Gas, war and the urea gap: Why it's time for bold fertilizer reforms

In the mid-1800s, some countries considered guano—accumulated seabird and bat droppings—to be the ultimate nitrogenous fertilizer. On the Chincha Islands, off the coast of Peru, centuries of seabird deposits had created mountains of poop. The US passed the Guano Islands Act in 1856 which allowed Americans to take possession of any unclaimed island containing guano. In 1864, Spain seized the Chincha Islands from Peru, setting off a series of battles between Spain and its former colonies.

The man who made these poop wars irrelevant was Fritz Haber, a German chemist who, in the early 1900s figured out how to extract nitrogen from air, which plants can use, via the Haber-Bosch process. In this process, hydrogen from natural gas (or methane) is used to produce ammonia (NH3). Then, ammonia is converted into granular urea, using carbon dioxide. Haber was awarded a Nobel prize because his invention helped increase food production manifold and avert famines.

In current times, Haber’s invention remains as critical.

Nitrogenous fertilizers are the backbone of global agricultural productivity, with urea being the most widely used fertilizer. For plants, nitrogen is a vital nutrient for growth—without it they cannot convert sunlight into energy. If all crops knew how to synthesize nitrogen from the air (which is available freely), there would be no need for urea. But only leguminous plants like soy and peas know how to, not crops like rice, wheat, maize and sugarcane and many fruits and vegetables we consume.

Which is why urea is a critical input for farmers in India and elsewhere. By the time this fiscal year rolls over, Indian farmers would have used nearly 40 million tonnes of urea. The government would have spent ₹1.26 trillion to subsidize urea for farmers; another ₹60,000 crore spent on subsidies for non-urea fertilizers. A quarter of the urea consumed was imported.

Most domestically produced urea is made using natural gas as input, also known as feedstock. About 85% of that is imported; most of it from Qatar. The country shut down its gas facilities after the Iran war started—leaving Indian farms in a quandary.

When Israel and the US attacked Iran on 28 February, setting off a regional war in West Asia, the vulnerability of Indian agriculture, along with other Asian economies, was laid bare. Iran blocked the strategic Strait of Hormuz, a narrow 39km wide waterway that carries a fifth of global oil and natural gas shipments. To manage supply disruptions, many countries built strategic petroleum reserves for energy security following the oil shock in the 1970s. But such strategic reserves were not built for fertilizers.

Multiple attacks on energy assets, particularly in Qatar (one single attack by Iran on its Ras Laffan facility on 18 March destroyed 17% of Qatar’s export capacity for up to five years), have jeopardized India’s natural gas imports. As a result, Indian urea manufacturers are receiving between 60-70% of their natural gas requirement. Some have advanced maintenance shutdowns, meaning lower than normal production in March.

Urea makers, including top producer Indian Farmer Fertiliser Cooperative Ltd, have either halted production in some facilities or started routine upkeep, Bloomberg reported on 11 March.

Besides, gas is not the only chokepoint. India also imports urea as a finished product from Oman, Saudi Arabia and Qatar—all impacted by the ongoing war. In FY25, India imported 2.2 million tonnes of sulphur, over 80% of which came from West Asia or Gulf countries. Sulphur, a valuable by-product of crude oil refining, is used to make diammonium phosphate (DAP), another critical fertilizer. In addition, India also depends on imports of finished DAP from Saudi Arabia, which accounted for 42% of imports in FY25. These supply lines are now choked by the closure of Hormuz.

So, what does this mean for the upcoming Kharif crop season which spans from June to October? Will Indian farmers have adequate supplies if the war extends beyond a month from now? Will lower nutrient application impact production and push food prices higher? Are there alternative sources which can come to India’s rescue? Also, what will be the impact on the fertilizer subsidy bill for the next fiscal?

Mint spoke with senior executives in fertilizer companies, experts and analysts, to get a sense of what’s coming.

Brave face

Earlier this March, the government issued a Natural Gas (Supply Regulation) Order, placing fertilizers on a priority list to ensure that production is not severely impacted. Under this, fertilizer plants are supplied 70% of their last six-month average gas consumption. On 10 March, the department of fertilizers assured farmers that despite disruptions in maritime transport and cargo ship movements, India maintains a sufficient inventory.

The government is also looking to purchase fertilizers and gas from alternative sources like Russia, Belarus and Morocco, amid China imposing export curbs, Reuters reported on 19 March.

Meanwhile, some farmers are playing it safe. “I have purchased 110 bags of urea and 80 bags of DAP (each weighing 45kg for urea and 50kg for DAP) which is enough for the entire year, including the winter crop season which begins end-October,” said a large farmer from Madhya Pradesh who did not want to be named. “Last year there was no war; yet getting fertilizers was not easy because of a spike in demand, driven by ample rains. So, I don’t want to take any chances.”

A few large farmers from Punjab told Mint they have completed purchases for the upcoming Kharif crop season. But most remain unaware of the possible disruption.

As on 10 March, India’s urea stocks were at 6.2 million tonnes. The requirement for the Kharif crop season (June-September) is about 18-19 million tonnes. With lower domestic output due to the gas crunch and uncertainty around imports, it remains unclear how supplies will pan out.

“We have enough to cover for May and June but if the war does not end in a month’s time, the stress will show up by July,” said a senior executive at a urea maker. “We could end up with a shortfall of 8-9 million tonnes of urea if the war prolongs. The way energy assets are being targeted in the Gulf with no visible end to the war in sight, India is certainly facing a supply risk.”

The executive did not want to be identified or the company name taken.

Panic to chaos

The other critical factor, several industry executives told Mint, is that unavailability in some pockets may lead to panic buying and hoarding, resulting in widespread chaos. A panic can make a shortfall of just 2-3 million tonnes appear as a big, difficult-to-manage gap.

“Despite the priority status for natural gas allocation, prolonged conflict would disrupt LNG (liquefied natural gas) imports, reducing supply and affecting urea production and efficiency. Alternative sourcing from Russia, Belarus and Morocco may help, but dependence on West Asia remains high,” said Pushan Sharma, director at Crisil Intelligence.

Sharma added that extended disruptions would raise input costs and force manufacturers to operate below capacity, squeezing margins and straining working capital. In addition, higher prices and reduced availability of key raw materials (like sulphuric acid, ammonia and rock phosphate) will force non-urea manufacturers to import at elevated costs. Soaring international prices, higher freight and insurance costs will erode profitability and margins.

The fertilizer industry executive quoted earlier pointed to another risk factor. India is the second-largest consumer of fertilizers globally, after China. So, when it enters the global market for spot purchases for either finished products or raw materials it can end up pushing prices higher. Since the beginning of the war, global urea prices have already increased by nearly 48%, from $460 a tonne in late February to over $680 currently. Asian LNG prices have doubled since the war started, to around $23 per million British thermal units, Financial Times reported on 22 March citing S&P Platts market data.

Alternatives

India’s fertilizer sector uses about 30% of the country’s aggregate LNG consumption, as per Crisil. Natural gas also comprises over 70% of the production cost of urea. Over FY21-25, 68% of urea and 34% of DAP imports came from the Middle East, underscoring India’s dependence on the war-torn region.

Sharma from Crisil said that India can diversify its natural gas imports by sourcing from countries such as Russia, the US, Canada, Algeria and Nigeria. While the volume and cost of LNG from these regions may differ significantly from West Asian suppliers (where long-term contracts with countries like Qatar mean lower gas prices), this diversification can aid fertilizer production in the coming months. For direct import of urea, India can diversify by sourcing from countries such as Russia, China and Indonesia. But factors like the quantum of import volumes and export restrictions—especially from China—must be considered, Sharma added.

Further, as per Crisil, India’s fertilizer subsidy bill is forecast to see a spike of over 25% compared to the budgeted amount of ₹1.7 trillion in 2026-27. Which means the subsidy bill will breach the ₹2 trillion mark.

Production impact

Can production be impacted if farmers end up using less urea? That will depend on the quantum of the shortfall. Indian farmers over-apply urea (because it is heavily subsidized) at the cost of other fertilizers. So, there is room to apply less urea per unit of land without impacting production. As per an ICRIER report on soil health (January 2026), excess use of urea ranges from 61% in Punjab and 46% in Bihar to 54% in Telangana. Because of this over-dependence on urea, farmers in nearly all states under-apply DAP and potash. Also, non-urea fertilizers are relatively expensive. On balance, the impact on Kharif production will depend on the actual application of both urea and non-urea nutrients, driven by their relative availability and prices.

Fertilizer company executives told Mint that this crisis also provides an opportunity for India. “This could be an inflection point, like a black swan event, using which India can correct the imbalance in fertilizer use (and its over dependence on urea). This can be done by promoting specialty fertilizers such as water-soluble ones and biologicals which can greatly improve soil health,” said one.

Another ICRIER policy brief, published in March (titled, De-risking Fertilizer Supplies for India), advocates bold reforms. It recommends direct cash transfer of subsidies (allowing farmers to choose which nutrients to use), de-regulating prices to push balanced application, and if these reforms are too bold, placing quantitative restrictions on the sale of fertilizers based on farm size, crops grown and recommended nutrient doses.

“Never lose an opportunity to reform when a serious crisis hits. And the time for that is now,” the authors of the brief, Ritika Juneja, Sachchida Nand, Emil Thomas Johny and Ashok Gulati wrote. Agricultural economist Gulati has for long argued for such reforms but it is unlikely that these reforms will be carried out now, ahead of elections scheduled next month in Kerala, West Bengal, Assam and Tamil Nadu.

For now, how fertilizer supplies are squeezed or eased will depend on how long the war continues. Further, even if the war stops in a few weeks from now, gas supplies will take time to normalize.

On Saturday evening, US President Donald Trump gave a 48-hour ultimatum to Iran to ‘fully open, without threat’ the Strait or Hormuz, or be ready for its power plants to be ‘hit and obliterated’. A belligerent Iran replied by carrying out missile strikes on Arad and Dimona, close to nuclear facilities, in southern Israel.

On Monday evening, Trump said that US is in talks with Iran to end the war and that US will not carry out any military strikes on Iranian power plants and energy assets for the next five days.

Nonetheless, one might ask if the poop wars of the mid-19th century were less crazy.