How vulnerable is India’s fertilizer sector amid China curbs

Besides curbing the export of di-ammonium phosphate (DAP), a type of fertilizer, China has restricted the export of rare earth materials. The curb on speciality fertilizers has made India vulnerable due to its sizeable import dependence, even as China’s role has seen a decline in recent years.

India meets 75-80% of its total consumption needs through indigenous production, leaving some room for import dependence, data available until 2023-24 by fertilizer ministry showed. Fertilizer-wise, the trends vary: India has met 77% of urea consumption through domestic production between FY20 and FY24 and 84% of its nitrogen, phosphorus, and potassium (NPKs). 

However, domestic production covered only 40% of India’s consumption during the period. Muriate of potash (MoP) is 100% import dependent. This suggests India is particularly dependent on other countries to meet DAP and MoP needs.

Specialty fertilizers, for which official data is not available, are advanced fertilizer products designed to provide targeted nutrients to specific crops. They are specifically formulated and can contain components of urea, DAP and NPKs.

The good news is India has reduced its reliance on China for overall fertiliser imports, even as a large part of the decline in 2024-25 came due to the world’s second-largest country’s supply squeeze on DAP. Nevertheless, growing reliance on Russia and some other countries offers India some buffer against China’s dominance.

Import vulnerability

Fertilizers are of key importance to India as the country depends heavily on agriculture, which contributes 14% to the Indian economy and employs around 45% of workers. Good agricultural production is essential for maintaining India’s food security and food inflation. India is also a net exporter of agricultural products, comprising around 12% of total exporters.

As such, India is the world’s second-largest consumer of fertilizer, only trailing China. India’s vulnerability stems not only from China’s policies but also from geopolitical risks. The Middle East and North Africa region (MENA) exports over 30% of the world’s nitrogen-based fertilizers. Israel is the top producer of MoP, while Iran is among the top exporters of urea globally. The current situation with China, first the curb on DAP and now on specialty fertilizers, only adds to the woes.

Also Read: Fertilizer subsidy bill faces West Asia shock

India is also dependent on imports for sourcing raw materials for domestic production of different fertilizers. For instance, it imports nearly100% of its potash requirement and 90% of rock phosphate for producing phosphatic fertilizers. 

“We have reduced our import dependency for urea, however, for complex fertilizers, dependency is still high. Key minerals used in manufacturing of complex fertilizers are scarce in India. Hence we are import-dependent for raw material as well as intermediaries,” said Anand Kulkarni, director at Crisil Ratings.

Price pressure

As India is import-dependent, it becomes vulnerable to global price fluctuations as well. Fertilizer prices in the past five years had risen significantly during the back-to-back impact covid-19 pandemic and Russia-Ukraine war. Even as fertilizer prices have come down from the highs seen in 2022, prices have begun rising in the past few months again, leading to worries. The reasons for the recent uptick are China’s supply curbs as well as crises in West Asia from the Israel-Hamas war to the Israel-Iran conflict.

Also read | A new fertilizer allocation plan is in the works—a hot potato or a crucial step?

Since fertilizer prices are highly subsidized to protect farmers and industries from price fluctuations, sharp rises often lead to a ballooning of India’s subsidy bill. Due to high prices between FY21 and FY23, the Centre’s subsidy bill rose 58% year-on-year in FY21, 20% in FY22 and 63% in FY23. While the subsidy bill has seen a decline in FY24 and FY25 and is budgeted to contract in FY26 as well, the recent developments could upset the government’s subsidy math.