After oil, gas, Iran's Hormuz chokehold raises fertiliser red flag for India

The ongoing US–Israel conflict with Iran, now stretching beyond 12 days, has not only reshaped military strategies but has also brought attention to a new form of asymmetric warfare. Tehran’s increasing reliance on drones has complicated conventional defence systems and interception mechanisms on the battlefield.

However, a less-discussed consequence of the conflict lies in its potential impact on fertiliser supply chains. While global attention has largely focused on energy disruptions, the war could expose deeper vulnerabilities for India, especially given the country’s heavy dependence on agriculture to sustain its estimated population of 147 crore. Any instability in fertiliser supplies could also affect employment and livelihoods tied to the agricultural sector. Much has already been written about the volatility in energy supplies, particularly crude oil, as attacks on refineries and storage depots in the Middle East, along with Tehran’s informal blockade of the Strait of Hormuz, have made shipments uncertain.

This instability has raised concerns in India about possible fuel shortages, ranging from petrol and diesel rationing to limited availability of LPG cylinders used by more than 33 crore households and thousands of food establishments.

The government, however, believes that reduced crude flows through the Strait of Hormuz could be compensated by increased imports from Russia. Officials have also emphasised that India’s strategic reserves are sufficient to handle temporary disruptions. At the same time, the Petroleum Ministry has instructed producers to step up the manufacturing of LPG cylinders.

Yet oil and gas represent only part of India’s vulnerability in the ongoing conflict.

A significant concern lies in fertiliser supplies. Estimates indicate that India faces roughly a 20–25 per cent risk of disruption in fertiliser imports due to the conflict and the tensions surrounding the Strait of Hormuz. Similar to crude oil, fertiliser shipments from Gulf countries such as the UAE, Qatar, Saudi Arabia and Oman typically pass through this crucial maritime route.

Given the importance of agriculture to the country’s economy, such exposure is far from minor. Around 63 per cent of India’s nitrogen fertiliser imports — including urea and ammonia — originate from these Gulf nations. Additionally, about 32 per cent of the country’s imports of di-ammonium phosphate (DAP) come from the same region. Saudi Arabia alone accounts for roughly 42 per cent of India’s potash imports.

Interestingly, Iran’s direct contribution to India’s fertiliser imports remains small. For instance, in 2024 India purchased urea worth around US$231 million from the UAE, Saudi Arabia and Qatar combined, while imports from Iran were valued at just US$2.59 million.

The problem therefore is not direct reliance on Iran but the route through which fertilisers from other Gulf suppliers reach India. Most shipments move through the Strait of Hormuz, and any disruption in this passage can slow or block deliveries.

Although there have been fluctuations — such as a 21 per cent drop in overall urea imports in 2023 — the broader trend has been rising demand. Projections suggest fertiliser imports could reach a record high of about US$18 billion by FY26. Urea alone is expected to make up nearly 61 per cent of this figure, largely because its price is regulated by the government.

Agricultural cycles add further urgency. India follows two major cropping seasons — Kharif and Rabi — and with sowing for the Kharif season typically beginning in June and July, any supply shortfall or spike in prices could severely affect farmers. War-related factors such as higher shipping costs and insurance premiums may further increase the burden, potentially impacting food security.

To address these risks, diversification of suppliers appears essential, though viable options remain somewhat limited.

One possibility could be re-engaging with Ukraine, but even before the conflict there, India’s urea imports from that country were minimal.

More practical alternatives include Russia and China. However, India had previously shifted toward Gulf suppliers partly to reduce dependence on China. On the positive side, both Russia and China could supply fertilisers through routes that avoid the Strait of Hormuz.

India also sources fertilisers from countries such as Nigeria, Uzbekistan and Indonesia, though their contributions remain modest, each accounting for less than five per cent of India’s total urea imports.

Another long-term solution lies in boosting domestic production under the “Make in India” approach. Expanding local manufacturing could reduce exposure to global disruptions and strengthen supply security during international conflicts. India had earlier set a target of producing around 38 million tonnes of fertiliser domestically, with the aim of significantly cutting urea imports by 2025.

Yet this strategy presents its own challenge: natural gas, a key input in urea production. India depends heavily on gas imports from Qatar, the UAE and Oman — the very countries affected by the current tensions — and supplies from these sources have already declined since the conflict escalated.

According to a Reuters report citing industry sources, Petronet, India’s largest gas importer, recently informed state-run marketing companies that supplies could be reduced by as much as 30 per cent.

Despite these concerns, the outlook is not entirely bleak.

The government has maintained that fertiliser reserves remain strong and sufficient. On March 6, the Department of Fertilisers stated that supplies of urea, other fertilisers and natural gas would not face serious disruption even if imports from the Middle East declined. Analysts quoted by S&P Global suggested that the government may be willing to absorb higher import costs rather than risk dissatisfaction among farmers, especially with elections scheduled for April and May.