Fertilizer Sector in India | 26 Aug 2025

Source: FE

Why in News? 

A parliamentary committee has urged the government to reclassify the fertilizer sector as ‘strategic’, criticizing its current ‘non-strategic’ status as inconsistent with India’s self-reliance goals under Atmanirbhar Bharat, especially in light of growing import dependency and food security concerns.

What are the Parliamentary Committee Observations and Recommendations on the Fertilizer Sector?

Observations

• Link to Food Security: Fertilizers are crucial for agricultural productivity and food sovereignty. The panel noted that India’s high import dependence (25% for urea, 90% for phosphates, and 100% for potash) makes strengthening fertilizer PSUs essential for domestic production, price stability, disaster resilience, and long-term food security.
  • The Department of Investment and Public Asset Management (DIPAM) denied strategic status to the fertilizer sector despite the sector’s critical role in food security.
• Low PSU Market Share: Public Sector Undertakings (PSUs) contribute only ~25% of urea and ~11% of non-urea fertilizer production.
  • The private sector dominates the industry, contributing over 57% of total production (2023–24).
  • The panel noted that PSUs serve as price stabilizers, particularly for small and marginal farmers through government-subsidized distribution, underscoring the need to treat the fertilizer sector as strategic.

Recommendations

• Policy Support: Classify the sector as ‘strategic’ to attract sustained investment and ensure alignment with Atmanirbhar Bharat goals.
• Revitalizing Fertilizer PSUs: Launch a dedicated mission to upgrade technology, diversify products, and adopt sustainable practices in public sector units.
  • The committee noted that revived fertilizer PSUs have achieved a successful turnaround, with the reopening of closed units contributing 7.62 MT to annual urea production.

How Integral are Fertilizers to India's Agriculture and Economy?

• Agriculture’s Economic Footprint: Agriculture and allied sectors contribute nearly 16% to GDP and support over 46% of India’s population, forming a foundational pillar for economic livelihood.
• Fertilizer Production and Consumption Trends: India is the second-largest user and third-largest producer of fertilizers globally.
  • The total Fertilizer production has increased from 385.39 Lakh Metric Tonnes (LMT) in 2014–15 to 503.35 LMT in 2023–24.
  • In 2023–24, fertilizer production was led by the private sector (57.77%), followed by cooperatives (24.81%) and the public sector (17.43%).
• Import Dependency: In 2023–24, India consumed 601 LMT of fertilizers, producing 503 LMT domestically and importing 177 LMT.
  • Self-sufficiency reached 87% for urea, 90% for NPK (nitrogen, phosphorus, and potassium), but only 40% for DAP (Di-Ammonium Phosphate), while Muriate of Potash (MOP) remains 100% imported.

How is India’s Fertilizer Sector Evolving Towards Sustainability and Self-Reliance?

• Brand Unification under ONOF: The One Nation One Fertilizer (ONOF) initiative standardizes branding across subsidized fertilizers like ‘Bharat Urea’, ‘Bharat DAP’, etc. to eliminate confusion and ensure uniform quality and government support.
• Sustainable Fertilizer Practices:
  • Nano‑fertilizers (nano urea, nano DAP): Nutrients encapsulated in tiny particles, releasing slowly into the soil for better plant absorption and minimal wastage..
  • Neem-Coated Urea (NCU): Improves nitrogen efficiency, requiring ~10% less urea to achieve comparable results, minimizing losses and enhancing soil health.
  • PM‑PRANAM Scheme: Encourages reduced chemical fertilizer use, promoting organic alternatives, with state incentives linked to performance.
  • Bio-fertilizers & Soil Health Card Scheme: Emphasize balanced nutrient input and tailored soil management through diagnostics and farmer guidance.
• Technological & Digital Infrastructure:
  • iFMS (Integrated Fertilizer Management System): Enables real-time tracking of fertilizer movement from production to retail.
  • mFMS (Mobile FMS): Facilitates dealer registration, stock monitoring, and supports DBT through MIS dashboards accessible via mobile.

What are the Challenges in Categorizing the Fertilizer Sector as ‘Strategic’?

• Global Integration and Supply Diversification: India has secured long-term DAP supply agreements with Saudi Arabia and Morocco, reducing the pressure to maintain large strategic production reserves.
• Technological Obsolescence: Older PSU plants suffer from low efficiency, high input costs, and require heavy capital for modernization.
  • This raises doubts about whether strategic status would yield productivity gains without major reform.
  • Some PSUs continue to operate at sub-optimal capacity due to raw material constraints, pricing mismatches, or outdated technology—further weakening the strategic case.
• Policy Inconsistency and Sectoral Ambiguity: The contradiction between treating fertilizers as essential to food security (by the Agriculture Ministry) versus a non-strategic commercial sector (by DIPAM) reflects policy incoherence.
  • This makes inter-ministerial consensus difficult and slows reform momentum.

How can India Make its fertilizer Sector Self-Reliant?

• Boost Domestic Production: Under New Investment Policy (NIP) 2012 ensure existing units operate profitably and revive closed plants to reduce import dependence.
• Innovation & Sustainability: Invest in research and development for new fertilizer formulations, eco-friendly production, and efficient resource use.
  • Promote use of bio-fertilizers and nano-fertilizers through PM-PRANAM Scheme and Pradhan Mantri Kisan Samridhi Kendras (PMKSKs).
• Promote Public-Private Collaboration: Encourage partnerships for innovation, investment, and increased production capacity.
• Regional Manufacturing Hubs: Establish fertilizer clusters near key agricultural zones to cut logistics costs and ensure quicker distribution.
• Financial Incentives: Introduce a  PLI (Production Linked Incentive) scheme for nano-fertilizer production to incentivize manufacturers and accelerate adoption.
  • Integrate nano-fertilizers into national nutrient management programs to complement conventional fertilizers and reduce import dependence.