Amid concerns of fertiliser shortage during the ongoing kharif season due to the situation in West Asia, greater demand because of El Niño and complaints of over-use of chemical fertilisers such as urea, the Cabinet Committee on Economic Affairs recently approved the National Investment Policy for Urea (NIPU)-2026.
The new policy is aimed at self reliance in urea production, a sector which is dependent on imports. According to the Government, the policy will encourage new investments in the urea sector for setting up the gas based urea manufacturing units in the country.
The key changes in the policy, compared to the existing policy, include the separation of fixed and variable costs for greater transparency, introduction of a viable Return on Equity (RoE) band with a floor at 12% and a ceiling at 16%, and mitigation of foreign exchange risk through conversion of fixed cost into Indian Rupees after four years based on prevailing exchange rates.
India’s urea policy
The Union Government had announced announced such a policy for urea sector in 2012, 2013 and it was amended in October 2014 to facilitate fresh investment.
Six new urea units have been set up under the 2012 policy, which includes four set up through Joint Venture Companies (JVC) of nominated PSUs and two set up by the private companies. At present, there are 33 operational urea manufacturing units with total reassessed/installed capacity of 269.42 Lakh Metric Tonnes (LMT), according to the Union Fertilisers Ministry.
“There is a need to increase the indigenous production of Urea. There is a gap in the indigenous production and demand of urea in the country which is filled by the import of urea,” the Government had said. It adds that total indigenous urea production capacity (Reassessed Capacity, RAC) has increased from 207.54 LMT per annum during 2014-15 to 269.42 LMT per annum during 2026-27.
The Government amended the policy further May 2015 for the existing 25 gas-based urea units and it led to additional production of urea by 20-25 LMT as compared to the production during 2014-15 annually.
From 225 LMT per annum during 2014-15, the current production from all these units has reached 314.07 LMT during 2023-24. “During 2025-26, 293.30 LMT of Urea was produced in the country,” the Government says.
Fertiliser subsidy
The total fertilisers subsidy in 2025-26 is ₹ 2,17,281.10 crore. In 2024-25, it was ₹ 1,77,162.06 crore. Out of this, the urea subsidy alone for 2025-26 was ₹ 1,42,175.74 crore and for 2024-25 it was ₹ 1,24,319.50 crore. For Phosphorus, and Potassium, the subsidy component is ₹ 74,999.99 crore and ₹ 52,810 crore respectively. For promotion of organic fertilisers, the Government provided a subsidy of ₹ 105.37 crore and ₹ 32.56 in the last two financial years.
Availability of Urea
According to the data provided by the Government in Parliament, as on March 3, 2026, the country has the requirement of 370.84 LMT of urea for the kharif season. The availability is 432.44 LMT, out of which 381.59 LMT will be for sale under Direct Benefit Transfer (DBT) system where all subsidised fertilisers will be sold to buyers is made through Point of Sale (PoS) devices “installed at each retailer shop and the beneficiaries are identified through Aadhaar Card, KCC, Voter Identity Card etc”. In 2024-25, the requirement was 364.01 LMT and availability was 443.83 LMT.
The Government claims it has taken steps to promote balanced and efficient use of fertilisers. “The Government is promoting Integrated Nutrient Management (INM), which advocates the judicious and scientific integration of organic sources, chemical fertilisers, and biological inputs for efficient and sustainable nutrient management,” the Ministry said adding that the INM aims to meet the nutrient requirements of crops in an economical and environmentally sustainable manner while maintaining long-term soil fertility. It had also experimented with Nano Urea, which is yet to get popularity among farmers, apparently after controversies over its scientific efficacy and result.
