NATIONAL INVESTMENT POLICY FOR UREA-2026 (NIPU-2026)

Why In News?

The Cabinet Committee on Economic Affairs (CCEA) approves the National Investment Policy for Urea-2026 (NIPU-2026) to scale up indigenous production and phase out the country's reliance on fertilizer imports.

What is Urea?

Urea is the most widely used nitrogenous fertilizer (46% Nitrogen) and is produced by reacting ammonia with carbon dioxide.

Urea accounts for roughly 80% of nitrogenous fertilizer consumption and over 55% of total fertilizer consumption in India. 

What is India's Policy on Urea Production?

Promote Domestic Manufacturing: NIPU-2026 encourages investment in 8–9 new gas-based urea plants to add 10 million tonnes (MT) of domestic capacity and reduce import dependence.  

New Investment Policy (NIP), 2012: Enabled the establishment of 6 new urea units, adding 76.2 Lakh Metric Tonnes Per Annum (LMTPA) of production capacity.  

Revival of Closed Fertiliser Plants: Revived Ramagundam, Gorakhpur, Sindri, Barauni and Talcher through Joint Venture Companies (JVCs) to enhance indigenous production. 

Long-Term Investment Assurance: NIPU-2026 provides a 12–16% Return on Equity (RoE) and denotes fixed costs in Indian Rupees, reducing foreign exchange risk for investors. 

Gas-Based Production Strategy: Prioritises natural gas-based plants, which are more energy-efficient and less carbon-intensive than naphtha- or fuel oil-based units. 

Why is Urea Policy Important?

Food Security: Urea supplies the nitrogen required for high crop productivity and supports India's food security.

Import Reduction: India imports around 10 MT of urea annually; every 1 MT of additional domestic production can save US$300–500 million in foreign exchange. (Source: Fertiliser Association of India).

Farmer Support: Urea is sold at a subsidised MRP of ₹242 per 45 kg bag, insulating farmers from global fertiliser price volatility. (Source: Economic Survey 2025–26).

Strategic Resilience: Domestic production reduces exposure to geopolitical disruptions affecting fertiliser and LNG supplies.

Fiscal Savings: Higher domestic output lowers fertilizer import bills and subsidy volatility arising from global price shocks. 

Supports Atmanirbhar Bharat: Expanding indigenous fertiliser production strengthens national input security for agriculture.  

Major Challenges 

High Fertiliser Subsidy Burden: Fertiliser subsidy reached ₹2,17,281.10 crore in 2025–26, with urea accounting for ₹1,42,175.74 crore. (Source: Union Budget).

Nutrient Imbalance: Excessive subsidisation has distorted the ideal N:P:K ratio (4:2:1) to 10.9:4.1:1 in 2023–24, leading to soil degradation. (Source: Economic Survey 2025–26).

Feedstock Dependence: Natural gas contributes 70%-90% of urea production costs, while India remains dependent on imported LNG.

Raw Material Dependence: India imports about 95% of phosphatic raw materials and 100% of potash. 

Low Nitrogen Use Efficiency: Crops utilise only 30–40% of applied nitrogen, with the remainder lost through leaching and volatilisation. (Source: FAO)

Environmental Degradation: Excessive urea use causes soil acidification, micronutrient deficiency, groundwater nitrate pollution and nitrous oxide emissions. 

Ageing Production Assets: Several fertiliser plants require modernisation to improve energy efficiency and reduce production costs. 

Government Initiatives Complement Urea Policy

Neem-Coated Urea: Mandatory neem coating improves nitrogen-use efficiency and prevents diversion of subsidised urea for industrial purposes. 

PM-PRANAM: Incentivises States to reduce chemical fertiliser consumption and promote balanced nutrient use. 

Nano Urea: Promoted by IFFCO to reduce conventional urea consumption by 25–50%; sales exceeded 1,219.27 lakh bottles. 

One Nation One Fertiliser (Bharat Brand): Standardises branding of subsidised fertilisers to improve availability and logistics.

Direct Benefit Transfer (DBT): Fertiliser subsidy is released after sale through Aadhaar-enabled Point-of-Sale (PoS) devices, improving transparency.

Soil Health Card Scheme: Encourages soil-test-based nutrient application to reduce indiscriminate urea use. 

Integrated Fertiliser Management System (iFMS): Digitally tracks fertiliser production, movement and distribution across India. 

National Green Hydrogen Mission: Promotes Green Ammonia, enabling long-term transition towards low-carbon urea production.

What Measures Can Strengthen India's Fertiliser Security?

Accelerate NIPU-2026 Implementation: Fast-track approval of 8–9 new gas-based urea plants to achieve the projected 40 MMT domestic urea demand and reduce import dependence. 

Link DBT with Soil Health Cards: Integrate Direct Benefit Transfer (DBT) with Soil Health Card (SHC) recommendations to encourage crop- and soil-specific fertiliser application instead of blanket urea use.  

Scale Up Nano & Alternative Fertilisers: Expand adoption of Nano Urea, Nano DAP, Urea Gold and bio-fertilisers to improve nutrient-use efficiency and reduce dependence on imported raw materials.  

Promote Precision Nutrient Management: Scale up drone spraying, fertigation, sensor-based nutrient application and AI-enabled advisories to minimise fertiliser wastage. 

Improve Soil Health: Promote Integrated Nutrient Management (INM), crop rotation, green manuring and natural farming to restore soil organic carbon and micronutrient balance.

Modernise Ageing Urea Plants: Upgrade old fertiliser plants with energy-efficient and low-emission technologies to reduce gas consumption and production costs.

Secure Long-Term LNG & Raw Material Supplies: Diversify import sources and negotiate long-term contracts for LNG, rock phosphate and potash to reduce geopolitical risks. 

Develop Green Ammonia Capacity: Integrate the National Green Hydrogen Mission with fertiliser production to reduce dependence on fossil-fuel-based ammonia.

Rebalance Fertiliser Subsidies: Progressively rationalise urea subsidies and strengthen incentives for balanced use of N, P and K nutrients to correct the distorted NPK ratio. 

Strengthen Digital Supply Chains: Expand Integrated Fertiliser Management System (iFMS) and real-time PoS monitoring to curb diversion, hoarding and black marketing. 

Promote Circular Nutrient Economy: Recover nutrients from municipal wastewater, livestock waste and crop residues to supplement chemical fertilisers.

Conclusion

India's NIPU-2026 and robust push for Nano Fertilisers act as a strategic masterstroke to eliminate import dependence, slash the subsidy burden, and ensure long-term food security while safeguarding soil health.

Source: THEHINDU