West Asia Conflict Impact: Fertilizer Production Likely to Decline

Ongoing conflict in the West Asia region may impact fertilizer production in India, according to Anand Kulkarni, Director at CRISIL Ratings. He stated that if the supply of key raw materials such as LNG and ammonia is disrupted for up to three months, domestic production of urea and complex fertilizers could decline by 10 to 15 percent. However, he noted that the government’s decision to allocate 70 percent of gas supply to urea manufacturing plants could help mitigate the impact. He also added that current fertilizer inventories in the country are sufficient to meet demand for the next three months and with imports increasing, immediate disruptions are unlikely.

Meanwhile, Kulkarni pointed out that rising import prices of fertilizers, along with increasing transportation costs of raw materials, are likely to raise the working capital requirements of fertilizer companies. As a result, the subsidy burden on fertilizers could increase by approximately ₹20,000 crore to ₹25,000 crore.

He further highlighted that India continues to rely on imports for about 20 percent of its urea requirements and nearly one-third of its complex fertilizers. Around 40 percent of imported urea and DAP comes from West Asian countries. Additionally, for domestic fertilizer production, nearly 60 to 65 percent of LNG and 75 to 80 percent of ammonia supplies are sourced from Gulf nations.