Middle East conflict to reduce India’s fertilisers production by 10-15%: Report

The supply chain disruptions due to the ongoing Middle East conflict could reduce India’s annual domestic production of urea and complex fertilisers by 10-15 per cent. The disruption in availability of key raw materials is also expected to weigh on capacity utilisation and dent profitability across fertiliser manufacturers, said Crisil Ratings in a report.

The constrained supplies of critical inputs such as natural gas, ammonia and phosphoric acid — most of which are imported — could lead to lower plant utilisation levels. This, in turn, may impact operating efficiencies, particularly for urea producers, where profitability is closely linked to energy consumption norms.

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Rising input costs are likely to further strain the sector. Prices of ammonia have already surged about 24 per cent since the onset of the conflict, while higher import costs for fertilisers could push up working capital requirements for companies. This is also expected to increase the government’s fertiliser subsidy burden by Rs 20,000–25,000 crore, Crisil Ratings said.

Despite these pressures, the report highlighted that the sector’s credit profile will remain supported by strong liquidity among large fertiliser companies and the government’s consistent track record of timely subsidy disbursements.

India’s fertiliser consumption remains heavily skewed towards urea, which accounts for around 45 per cent of total usage. Complex fertilisers such as diammonium phosphate (DAP) and NPK make up about one-third, while single super phosphate (SSP) and muriate of potash (MOP) constitute the remainder.

Import dependence continues to be significant. Around 20 per cent of urea and nearly one-third of complex fertilisers are imported, with the Middle East accounting for nearly 40 per cent of these imports in the first nine months of FY26. The region’s importance is even more pronounced for raw materials, supplying about 60–65 per cent of India’s LNG needs and 75–80 per cent of ammonia imports.

Lower capacity utilisation is expected to disproportionately affect urea manufacturers, as suboptimal plant operations reduce energy efficiency. Typically, efficient players consume about 5 per cent less energy than prescribed norms, which boosts margins. However, reduced utilisation could erode this advantage, impacting operating profits. Companies with multiple plants may partially offset this by optimising gas allocation.

West Asia accounts for 26.2 per cent of India’s fertiliser imports, followed by Jordan at 19.2 per cent and Russia at 15.5 per cent. Further, Morocco accounts for 10.4 per cent, China at 5.7 per cent, Egypt at 5.6 per cent, Canada at 3.8 per cent and Togo at 3.6 per cent, while others account for 10 per cent.