Strait to Farms: West Asia War Hits Fertiliser Supply—Can India Look Beyond?

After Israeli-US joint missiles hit Iran on February 28, the West entered a new, more dangerous phase. For the first time, shipping through the Strait of Hormuz had effectively ground to a halt.

For the world's energy markets, that was alarming enough. For India's farmers, with 146mn of them preparing for the kharif season, the disruption carried a different, more intimate kind of threat.

The Hormuz is not just a chokepoint for oil. Nearly 45–50% of India's Liquefied Natural Gas (LNG) supply is sourced from Gulf producers, including Qatar, and that gas is the lifeblood of India's urea factories.

Natural gas accounts for close to 80% of the cost of producing urea, making the sector extraordinarily sensitive to any disruption in supply lines thousands of kilometres away. Around 86% of the LNG required by India's fertiliser plants originates from West Asia.

The Squeeze Begins

The price shock arrived quickly. Global urea prices climbed by approximately $200–$250 per tonne from pre-conflict levels, reaching nearly $700 per tonne. Diammonium phosphate (DAP), the second most consumed fertiliser in India, rose from around $650 per tonne to $750–$770 per tonne. At home, urea prices were up 20% year-on-year as of March, DAP by over 10%, and muriate of potash (MOP) by 23%. Since then, escalation has continued.

The cost pressure has not stayed at the factory gate. Container freight rates surged two to three times over. Insurance and war-risk premiums climbed sharply, and bunker fuel prices rose from $520 to $700 per tonne. Shipping transit times, which typically run 25–30 days, stretched to 35–45 days, adding further cost at every step of the supply chain.

Anand Chandra, Co-founder and Executive Director of Arya.ag, sadi, "When fertiliser prices move globally, the first real impact is felt at the farmgate. For smallholders, even a 10–15% increase in input costs can influence cropping decisions and directly affect income outcomes. In the current environment, any increase in crude prices or supply shortfalls is likely to raise transportation costs, which then flows through the agri value chain."

And If India Runs Short of Urea

India consumes roughly 400 lakh tonnes of urea each year and produces around 300 lakh tonnes domestically. The remaining 25% comes from imports, a significant share of which originates in the Gulf. The conflict has already cut India's daily urea production by an estimated 30,000–35,000 tonnes.

A genuine shortage would escalate fast. Urea is used extensively in paddy and wheat, the crops that anchor India's food security. Siraj Hussain, former Agriculture Secretary, has warned talking to Mongabay that the government should "plan for shortage of urea due to much lower availability of LNG from Oman.”

Public policy campaigner Narasimha Reddy Donthi has flagged an additional risk that panic among farmers could trigger hoarding and black marketing, amplifying the shortage even if physical stocks remain manageable, Mongabay reported.

The fiscal implications are equally significant. India's fertiliser subsidy for FY26 is projected to be 14% above budget at RS 1.92 lakh crore, driven by elevated DAP and urea imports, according to Crisil Intelligence. SBICAPS has noted that the Union was forced to cut levies on fuels to manage the crude price spike, which puts the FY27 revenue targets further in doubt. Higher outlays for fertiliser subsidies, combined with the hit to GDP from lower exports and elevated energy costs, risk ballooning the fiscal deficit in a year when gross borrowings are already elevated.

The government has so far managed supply through coordination and stockpiling. As of May 2, the Ministry of Petroleum and Natural Gas had enhanced gas allocation to fertiliser plants to approximately 98% of their six-month average consumption. The Union Cabinet approved a 10–21% hike in per-kilogram subsidy rates for non-urea fertilisers for kharif 2026, costing the exchequer around Rs 41,534 crore, roughly 12% more than last season.

Suresh Kumar Chaudhari, Director General of the Fertiliser Association of India (FAI), says the sector is managing the pressure through close coordination with the government: "Production planning and gas allocation are being optimised to ensure uninterrupted output, even as some plants undergo scheduled maintenance. Diversified sourcing strategies and long-term supply arrangements are helping mitigate regional risks. At this stage, availability remains comfortable."

Deeper Concern

The crisis has also exposed a longer-term vulnerability that predates the current conflict. Farmers in India pay a fixed price of around Rs 266 for a 45 kg bag of urea, while the actual cost of producing or importing that bag runs between Rs 1,200 and Rs 1,700.

This heavily subsidised pricing has led to chronic overuse of nitrogen relative to other nutrients. Farmers applied nutrients in a ratio of 11.6:4.6:1 in 2023–24, far from the recommended 4:2:1. The consequences show up in soil health data: in 1980, one tonne of nitrogen fertiliser produced roughly 35 tonnes of foodgrain; today that figure has dropped to around 16 tonnes, according to a Finshots report.

Alternatives on the Table

The government and industry are looking at several options to reduce exposure. Import sources have been diversified to include Russia, Morocco, Australia, Algeria, Egypt, Indonesia, Malaysia and Canada. Domestically, coal gasification — converting India's abundant coal reserves into syngas for ammonia production — is being explored as a way to reduce LNG dependence, though it carries efficiency and environmental trade-offs.

The Ministry of Agriculture has also written to states urging promotion of green manuring, which can improve soil fertility and reduce chemical fertiliser dependence.

For now, India's farmers are waiting to see whether the monsoon arrives on time and whether the bags of urea they will need in June are available at the price as per standards. Both questions remain open.