Why the Hormuz Crisis Should Redefine Fertilizer Reform

India’s agriculture debate has moved beyond foodgrain output toward nutrition, crop diversification, millets, and climate resilience. But that ambition will remain incomplete unless India reforms the most politically sensitive part of its farm economy: fertilizers. The Department of Fertilizers continues to define timely and affordable fertilizer availability as central to agricultural production, and the sector matters because agriculture and allied activities contribute nearly 16% of GDP and support over 46% of India’s population. [1], [11]

The fiscal scale is immense. In Budget 2025–26, food subsidy was pegged at ₹2,03,420 crore and fertilizer subsidy at about ₹1.67 lakh crore, taking the combined total to roughly ₹3.71 lakh crore. Departmental budget documents also show that subsidy support remains heavily concentrated in urea subsidy and nutrient-based subsidy (NBS), reinforcing how dependent the system still is on direct state financing. [3], [2]

India has improved domestic production, but vulnerability remains. Official policy communication notes that India is the second-largest consumer and third-largest producer of fertilizers globally, while domestic urea production crossed 314 LMT in 2023–24 after six new plants added 76.2 LMT of capacity. Yet the Economic Survey 2025–26 shows that in 2024–25 India consumed 32.93 million tonnes of nutrients, against domestic production of 22.07 million tonnes and imports of 8.84 million tonnes, underlining continued dependence on imported raw materials, intermediates, and finished products. [11], [2]

That vulnerability was starkly exposed during the 2026 Strait of Hormuz crisis. UNCTAD reported that vessel traffic through Hormuz fell by over 95%, with daily transit dropping from more than 100 vessels in late February to single digits in March. At the same time, the World Bank reported that its fertilizer price index rose by more than 12% quarter-on-quarter in Q1 2026, while urea prices climbed above $850 per tonne in April, up 80% since February, as gas, ammonia, sulfur, and fertilizer flows from the Gulf were disrupted. [15], [17]

India responded through inventory-building and supply rerouting, but the stress was real. By early June 2026, officials said total fertilizer requirement for the kharif season had been reassessed at 38.39 MT, while stock stood at 19.98 MT, or over 52% of requirement. The same briefing noted that the government had built up 13.24 MT of fertilizer stock after the West Asia crisis began, yet global urea prices had still jumped to around $947 per tonne, compared with $447 per tonne in February. That is a reminder that fertilizer policy is no longer just an agricultural issue; it is a question of strategic economic resilience. [5], [15]

This exposes the limits of the current subsidy model. Urea remains the most tightly controlled fertilizer segment, with the state cushioning prices and compensating producers or importers. That protects affordability, but it also creates rigidities: innovation is weak, nutrient use remains skewed, and incentives are focused more on moving subsidized product than on rewarding better farmer choices. Official descriptions of the subsidy architecture show that, even after DBT-enabled sales at the retail level, subsidy still largely flows through firms and products rather than being redesigned as a direct farmer-centred performance incentive. [1]

There have, however, been important incremental reforms. The One Nation, One Fertilizer framework was launched to reduce brand-led criss-cross movement, improve availability, and streamline the supply chain. Government communication and parliamentary responses indicate that the objective was to increase the availability basket, reduce confusion among farmers, and ensure timely supply, while separate policy reporting set a target of bringing the average transport lead down from 700–750 km to around 500 km. [8], [4], [13]

This reform was tied to a broader distribution architecture. In October 2022, the government launched 600 Pradhan Mantri Kisan Samruddhi Kendras (PMKSKs) and stated that more than 3.25 lakh fertilizer shops would gradually be developed into such centres. The idea was that these would not function only as fertilizer outlets, but also as platforms for soil testing, seed access, and agronomic information. That is strategically important today, because resilience will not come from moving subsidized bags faster alone; it will come from giving farmers integrated input advice and localized decision support. [10]

That wider input perspective matters because fertilizers are only one pillar of the agri-input economy. The other two are seeds and crop protection chemicals. Recent reporting and policy explainers show that India’s organized pesticide market is now worth about ₹24,500 crore, with herbicides at ₹8,200 crore emerging as the fastest-growing segment after insecticides. The main driver is labour scarcity: manual weeding takes 8–10 hours per acre, whereas herbicide application may take 1–2 hours, and agricultural wage rates rose from roughly ₹326 in 2019 to about ₹447 in 2024. [7], [16], [14]

This shift has two implications for fertilizer reform. First, it shows that Indian agriculture is moving toward a more integrated, time-sensitive input economy, where fertilizer efficiency increasingly depends on synchronized decisions around weeds, labour, irrigation, and cropping windows. Second, it demonstrates that resilience can no longer be measured only in fertilizer tonnage or subsidy outlay. If herbicides are becoming labour-saving tools “like tractors,” then the policy system needs to think in terms of whole-farm input resilience, not isolated fertilizer policy. PMKSKs, if properly developed, could become the institutional interface where fertilizer recommendations, crop protection choices, and soil-health information converge. [16], [10]

The next reform step should therefore be more structural: move gradually from blanket product subsidy toward direct farmer benefit transfer, while protecting smallholders. Reform advocates argue that such a transition could generate substantial savings — in some estimates around ₹40,000 crore annually — while allowing support to be linked to balanced nutrient use, soil testing, and better agronomic outcomes rather than simply subsidizing volume. It would also create room for differentiated products, including fortified and customized fertilizers such as zinc-enriched formulations, to compete on value rather than being trapped in a rigid administered-price framework. The challenge, however, is political communication: any visible urea price adjustment without a credible explanation could trigger backlash, so reform would need to be framed clearly as subsidy redesign, not subsidy withdrawal. [12]

At the same time, fertilizer reform should not be confused with indiscriminate chemical intensification. The government’s own policy framework supports more balanced nutrient management through the NBS regime, while Paramparagat Krishi Vikas Yojana (PKVY) had, by early 2025, supported around 15 lakh hectares, formed 52,289 clusters, and benefited 25.3 lakh farmers under organic farming promotion. Organic, bio-based, and natural alternatives have a role, but they work best when integrated into a scientifically grounded strategy that also protects yield, soil fertility, and affordability. [12], [9]

To blunt the economic shock from a Strait of Hormuz disruption, India should target a 30–40% increase in domestic nitrogen (ammonia/urea) production capacity within 3–5 years by completing brownfield expansions and restarting idled units, while fast‑tracking 1–2 large green‑ammonia pilots (100–200 ktpa each) within 5 years. Simultaneously, diversify phosphate‑rock imports to ensure at least three viable alternative corridors (for example: Arabian Sea–Red Sea transshipment, overland routes via Iran/Afghanistan/Central Asia where feasible, and direct shipments from West/Central Africa) and sign 5–8 medium‑term (3–5 year) supply contracts to cover 60–70% of current annual phosphate demand. 

India should invest in strategic ammonia storage equivalent to 60–90 days of national feedstock needs (roughly 0.5–1.0 million tonnes capacity depending on demand scenario), and build 3–5 coastal and inland handling hubs with associated safety and blending facilities within 4 years. Pair these measures with fiscal incentives (10–20% capex support), streamlined clearances (single‑window approvals within 90 days), and an emergency fertilizer buffer procurement fund of INR 5,000–10,000 crore to subsidize seasonal shortfalls and stabilize farm prices.

The core lesson of the Hormuz crisis is clear: crop resilience cannot be built without input resilience. India has strengthened domestic fertilizer capacity, improved movement planning, and expanded the institutional architecture of input delivery. The next step is to redesign subsidies so they reward outcomes, support innovation, and reduce strategic vulnerability across fertilizers, agrochemicals, seeds, and advisory systems. In the era of millets, nutrition, and climate risk, fertilizer policy must evolve from a recurring fiscal burden into a strategic pillar of agricultural resilience. [1], [5]

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References (Harvard style)

1. Department of Fertilizers, Ministry of Chemicals & Fertilizers, Government of India (2024) Annual Report 2023–24. New Delhi: Government of India. Available at: https://fert.gov.in/sites/default/files/2025-04/Annual_Report_fertilizer_English.pdf [fert.gov.in]
2. Department of Fertilisers (2025) Department of Fertilisers – Demand for Grants 2025–26. New Delhi: Government of India Budget. Available at: https://www.indiabudget.gov.in/doc/eb/sbe6.pdf [indiabudget.gov.in]
3. Economic Times (2025) Budget 2025: Food, fertilizer subsidy pegged marginally higher at Rs 3.71 lakh crore for FY26. 1 February. Available at: https://economictimes.indiatimes.com/news/economy/finance/budget-2025-food-fertilizer-subsidy-pegged-marginally-higher-at-rs-3-71-lk-cr-for-fy26/articleshow/117824686.cms [economicti...atimes.com]
4. ETGovernment (2022) One Nation, One Fertilizer: All subsidised fertilizers to be sold under ‘Bharat’ brand from Oct. 29 August. Available at: https://government.economictimes.indiatimes.com/news/governance/one-nation-one-fertilizer-all-subsidised-fertilizers-to-be-sold-under-bharat-brand-from-oct/93847900 [government...atimes.com]
5. Financial Express (2026) Fertiliser demand estimate for kharif season revised downwards. 1 June. Available at: https://www.financialexpress.com/policy/economy/fertiliser-demand-estimate-for-kharif-season-revised-downwards/4256632/ [financialexpress.com]
6. Government of India (2026) Economic Survey 2025–26, Statistical Appendix, Table 1.22: Production, Imports and Consumption of Fertilizers. New Delhi: Government of India. Available at: https://indiabudget.gov.in/economicsurvey/doc/stat/tab1.22.pdf [indiabudget.gov.in]
7. InsightsIAS (2025) Changing Trends in India’s Pesticide Market. 5 August. Available at: https://www.insightsonindia.com/2025/08/05/changing-trends-in-indias-pesticide-market/ [insightsonindia.com]
8. Lok Sabha (2024) Unstarred Question No. 850: One Nation One Fertilizer Scheme, answered on 26 July 2024. Available at: https://www.sansad.in/getFile/loksabhaquestions/annex/182/AU850_ZsdgMQ.pdf?source=pqals [sansad.in]
9. Ministry of Agriculture & Farmers Welfare (2025) Paramparagat Krishi Vikas Yojana (PKVY): Nurturing Organic Farming in India. Press Information Bureau, 7 October. Available at: https://pib.gov.in/FaqDetails.aspx?id=155374&NoteId=155374&ModuleId=4 [pib.gov.in]
10. Press Information Bureau, Government of India (2022) Prime Minister Inaugurates 600 Pradhan Mantri Kisan Samruddhi Kendras; Launches Pradhan Mantri Bhartiya Jan Urvarak Pariyojana – One Nation One Fertiliser. 17 October. Available at: https://www.pib.gov.in/PressReleasePage.aspx?PRID=1868496 [pib.gov.in]
11. Press Information Bureau, Government of India (2025) Amrit Kaal: Empowering India’s Farmers Through Strategic Fertilizer Policy. 3 August. Available at: https://pib.gov.in/PressNoteDetails.aspx?NoteId=154966&ModuleId=3 and https://static.pib.gov.in/WriteReadData/specificdocs/documents/2025/aug/doc202583598601.pdf [pib.gov.in], [static.pib.gov.in]
12. Press Information Bureau (2026) Supporting Balanced Fertilization: Nutrient-Based Subsidy Rates for Rabi 2025–26. 5 January. Available at: https://pib.gov.in/PressNoteDetails.aspx?NoteId=156820&ModuleId=3 [pib.gov.in]
13. The Hindu (2022) Single brand to help cut fertilizer cost: Union Minister. 28 August. Available at: https://www.thehindu.com/news/national/pmbjp-will-cut-fertilizers-logistics-subsidy-cost-mandaviya/article65819257.ece [thehindu.com]
14. The Indian Express (2025) How India’s pesticide market is changing. 4 August. Listing available via: https://indianexpress.com/about/pesticide/ [indianexpress.com]
15. UNCTAD (2026) From gas to grain: Fertilizer disruptions raise risks for food security and trade. 30 March. Available at: https://unctad.org/news/gas-grain-fertilizer-disruptions-raise-risks-food-security-and-trade [unctad.org]
16. Vajiram & Ravi (2025) India’s Herbicide Boom: Changing Trends in Crop Protection. 7 August. Available at: https://vajiramandravi.com/current-affairs/indias-herbicide-boom-changing-trends-in-crop-protection/ [vajiramandravi.com]
17. World Bank (2026) Fertilizer prices surge as Strait of Hormuz disruptions tighten supplies. 14 May. Available at: https://blogs.worldbank.org/en/opendata/fertilizer-prices-surge-as-strait-of-hormuz-disruptions-tighten- [blogs.worldbank.org]