Fertilizer squeeze: Why soaring import costs are a policy tightrope for India

Subscribe to enjoy similar stories.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.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.Although