Cabinet Approves National Urea Investment Policy; Eyes 10 Million-Tonne Capacity Boost

The Union Cabinet has approved the National Investment Policy for Urea-2026 (NIPU-2026) to encourage fresh investments in the domestic urea sector, with the aim of increasing local production and reducing India's dependence on imports.

The new policy is expected to add nearly 10 million tonnes (1 crore metric tonnes) of annual urea production capacity through the establishment of 8-9 new gas-based urea plants, according to Information and Broadcasting Minister Ashwini Vaishnaw.

Domestic production continues to fall short of demand, requiring India to import a significant portion of its urea requirement. The new policy is expected to help bridge this gap and support the government's Atmanirbhar Bharat initiative.

Focus on Domestic Production

The NIPU-2026 will support investments in new gas-based urea manufacturing units across the country to expand domestic capacity and reduce import dependence.

The policy introduces several reforms over the earlier New Investment Policy (NIP)-2012. These include the separation of fixed and variable costs to improve transparency, a guaranteed Return on Equity (RoE) ranging from 12% to 16%, and protection against foreign exchange fluctuations by converting fixed costs into rupees after four years based on prevailing exchange rates.

According to the government, these changes are expected to generate savings of more than ₹250 crore for each new urea plant established under the policy compared with projects approved under the 2012 framework.

Building on the 2012 Policy

The earlier New Investment Policy, introduced in 2012, led to the establishment of six new urea plants, including four through joint ventures involving public sector companies and two by private firms. The investment window under the policy closed in October 2019.

India currently has 33 operational urea manufacturing units with a reassessed installed capacity of 269.42 lakh metric tonnes. However, domestic output remains below demand, making imports necessary to meet the country's fertiliser requirement.

Commenting on the policy, Satyam Shivam Sundaram, Partner, Government and Public Sector, EY India, said the government's push for fresh investments in domestic urea manufacturing could significantly reduce import dependence and strengthen India's food production ecosystem.

"The proposed capacity addition, coupled with long-term policy support and assured offtake mechanisms, sends a strong signal to industry and investors alike that India is committed to building self-reliance in critical agricultural inputs," he said.

Sundaram added that every one million tonnes of domestic urea capacity replacing imports could save around $300 million-$500 million annually in foreign exchange. He said the policy could also encourage investments in modern and environmentally responsible production facilities, while improving supply reliability for farmers and reducing their exposure to global supply disruptions and price volatility.

The government said it has received several proposals from both public and private sector companies for setting up new urea plants. The approval of NIPU-2026 is expected to provide a fresh investment framework to facilitate capacity expansion and strengthen India's self-reliance in fertiliser production. Sundaram further said the focus should now be on rapid execution, technology adoption and feedstock diversification to strengthen the domestic fertiliser value chain and improve long-term competitiveness.