Indian urea producers shut plants as Iran war cuts Qatari supplies of LNG
Indian urea manufacturing plants have begun shutting down operations as supplies of liquefied natural gas (LNG) — the primary feedstock for urea production —...
What Happened
- Indian urea manufacturing plants have begun shutting down operations as supplies of liquefied natural gas (LNG) — the primary feedstock for urea production — were disrupted following the Iran-Israel conflict and its spillover effects on Qatari exports.
- Qatar, one of the world's largest LNG exporters, has paused production amid regional tensions, cutting LNG flows to Indian urea producers by up to 40%.
- LNG is not only the feedstock (converted to hydrogen for the Haber-Bosch process) but also the primary fuel for fertiliser plant operations, making supply disruption doubly damaging.
- With the kharif sowing season approaching, India faces pressure to ensure adequate urea supply for farmers, prompting the government to seek alternative sources including China.
- India's Fertiliser Association (FAI) has assured that existing stocks — approximately 62 lakh tonnes as of mid-March — are sufficient for the kharif season, but warned that prolonged LNG disruption remains a concern.
Static Topic Bridges
Urea Subsidy Framework and New Urea Policy 2015
Urea is the most widely used nitrogenous fertiliser in India, accounting for nearly 50% of total fertiliser consumption. The government controls its retail price (currently ₹242 per 45-kg bag for non-neem coated) and pays a substantial subsidy to producers to cover the difference between production cost and the controlled sale price. The New Urea Policy (NUP) 2015 revised energy consumption norms for gas-based urea plants and linked subsidy to energy efficiency, aiming to reduce the government's subsidy burden.
- Urea is under the Essential Commodities Act — its MRP is fixed by the government
- Nutrient Based Subsidy (NBS) scheme (introduced April 2010) applies to phosphatic and potassic (P&K) fertilisers, NOT to urea — urea remains outside NBS
- Under NUP 2015, urea plants are grouped by energy consumption norms; subsidy is uniform within each group
- Neem-coating of urea became mandatory in 2015 to reduce diversion to industrial use
- Nodal ministry: Ministry of Chemicals and Fertilisers
Connection to this news: When LNG costs spike due to supply disruptions, the gap between production cost and the fixed MRP widens, increasing the government's subsidy liability. Plant shutdowns reduce domestic production, forcing higher-cost imports.
LNG as Urea Feedstock — The Production Chain
Urea (CO(NH₂)₂) is synthesised via the Haber-Bosch process: natural gas is steam-reformed to produce hydrogen (H₂), which then reacts with atmospheric nitrogen (N₂) under high pressure and temperature to yield ammonia (NH₃); ammonia then reacts with CO₂ to produce urea. LNG is the preferred feedstock because it is the cleanest (lowest carbon) and most energy-efficient form of natural gas.
- India's fertiliser sector consumes 46–50 million standard cubic metres per day (MMSCMD) of gas
- Domestic gas allocation to fertiliser sector: only 14–17 MMSCMD (roughly 30–37% of requirement)
- Balance (~63–70%) met by imported R-LNG (regasified LNG) — primarily from Qatar (Qatargas, RasGas)
- Qatar is the world's largest LNG exporter by capacity; India is among its top customers
- Alternate suppliers being explored: USA (Sabine Pass), Australia (NWS), Russia (Sakhalin)
Connection to this news: India's urea plants are structurally dependent on Qatari LNG. A production pause in Qatar directly translates to plant shutdowns in India within days, exposing a critical vulnerability in the agricultural input supply chain.
India's Fertiliser Import Dependency
India is the world's second-largest consumer of fertilisers. Despite being a major agricultural economy, India imports significant volumes of urea (~33% of total consumption), DAP (nearly 100%), and MOP (100%). The Iran war's impact on shipping routes and LNG supply has exposed the concentration risk in India's fertiliser import basket.
- Total urea consumption: ~35–36 million tonnes per year
- Domestic urea production: ~26–27 MT/year (covers ~65–70% of need in normal years)
- India has been seeking urea from China amid the LNG crunch — China periodically restricts urea exports to protect domestic supply
- India's fertiliser subsidy bill: approximately ₹1.64 lakh crore (FY2024-25)
- FAI stock data (mid-March 2026): 62 lakh tonnes urea (10 lakh tonnes higher than same period last year)
Connection to this news: The combination of domestic production shutdown and the difficulty of quickly rerouting imports highlights why food security planning must account for energy supply chain vulnerabilities.
Key Facts & Data
- LNG share in Indian fertiliser sector gas consumption: ~63–70% (imported R-LNG)
- Qatari LNG supply cut to Indian urea producers: up to 40% reduction
- India's urea stock (mid-March 2026): ~62 lakh tonnes (above last year's level)
- Total urea imports (up to Feb 2026): 98 lakh tonnes of finished fertilisers
- Gas requirement for urea plants: 46–50 MMSCMD; domestic allocation: only 14–17 MMSCMD
- Urea MRP (fixed): ₹242 per 45-kg bag (non-neem coated, farmer price)
- NUP 2015: Estimated annual savings of ~₹4,829 crore in subsidy