The joint military strikes by the US and Israel on Iran in late February triggered a shockwave far beyond the energy markets, severely disrupting global commodity markets, especially fertilizers. India depends on imports for 25% of its urea, 90% of its phosphate, and its entire supply of potash. To shield farmers from these volatile international costs, the Indian government maintains strict price controls on these essential agricultural inputs.
Also, natural gas, an input in urea, is primarily imported from the Gulf. For now, the government says fertilizer stocks are sufficient for the upcoming kharif agricultural season. And, at the time of writing this, markets are optimistic that the US and Iran will strike a deal soon.
Prices surge
The current situation once again,highlights India’s vulnerability to disruptions in the global supply of key commodities and fuels—a weakness that successive governments have failed to address. Prices of fertilizers have skyrocketed in global markets, led by urea, which has shot up 81% in two months.
The World Bank, in its latest edition of Commodity Markets Outlook, forecasts a 6-12% increase in prices of key fertilizers in 2026. Countries around the world depend on fertilizer imports. For instance, 78% of potash produced is exported by countries that are lucky enough to have sufficient reserves.
The current surge remains below the historic peaks seen in 2021 and 2022, which were driven first by pandemic-related supply chain disruptions and later by Russia’s invasion of Ukraine. Sanctions on Russia and Belarus—key exporters of potash—meant global supplies were disrupted. When other suppliers stepped in to fill the gap, they charged importers a heavy premium.
Import gulf
Although India imports a substantial proportion of its fertilizer requirements, the government says disruptions to domestic supplies have been minimal. To support this, it said in a press statement on 4 May that 1.67 million tonnes of fertilizer imports had reached Indian ports since the start of the crisis, without specifying the exact period. To put this number into context, it was 13% below the March-April 2025 imports.
The reality remaines sobering. A World Bank report in 2024 said West Asia accounted for a quarter of global exports of urea and 15% of global ammonia exports (used in urea production). India’s dependence on the Gulf is acute. According to an earlier , West Asia meets about 30% of India’s urea needs, 30% of di-ammonium phosphate (DAP) demand and 50% of liquefied natural gas (LNG) requirement, which is used for the production of fertilizers. Entering the global markets at the same time as several other countries comes at a steep cost.
Stock check
The Indian government is aiming to diversify fertilizer imports away from the Gulf such as Russia, Morocco, Australia, Indonesia, Malaysia, Jordan, Canada, Algeria, Egypt and Togo. It has floated multiple global tenders for fertilizers in recent weeks. On 24 April, for instance, the government floated a global tender for the supply of 1.9 million tonnes of different types of fertilizers or raw materials.
With the key kharif planting season coming up, the government has its work cut out. According to its own data, as of 4 May, the total requirement of fertilizers for the kharif season is around 3.9 million tonnes. Of this, current stocks are assessed to be around 2 million tonnes, or about 50% of the requirement.
This, the government says, is “significantly higher” than the normal average of 33% and more than the same period last year, adding that the economy is in a “strong position” going into the kharif season. The government also says it hasn’t raised prices of key fertilizers since the start of the Iran war.
Subsidy surge imminent?
If the government is not raising prices but pursuing tenders in the global market to ensure adequate supply, it means its cost of procurement is likely to go up, especially since many other countries are competing for the same supplies. Something has to give, and that is usually the government’s subsidy bill.
A mapping of the average annual change in the World Bank’s fertilizer price index against the change in India’s fertilizer subsidy bill shows that the decline in global prices doesn’t have a material impact on the subsidy bill. Even a large decline either leads to a small fall in the subsidy bill or a minor increase.
But when prices pick up, the bill can soar, as happened during 2021-23. The World Bank index rose 165%, causing India’s subsidy bill to almost double. And while prices subsequently moderated, they didn’t drop back to where they were before the Russia-Ukraine war. The same thing happened to India’s subsidy bill as well.
Profits under pressure
For 2026-27, India’s subsidy bill is budgeted at ₹1.7 trillion, and will almost certainly exceed that. When the US-Iran war brokeout, the combined market capitalization of 17 listed fertilizer companies tracked by CMIE Prowess (some of these companies are also into agrochemicals and other businesses) declined 13% between 26 February and 9 March.
Over the rest of March, share prices remained subdued and fluctuated based on news flow. By early April, share prices had started to recover on news of a ceasefire between the US and Iran. While their total market capitalization has bounced back, it remains well below pre-war levels.
These companies face higher raw material costs. During 2021-23, their median net margin declined by about a percentage point. But the real decline started in late 2023, and by about 2024-25, their median quarterly margin had sunk to about 1%. The war dragging on won’t help.
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