Nepal to procure 80,000 tonnes of fertiliser from India as Iran disrupts global supply chains

Nepal's government granted in-principle approval to procure 80,000 tonnes of chemical fertiliser from India on a government-to-government (G2G) basis, compri...

What Happened

Nepal's government granted in-principle approval to procure 80,000 tonnes of chemical fertiliser from India on a government-to-government (G2G) basis, comprising 60,000 tonnes of urea and 20,000 tonnes of Di-Ammonium Phosphate (DAP).
The emergency procurement was triggered by disruption to Nepal's regular fertiliser supply chain: the conflict in West Asia had halted shipments of approximately 94,500 tonnes of fertiliser previously contracted by Nepal from West Asian suppliers, primarily from Iran and Gulf states.
Nepal relies on West Asia for 60–70% of its fertiliser imports; Iran, Saudi Arabia, Qatar, and Oman are key producers and exporters whose operations have been affected by the conflict.
Nepal had originally requested 150,000 tonnes from India but received approval for 80,000 tonnes; combined with existing stocks of 171,000 tonnes held by the Agriculture Inputs Company, Nepal still faces a shortfall against the 250,000 tonnes required for the plantation season.
The procurement was made within the framework of the India-Nepal G2G Fertiliser MoU (2022), which guarantees India supplies at least 30% of Nepal's annual requirement through a five-year agreement; the MoU was due for extension as of March 2026.
The episode highlights India's emerging role as a regional food security anchor in South Asia, leveraging its fertiliser production and distribution capacity to support Neighbourhood First policy goals.

Static Topic Bridges

India-Nepal G2G Fertiliser Agreement and Neighbourhood First Policy

India's "Neighbourhood First" policy, operationalised from 2014 onward, prioritises deep economic, infrastructural, and people-to-people connectivity with SAARC neighbours. In the agriculture and food security domain, India has progressively expanded government-to-government (G2G) supply arrangements for food, petroleum, and fertilisers with Nepal, Bangladesh, and Sri Lanka.

India and Nepal signed a five-year G2G Fertiliser MoU on February 28, 2022, guaranteeing supply of urea and DAP; volumes escalate from 150,000 tonnes in Year 1 to 210,000 tonnes in Year 5.
India is one of the world's largest urea producers (domestic consumption ~35 million tonnes/year; production capacity ~25 million tonnes, supplemented by imports) and one of the few countries with state-controlled fertiliser supply chains via cooperatives and IFFCO, KRIBHCO, and state trading companies.
The G2G mechanism — bypassing commercial commodity markets — provides Nepal price stability and supply reliability that commercial contracts cannot guarantee in periods of geopolitical disruption.
Nepal is landlocked; its supply chains run through Indian territory (road and rail) or through Chinese ports — making India the logistically natural emergency supplier.

Connection to this news: The 80,000-tonne emergency procurement directly invoked the G2G MoU framework, demonstrating how the Neighbourhood First policy translates into concrete food security safety nets for smaller neighbours.

Global Fertiliser Markets and West Asia's Role

Fertilisers — particularly urea (nitrogen), DAP (phosphorus), and muriate of potash (MOP) — are globally traded commodities. The West Asia and North Africa (WANA) region is a major exporter of nitrogen-based fertilisers (urea, ammonia) because of abundant natural gas reserves that serve as the primary feedstock for nitrogenous fertiliser production.

Iran is a significant urea exporter, with production capacity of approximately 7–8 million tonnes per year, much of it exported to South and Southeast Asia. Disruptions to Iranian exports have cascading effects on price and availability in import-dependent countries like Nepal, Sri Lanka, and Bangladesh.
Saudi Arabia (through SABIC and SAFCO), Qatar (through QAFCO), and Oman (through OCI) are also major fertiliser exporters in the region.
Fertiliser prices spiked sharply during 2021–22 following Russia's invasion of Ukraine (Russia and Belarus together account for ~40% of global potash exports and ~20% of urea exports); the West Asia conflict of 2026 represents a second supply shock on top of an already-stressed global market.
The Strait of Hormuz — through which a significant portion of West Asian fertiliser exports transit — is a critical maritime chokepoint; any disruption to shipping through the Strait directly impacts fertiliser availability across Asia.

Connection to this news: Nepal's cancelled contracts (94,500 tonnes) represent the direct consequence of West Asian supplier disruption — shipping uncertainty, production slowdown, and price escalation forced contract cancellations, triggering the emergency India procurement.

Fertiliser Policy in India: Subsidy Architecture and Strategic Reserves

India's domestic fertiliser sector is governed through a complex subsidy architecture. The Nutrient Based Subsidy (NBS) scheme (for P&K fertilisers including DAP) and the flat-rate subsidy for urea make Indian fertilisers among the most heavily subsidised in the world, enabling affordable access for farmers while creating export headroom when the government directs supply to neighbours.

Urea: Price is regulated and heavily subsidised; India produces urea at gas-based plants and imports from West Asia, Russia, and North Africa. Total subsidy outlay for fertilisers exceeded ₹1.75 lakh crore in 2022-23.
DAP: Covered under NBS scheme; India imports significant quantities from Russia (MAP/DAP), Saudi Arabia (SABIC), Jordan, and Morocco.
India's fertiliser security is tied to its energy security — urea production requires natural gas; global gas price spikes (as seen in 2021-22) raise domestic production costs and subsidy burden simultaneously.
The Department of Fertilisers (under Ministry of Chemicals and Fertilisers) manages allocation, distribution, and import policy; the Government operates a direct benefit transfer (DBT) mechanism for subsidy delivery to farmers.
Strategic fertiliser reserves and buffer stocking are not as institutionalised as food grain reserves; the 2022 crisis exposed vulnerabilities that policy-makers have sought to address through diversification of import sources.

Connection to this news: India's ability to supply Nepal with 80,000 tonnes on an emergency basis reflects both domestic production capacity and the policy flexibility built into the G2G MoU framework — a model being considered for other neighbours as well.

SAARC Food Security Framework and Regional Cooperation

The South Asian Association for Regional Cooperation (SAARC) established the SAARC Food Bank Agreement (2007) to maintain a regional food reserve for emergency use during food shortages and natural disasters. However, the SAARC process has been largely stalled since 2016; bilateral arrangements — particularly India-centric — have filled the gap.

SAARC Food Bank: Established in 2007; each member country maintains a quota of food grain in a designated national grain bank; activated during food emergencies. The reserve was last supplemented in 2011.
SAARC Agriculture Centre (SAC): Located in Dhaka, Bangladesh; supports agricultural research and technology sharing across member states.
India's bilateral food and fertiliser supply arrangements with Nepal, Sri Lanka (during 2022 economic crisis), and Bangladesh reflect a shift from multilateral SAARC mechanisms to direct bilateral diplomacy under Neighbourhood First.
The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) has also explored agricultural cooperation frameworks as a complement to SAARC.

Connection to this news: Nepal turning to India — rather than activating the SAARC Food Bank or seeking WTO-mediated emergency supply — illustrates the primacy of bilateral India-Nepal ties over multilateral mechanisms in South Asian food security crises.

Key Facts & Data

Nepal procurement: 80,000 tonnes total — 60,000 tonnes urea + 20,000 tonnes DAP.
Nepal's original request to India: 150,000 tonnes (only 80,000 tonnes approved).
Nepal's plantation season requirement: 250,000 tonnes; stock on hand: 171,000 tonnes; shortfall remains.
Nepal's West Asia fertiliser dependence: 60–70% of total fertiliser imports.
Cancelled supplier contracts (West Asia conflict): 94,500 tonnes.
India-Nepal G2G Fertiliser MoU: signed February 28, 2022; five-year term; guarantees at least 30% of Nepal's annual requirement; due for extension in March 2026.
MoU volumes: 150,000 tonnes (Year 1) → 210,000 tonnes (Year 5).
Iran fertiliser production capacity: approximately 7–8 million tonnes/year urea.
Strait of Hormuz: key maritime chokepoint for West Asian fertiliser exports; disruption cascades to South and Southeast Asia.
India's fertiliser subsidy outlay: exceeded ₹1.75 lakh crore in FY 2022-23.
SAARC Food Bank: established 2007; largely dormant; bilateral India-centric arrangements have been more effective in practice.