Syllabus: GS2/Governance; GS3/Economy
Context
- Recently, the Union Cabinet has approved the National Investment Policy for Urea (NIPU)-2026 to promote investment in domestic urea production amid concerns over fertiliser availability during the ongoing kharif season.
Fertilisers
- Fertilisers are natural or man-made compounds that offer critical nutrients to plants for their healthy growth, better crop productivity and maintenance of soil fertility.
- The three major plant nutrients are Nitrogen (N), Phosphorus (P) and Potassium (K), collectively known as NPK.
- Fertilisers are generically characterised based on the nutrients given as:
- Nitrogenous fertilisers: Urea Ammonium Sulphate Calcium Ammonium Nitrate (CAN)
- Phosphatic fertilisers: Di Ammonium Phosphate (DAP), Single Super Phosphate (SSP).
- Potassic Fertiliser: Muriate of Potash (MOP), Sulphate of Potash (SOP).
- Complex/compound fertilisers: Have two or more primary nutrients.
Evolution of India’s Urea Policy
- National Investment Policy, 2012: It was announced to encourage fresh investment in the Urea sector in India. It was amended in 2013 and October 2014 to facilitate new projects.
- Achievements of National Investment Policy, 2012:
- Six new urea plants were established. Four through Joint Venture Companies (JVCs) of public sector undertakings. Two by private companies.
- Presently 33 operational urea manufacturing units.
- Installed/Reassessed Capacity (RAC): 207.54 LMT (2014-15); 269.42 LMT (2026-27)
- Amendment in 2015: It applied to 25 existing gas-based plants. It added 20-25 LMT of annual production above 2014-15 levels.
- 225 LMT (2014-15) 314.07 LMT (2023-24) 293.30 LMT (2025-26)
- Achievements of National Investment Policy, 2012:
- Fertiliser Subsidy: India gives huge subsidies to make fertilisers available to farmers at affordable prices.
- Total Subsidy on Fertiliser: Total Fertiliser Subsidy: ₹1,77,162.06 crore (2024-25); ₹2,17,281.10 crore (2025-26). The Union Budget (2026-27) allocated ₹1.71 trillion for fertiliser subsidies.
- Urea Subsidy: ₹1,24,319.50 crore (2024-25); ₹1,42,175.74 crore (2025-26)
- Nutrient-Based Subsidy (NBS):
- Phosphatic fertilisers: ₹74,999.99 crore
- Potassic fertilisers: ₹52,810 crore
- Organic Fertilisers: ₹32.56 crore (2024-25); ₹105.37 crore (2025-26)
- Subsidised fertilisers are distributed through the Direct Benefit Transfer (DBT) system using Point of Sale (PoS) devices with beneficiary authentication through Aadhaar, Kisan Credit Card (KCC), Voter ID and other approved identity documents.
Major Features of National Investment Policy for Urea (NIPU)-2026
- Promotion of Domestic Manufacturing: Policy encourages setting up of new gas-based urea plants with aim to reduce dependence on imported urea.
- Transparent Cost Structure: Distinguishes fixed and variable costs for improved transparency and efficiency.
- Assured Return on Equity (RoE): It introduces a viable RoE band i.e. 12% (Minimum) to 16% (Maximum). It is intended to attract private and public investment.
- Mitigation of Foreign Exchange Risk: Fixed costs shall be translated into Indian Rupees at the prevailing rate after four years. minimises the volatility of the exchange rate for investors.
Government Initiatives for Balanced Fertiliser Usage
- Integrated Nutrient Management (INM): Encourages balanced use of organic manures, chemical fertilisers and bio-fertilisers.
- It enhances fertiliser usage efficiency, maintains soil fertility in the long run, lowers environmental degradation, and supports sustainable agriculture.
- Nano Urea: It is marketed as an alternative to traditional urea. However, it is accepted only to a limited extent due to scientific efficacy, variable field level results and low farmer acceptance.
- Sustainable and Green Agriculture: Eco-friendly options such as Fortified Organic Manure, Liquid FOM and Phosphate-Rich Organic Manure. It grew to seven times the volume in Financial Year 2025-26 from 2024-25.
Challenges
- The West Asia crisis, increased demand for fertiliser due to El Nino linked climatic conditions and the continuous usage of chemical fertilisers have underlined the need for more self-reliance in urea production.
- Continued dependence on imported urea to bridge the demand-supply gap.
- The Exchequer’s burden of fertiliser subsidies is rising.
- Too much application of urea leads to imbalance of nutrients and deterioration of soil health.
- Poor uptake of organic and bio-fertilisers.
- Global supply chain interruptions and geopolitical risk exposure.
- Call for higher energy efficiency in fertilizer production.
Way Forward
- NIPU-2026 implementation should be accelerated to increase domestic production capability.
- Ensure balanced fertilisation by practising Integrated Nutrient Management and Nutrient Based Subsidy regime.
- Encourage the use of organic, bio-fertilisers and scientifically proven nano fertilisers.
- Soil health cards, precision farming and awareness initiatives to increase nutrient-use efficiency.
- Diversify sources of imports and build up strategic stocks of fertilisers.
- Promoting the use of energy efficient and low-carbon fertiliser production methods.
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