India’s policy on urea

The Cabinet Committee on Economic Affairs recently approved the National Investment Policy for Urea (NIPU)-2026. 

Evolution of India’s Urea Policy: 

• National Investment Policy, 2012: Introduced to attract fresh investment in the urea sector and subsequently amended in 2013 and October 2014 to facilitate new projects.
• Expansion of Manufacturing Capacity: Six new urea plants were established—four through PSU joint ventures and two by private companies—taking the number of operational units to 33.
• Growth in Installed Capacity: India’s installed/reassessed urea capacity increased from 207.54 LMT in 2014–15 to 269.42 LMT in 2026–27.
• 2015 Policy Amendment: The amendment covering 25 existing gas-based plants generated an additional 20–25 LMT of annual urea production over the 2014–15 level.
• Production Trend: Urea production increased from 225 LMT in 2014–15 to 314.07 LMT in 2023–24, before declining to 293.30 LMT in 2025–26.
• Total Fertiliser Subsidy: Fertiliser subsidy increased from ₹1,77,162.06 crore in 2024–25 to ₹2,17,281.10 crore in 2025–26, while the Union Budget 2026–27 allocated around ₹1.71 trillion.
• Urea Subsidy: Government support for urea increased from ₹1,24,319.50 crore in 2024–25 to ₹1,42,175.74 crore in 2025–26.
• Subsidy for Other Fertilisers: Subsidy support included ₹74,999.99 crore for phosphatic fertilisers, ₹52,810 crore for potassic fertilisers, and organic-fertiliser support rising from ₹32.56 crore to ₹105.37 crore.

Major Features of the National Investment Policy for Urea, 2026

• Promotion of Domestic Manufacturing: The policy encourages the establishment of new gas-based urea plants to expand indigenous production and reduce dependence on imports.
• Transparent Cost Framework: It clearly separates fixed and variable costs to improve transparency, operational efficiency and regulatory certainty.
• Assured Return on Equity: The policy provides a minimum RoE of 12% and a maximum of 16% to attract both public- and private-sector investment.
• Foreign Exchange Risk Protection: Fixed costs will be converted into Indian rupees at the prevailing exchange rate after four years, reducing investors’ exposure to currency volatility.

Government Initiatives for Balanced Fertiliser Use

• Integrated Nutrient Management: INM promotes the balanced and scientific use of organic manure, chemical fertilisers and bio-fertilisers.
• Benefits of INM: It improves nutrient-use efficiency, preserves long-term soil fertility, reduces environmental damage and supports sustainable agriculture.
• Nano Urea: Nano Urea is promoted as an alternative to conventional urea, but its adoption remains limited due to concerns over scientific efficacy, inconsistent field results and low farmer acceptance.
• Green Fertiliser Alternatives: The government is promoting eco-friendly products such as Fortified Organic Manure, Liquid FOM and Phosphate-Rich Organic Manure.
• Growth in Organic Fertilisers: The use of these green alternatives increased nearly sevenfold in 2025–26 compared with 2024–25.