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India raises gas supply for fertilizer firms as imports improve

April 08, 2026 6 min read Economics Agriculture GS3 (Agriculture Food Security Energy Indian Economy)
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What Happened

  • India restored natural gas supply to urea manufacturing plants to 90% of their average consumption requirements (up from 70–75% during the period of Middle East supply disruptions), effective from April 6, 2026
  • The improvement was driven by the arrival of scheduled LNG cargo shipments from alternative suppliers (US, Australia, Russia) as LNG flows from Qatar — disrupted due to the Iran conflict and Hormuz blockage — remained suspended
  • The decision was taken based on inventory assessments and scheduled LNG arrivals, with the objective of ensuring adequate fertiliser stocks ahead of the kharif (summer monsoon) planting season, which begins in June
  • India had earlier been sourcing approximately 18 million metric tonnes of urea against its total 39.05-million-tonne requirement for the season, with about 46% already in stock
  • In parallel, India was exploring emergency urea imports from China, targeting approximately 2.5 million tonnes, as a supply risk hedge
  • A government plan to build a Rs 600 crore LNG buffer stock for the fertiliser sector was also in progress to reduce future vulnerability

Static Topic Bridges

Natural Gas as Feedstock for Urea Production — The LNG-Fertiliser Nexus

Urea (CO(NH₂)₂) is the most widely used nitrogenous fertiliser in India, applied to paddy, wheat, sugarcane, and other major crops. Its production requires natural gas as both a feedstock (to produce hydrogen via steam methane reforming) and as an energy source. India's urea production is therefore structurally linked to natural gas supply, making the sector highly sensitive to gas price volatility and supply disruptions.

  • 30 out of India's 32 urea manufacturing units use natural gas as primary feedstock; only 2 use naphtha-based or coal-based processes
  • India's daily natural gas requirement for the urea sector: 46–50 MMSCMD (Million Standard Cubic Metres per Day) on average
  • Domestic gas allocation for the urea sector: only 14–17 MMSCMD — the balance (approximately 60–65%) is met through imported LNG (Re-gasified LNG or RLNG)
  • In FY2020–21, imported RLNG constituted approximately 63% of gas consumed by the fertiliser sector — reflecting deep structural import dependence
  • The Qatar LNG supply suspension (due to Hormuz blockage) removed a key source of RLNG, directly cutting plant throughput and forcing partial shutdowns

Connection to this news: Restoring supply to 90% of average consumption required spot procurement of LNG from alternate suppliers — the US, Australia, and Russia — at likely higher spot market prices, which would flow through to the fertiliser subsidy bill paid by the government.

New Urea Policy (NUP) 2015 and Fertiliser Subsidy Framework

India's urea sector is heavily regulated and subsidised. The retail price of urea is fixed by the government at a maximum retail price (MRP) far below the actual cost of production, with the difference paid as subsidy to manufacturers. This subsidy is administered by the Department of Fertilizers under the Ministry of Chemicals and Fertilizers.

  • New Urea Policy (NUP) 2015: Applies to 25 gas-based urea units; divides plants into three groups based on energy efficiency norms; each group receives a uniform subsidy per tonne irrespective of individual plant costs — incentivising energy efficiency improvements
  • Maximum Retail Price (MRP) of urea: Rs 266.50 per 45 kg bag (as subsidised price); actual production cost is significantly higher (approximately Rs 20,000–25,000 per tonne) [Unverified — verify against DOFAR data]
  • India's total annual urea subsidy: over Rs 1.5 lakh crore in recent years [Unverified — verify against Union Budget data]
  • Direct Benefit Transfer for Fertilizers (DBT-Fertilizers): Subsidy is transferred to manufacturers after fertiliser is sold to farmers via Point of Sale (PoS) machines linked to the e-Urvarak DBT portal using Aadhaar-based biometric authentication; launched in 2017 and scaled up by 2018
  • Urea production in India is insufficient to meet domestic demand; India is a net importer of urea; key import sources include Oman, Egypt, China, and (until the conflict) Gulf states

Connection to this news: The decision to raise gas allocation to 90% directly supports domestic urea production capacity, reducing the volume of urea that must be imported at (typically) higher international spot prices, thereby helping contain the fertiliser subsidy burden even as LNG input costs rise.

Kharif Agriculture Cycle and Fertiliser Demand Seasonality

The kharif (summer) crop season is one of two major agricultural seasons in India (the other being rabi, the winter season). Kharif crops are sown at the beginning of the monsoon (June–July) and harvested in September–October. Key kharif crops include rice (paddy), maize, cotton, groundnut, soybean, and jowar. Urea demand peaks sharply before and during the kharif sowing season.

  • Monsoon onset: typically around June 1 in Kerala; spreads across the country by mid-July; Indian Meteorological Department (IMD) issues monsoon forecasts in April and May
  • Key kharif crops and urea intensity: Paddy (rice) is the most urea-intensive kharif crop; India cultivates approximately 40–44 million hectares of paddy annually
  • The rabi crop (wheat, mustard, chickpea) is sown in October–November after monsoon withdrawal; urea demand for rabi peaks in December–January
  • Fertiliser buffer stock norms: The Department of Fertilizers maintains district-level stock norms; state governments are responsible for distribution through cooperatives and private dealers
  • India's total fertiliser consumption: approximately 61–65 million metric tonnes (nutrient-wise, all fertilisers) annually, of which urea alone accounts for approximately 33–35 million metric tonnes [Unverified — verify against DoF annual report]

Connection to this news: The urgency of restoring gas supply to urea plants stems from the kharif deadline — if urea availability is not restored before June, farmers face shortages during the critical sowing window, which can reduce crop area and yields, threatening food security.

India's Energy Import Dependence and LNG Supply Diversification

India imports approximately 85% of its crude oil and a significant share of its natural gas requirements. The Middle East conflict exposed a structural vulnerability: heavy dependence on Qatar for LNG (which exclusively transits Hormuz) and on pipeline-connected Gulf states for natural gas.

  • India's LNG import infrastructure: Regasification terminals at Dahej (Gujarat, largest; capacity ~17.5 MMTPA), Hazira (Gujarat), Kochi (Kerala), Dabhol/Ratnagiri (Maharashtra), Ennore (Tamil Nadu), and Mundra [Unverified — verify operational capacities against MoPNG]
  • Petronet LNG: India's largest LNG importer; has long-term contracts with Qatar's Qatargas (25-year contract for 7.5 MMTPA from the Ras Laffan facility)
  • Alternate LNG sources being tapped: US (Henry Hub-linked contracts — flexible, spot); Australia (NW Shelf, APLNG); Russia (Sakhalin-2, Yamal LNG)
  • LNG spot market: priced in MMBtu (Million British Thermal Units); spot prices are significantly more volatile than long-term contract prices
  • India's energy security framework: Administered by the Ministry of Petroleum and Natural Gas; strategic petroleum reserves (crude oil only) maintained at 3 sites; no strategic LNG reserve exists (the Rs 600 crore buffer plan mentioned in the article would be a first step)

Connection to this news: The immediate policy response — sourcing from US, Australian, and Russian LNG — demonstrates India's diversification strategy in action under stress, though at higher cost. The Rs 600 crore buffer stock plan signals recognition that a strategic LNG reserve for the fertiliser sector is a national food security necessity.

Key Facts & Data

  • Natural gas supply to urea plants restored to: 90% of average consumption (from 70–75%)
  • Restoration effective from: April 6, 2026
  • India's total urea requirement for the kharif season: 39.05 million metric tonnes
  • Urea stock available as of early April 2026: approximately 18 million metric tonnes (~46% of requirement)
  • India's emergency urea import target from China: approximately 2.5 million metric tonnes
  • LNG buffer stock plan for fertiliser sector: Rs 600 crore
  • Number of urea plants in India: 32 total; 30 gas-based; 25 covered under New Urea Policy 2015
  • India's daily gas requirement for urea sector: 46–50 MMSCMD; domestic supply: 14–17 MMSCMD; balance from LNG imports
  • Kharif sowing begins: June (coinciding with monsoon onset, typically June 1 in Kerala)
  • DBT for fertilizers: subsidy routed via e-Urvarak portal with Aadhaar-based PoS authentication (launched 2017)
  • MRP of urea (subsidised): Rs 266.50 per 45 kg bag
  • Petronet LNG Qatar contract: 7.5 MMTPA for 25 years (Ras Laffan, Qatargas)