The 2026 Strait of Hormuz disruption showed how an energy shock can become a food-security risk. India is responding on two fronts: expanding gas-based urea production while using long-term procurement to build a green-ammonia industry. The next challenge is to translate greater supply security into more balanced fertiliser use and healthier soils.
By Jianbo Wu
When tensions around the Strait of Hormuz began to disrupt energy and fertiliser flows in the spring of 2026, India looked set for another familiar fertiliser scare. As one of the world’s largest fertiliser consumers, India remained exposed to overseas fertiliser supplies and the energy inputs behind them, particularly through the Gulf. Early tenders that year reflected the pressure: urea import prices jumped sharply, while delayed shipments and higher feedstock costs raised fears of a domestic shortage.
Yet India did not run out of fertiliser. By mid-July, official figures showed about 6.9 million tonnes of urea in closing stocks, while availability of all major fertilisers exceeded Kharif requirements. By the end of August, stocks had risen further to 7.51 million tonnes. The disruption has not ended, and it exposed real vulnerabilities in the country’s supply chains, but it has not broken the system that delivers fertiliser to farmers.
In addition to strategic inventories, India’s resilience rested on two other buffers: domestic production and fiscal support. Domestic plants now produce about 30 million tonnes of urea a year. Most importantly, the government kept the retail price of urea at ₹266.50 per 45-kg bag despite international volatility. That price has been unchanged since March 2018. The stability is not free: the subsidy on a 45-kg bag rose from ₹1,350 before the war to ₹2,775.
Physical stocks and domestic conversion capacity absorbed delays; fiscal capacity absorbed the price. But the deeper significance of the episode lies in what the stress test revealed: India is not simply trying to protect the fertiliser system it already has. It is building two different ways to make that system more secure.
The First Future: Moving Control Upstream
The first future India is constructing relies on a state-backed expansion of conventional gas-based capacity. On July 15, 2026, the Cabinet approved the National Investment Policy for Urea (NIPU-2026), the country’s first dedicated investment framework for the sector in nearly fourteen years. It aims to support eight or nine new plants, adding roughly 10 million tonnes of annual capacity, close to the gap between India’s current domestic production and consumption. By late September the Department of Fertilisers had received 17 proposals, potentially worth up to ₹2.04 trillion.
The significance of NIPU-2026 lies as much in its investment framework as in the tonnes it promises. The policy separates fixed and variable costs, introduces a 12-16 per cent return-on-equity band and reduces foreign-exchange exposure by converting fixed costs into rupees after four years. The government estimates that these changes could save more than ₹250 crore for each new plant compared with the previous framework.
This policy is designed to make the existing fertiliser system easier to finance and more resilient to external cost pressures. The capacity it supports is aimed at closing India’s immediate and medium-term supply gaps, using proven industrial designs and additional domestic production. More importantly, it seeks to move control upstream, towards the domestic conversion stage.
Nitrogenous fertiliser production follows a strict physical chain: natural gas to hydrogen, hydrogen to ammonia and ammonia to urea. India cannot control the international gas market, but it can exercise greater control over how energy is converted into fertiliser at home.
The Second Future: Change the Energy Foundation
India’s second fertiliser future addresses the same vulnerability differently. Instead of simply strengthening the existing gas-based system, it seeks to change what that system depends on.
The National Green Hydrogen Mission, approved in 2023 with an outlay of ₹19,744 crore, was designed to build a domestic industry around green hydrogen and its derivatives, with a target of at least five million tonnes of annual green hydrogen production by 2030.
Through the Solar Energy Corporation of India (SECI), the government has already aggregated demand for 724,000 tonnes of green ammonia a year for 13 fertiliser plants. The winning prices ranged from ₹49.75 to ₹64.74 per kilogram, with a weighted average of ₹53.27. The agreements run for ten years, giving producers something that new technologies usually lack: a committed buyer. In August 2026, SECI also proposed procuring another 1 million tonnes a year through new tenders.
The scale, however, needs to be kept in perspective. At about 0.57 tonnes of ammonia per tonne of urea, 724,000 tonnes of green ammonia is equivalent to roughly 1.3 million tonnes of urea, around 3 per cent of India’s consumption of about 40 million tonnes. It can begin to displace fossil-based ammonia used in part of the fertiliser industry, but it is not yet large enough to materially change India’s urea supply balance.
Even so, the significance lies in the method. Instead of waiting for production capacity to emerge and then looking for demand, the state is creating demand first and using long-term procurement to make new production investable. In this sense, the National Green Hydrogen Mission is being drawn into India’s fertiliser strategy, linking the energy transition to a problem usually treated as one of food security.
Fertiliser Security Is Not Yet Food Security
India is not choosing between grey and green. It is pursuing both because they solve different problems on different timelines. One secures supply in the near term; the other seeks to build the infrastructure for a new one over the longer term. Both strategies address the same vulnerability that the Hormuz shock made impossible to ignore: fertiliser security depends on the security of the energy system behind it.
Yet neither future fully answers what happens after fertiliser reaches the farm. India’s fertiliser resilience comes alongside another achievement: record agricultural output. Its 2025–26 foodgrain production reached an estimated 376.56 million tonnes, 5.3 per cent above the previous year and the highest level on record.
Record output, however, does not tell us how sustainable that production is. The country’s N:P:K ratio stood at 10.9:4.4:1 in 2023–24 and improved to 9.3:3.5:1 in 2024–25, but remained heavily skewed towards nitrogen relative to phosphorus and potassium. Preliminary Soil Health Card results from 2025–26, covering more than 9.3 million samples, point to a wider constraint: nearly 82 per cent recorded organic-carbon levels below the desirable range.
That nitrogen skew is partly a price effect. Urea remains administratively cheap at ₹266.50 a bag, while DAP is held near ₹1,350 and MOP sells for roughly ₹1,700–2,200. In the first three weeks of August, farmers bought about 80 per cent of estimated monthly urea demand, compared with 70 per cent for DAP and 38 per cent for MOP. The policy that keeps urea affordable has also reinforced a long-standing preference for nitrogen
The Hormuz shock demonstrated that India possesses the administrative capacity and financial depth to absorb an international supply crisis. In the coming years, the key test will be to manage the two futures without allowing one to crowd out the other. Beyond those supply-side tests, the harder question is whether India can maintain the soil and nutrient balance that turns fertiliser into lasting agricultural productivity.
About the author:
Jianbo Wu is Secretary General of the Green and Smart Energy Organization (GSEO), an international non-profit focused on cooperation in green and smart energy systems. His work examines the intersection of energy, infrastructure, global supply chains, and economic connectivity. He has directed multiple United Nations-supported programmes and has contributed commentary to a range of international policy and business publications, including East Asia Forum, Singapore Business Review, and the LSE South Asia Centre.
