India launches new investment policy to achieve urea self-sufficiency

The Indian government has approved a new investment policy for the urea production sector (NIPU-2026), aimed at making the country fully self-sufficient in nitrogen fertilizers and reducing its dependence on imports. The program is the first major overhaul of the sector’s policy in 14 years and is intended to strengthen food security amid climate and supply chain risks.

The new policy provides for the construction and modernization of 8–9 large gas-based fertilizer plants with a combined production capacity of about 10 mln tons of urea per year. Each facility is expected to produce around 1.27 mln tons annually. Developed by India’s Ministry of Chemicals and Fertilizers, the program covers state-owned enterprises, private companies and agricultural cooperatives.

According to EY India, replacing every 1 mln tons of imported urea with domestic production would save the country between $300 mln and $500 mln in foreign exchange reserves each year. The revised subsidy framework is also expected to reduce government spending by more than 2.5 billion rupees (about $30 mln) for each new plant compared with the 2012 policy.

A key feature of NIPU-2026 is the introduction of stronger safeguards for investors. The government has established a more transparent subsidy calculation system, guaranteed a return on equity of 12–16%, and introduced measures to protect producers from currency risks. Four years after commissioning, fixed project costs will be converted into Indian rupees using the prevailing exchange rate.

India remains one of the world’s largest consumers of nitrogen fertilizers and one of the leading importers of urea. The implementation of the new investment policy is expected not only to reduce the country’s reliance on foreign suppliers but also to strengthen the resilience of its domestic fertilizer market amid the effects of El Niño, supply chain disruptions and volatile global fertilizer prices.

Tags: India, fertilizers