Proposal for seven new units to raise India’s domestic urea production

Amid the West Asia crisis, the central government is finalising an extension of the 2012 New Investment Policy (NIP), with some amendments, to attract fresh investments in the urea sector.

Sources said the policy aims to raise India’s domestic urea production by almost 9-10 million tonnes (mt) over the next eight years through the establishment of seven new units, including both brownfield and greenfield projects.

Each unit is proposed to have an annual production capacity of around 1.27 mt of urea. Preliminary reports indicate that, of the seven proposed units, three could be set up in the private sector, three in the government sector (including by state governments), and one in the cooperative sector.

The move is projected to save the exchequer more than 10,500 crore annually in subsidies, based on conservative estimates and assuming an average imported urea price of $345 per tonne.

According to sources, the new policy guarantees a buyback arrangement for the units for eight years from the commencement of production. According to sources, the policy estimates the project cost at around 11,000 crore for greenfield projects and ₹9,000 crore for brownfield projects (based on an exchange rate of $1 = ₹90).

India currently imports around 26 per cent of its annual urea requirement, placing a heavy burden on the exchequer amid elevated global prices triggered by the West Asia crisis. In 2026-27 (FY27), some estimates have pegged India’s fertiliser subsidy bill at over ₹3 trillion. If realised, this would make FY27 fertiliser subsidies the highest ever, surpassing the ₹2.51 trillion recorded in 2022-23.

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