages. Its invocation for LNG allocation demonstrates its role in crisis governance, though over-reliance indicates systemic vulnerabilities in India's fertiliser security framework.

Strait of Hormuz

A critical maritime chokepoint between Oman and Iran, handling 21 million barrels of oil daily (30% of global seaborne trade). Its strategic importance to India stems from 50% of crude imports transiting through it, making energy security contingent on regional stability in West Asia.

Urea Subsidy Mechanism

A price support system where the government compensates manufacturers for selling urea at controlled prices (currently Rs 242/bag vs production cost of Rs 540). Its fiscal burden (Rs 1.7 lakh crore in FY25) reflects distortions from delayed reforms in nutrient-based subsidy regimes.

AgriStack

A digital infrastructure initiative under MoA&FW to enable targeted delivery of farm services. Its potential integration with fertiliser subsidy distribution could address 20% leakage rates and enable precision agriculture, though data privacy concerns require GS2 governance safeguards.