The Cabinet Committee on Economic Affairs (CCEA) on Wednesday approved the National Investment Policy for Urea-2026, a major push toward self-reliance in fertilizers, according to a Hindu BusinessLine report. The policy aims to facilitate the establishment of eight new plants, generating an additional 10 million tonnes (mt) of urea output to completely offset India's current import dependence on the nitrogen nutrient. Open to public, private, and cooperative sector participation, the initiative is projected to pump up to ₹90,000 crore of fresh investment into the domestic fertilizer sector if targets are met.
Policy Details
An annual capacity of 1.27 mt of urea, a greenfield plant entails an investment of $1.2-1.5 billion, while a brownfield unit with the same capacity may incur $900 million, industry sources told Hindu BusinessLine. Under the policy, the government has separated fixed and variable costs for subsidy calculation and set the Return on Equity (RoE) at a minimum of 12% and a maximum of 16%. Besides, forex risk mitigation is included, resulting in savings of ₹250 crore per plant, according to Information and Broadcasting Minister Ashwini Vaishnaw.
Current Urea Scenario
India's urea market is characterized by significant import dependence. The table below summarizes the key figures:
| Metric | Current Level |
|---|---|
| Annual Urea Demand | ~40 mt |
| Domestic Production | ~30 mt |
| Annual Imports | ~10 mt |
| Import Dependence | 27.5% |
| Demand Growth Rate | 5% per annum |
Urea demand is rising at 5% per annum due to changing crop patterns as well as higher foodgrain production, Vaishnaw said. Officials noted that due to ethanol demand, maize area and its production have gone up substantially, so also demand for urea to meet the crop’s optimum yield.
Industry Reactions and Concerns
Briefing the media, Ashwini Vaishnaw said the new policy would help set up 8-9 new plants and make the country achieve self-sufficiency in urea. “India’s import dependence has come down due to the addition of six new plants in the last decade. Creation of additional 8-9 new plants will help the country meet its complete requirement locally and make it Atmanirbhar in Urea,” he stated.
However, existing players face an uncertain future due to continuous tightening of energy efficiency norms, reducing the margins available. A CEO of a leading fertiliser company said: “It is very good for the new plants. But what about the old plants that are operating at very low margins.” Since the urea subsidy takes into account the production costs including a profit margin of about 12%, some plants complain about either ‘no-profit-no-loss’ or even negative realisation.
RG Rajan, Former Chairman and Managing Director of Rashtriya Chemicals & Fertilizers (RCF), said: “The new policy marks a structural shift in India’s fertiliser policy framework as it ensures viable returns while progressively delinking fixed-cost recovery from dollar fluctuations. This also insulates the government from exchange-rate volatility.”
With urea’s import dependence at 27.5% and 95% of production based on natural gas, which is largely dependent on imported LNG, India needs a long-term strategy built on indigenous resources, said Balasaheb Darade, president of Gasification Technologies & Research Council of India. The policy rightly focuses on capacity expansion and modernisation, he said, adding it presents a strong opportunity to promote coal gasification-based urea production.
SS Sundaram, partner (government and public sector) at EY India, noted that every million tonne of domestic urea capacity that replaces imports can roughly save $300-500 million per year.
Implications for Self-Reliance
In the last decade, India has added six new urea plants of 1.27 mt capacity, including two in the private sector and four through the revival of closed units. On the other hand, in the private sector, one plant has moved from urea to green ammonia production after being sold to a US-based company, and another plant in Uttar Pradesh suspended operation in 2025. The new policy is expected to accelerate capacity expansion and modernisation, reducing India's reliance on imported urea and saving foreign exchange.
Sources:
