The central government is finalising an extension of the 2012 New Investment Policy (NIP) with amendments to attract fresh investments in the urea sector amid the West Asia crisis. According to reports from Business Standard, the policy aims to raise India's domestic urea production by almost 9-10 million tonnes over the next eight years through the establishment of seven new units, including both brownfield and greenfield projects. Each unit is proposed to have an annual production capacity of around 1.27 million tonnes of urea. The government has also announced plans to develop a green urea fertiliser industry under a company model in collaboration between the Nepal Electricity Authority and the private sector, with electricity subsidies and procurement guarantee agreements to encourage private investment.
The extended policy is projected to save the exchequer more than ₹10,500 crore annually in subsidies, based on conservative estimates and assuming an average imported urea price of $345 per tonne. As reported by Business Standard, the policy estimates project costs at around ₹11,000 crore for greenfield projects and ₹9,000 crore for brownfield projects (based on an exchange rate of $1 = ₹90). The new policy guarantees a buyback arrangement for the units for eight years from the commencement of production. The government has also allocated ₹32.46 billion for chemical fertiliser subsidies in fiscal year 2026/27, which is 12.6 percent higher than the current fiscal year's budget of ₹28.82 billion, aiming to prevent recurring shortages faced by farmers during major agricultural cultivation periods.
The policy is being finalised as global urea prices have surged by more than 112 per cent amid the West Asia crisis, driven by supply bottlenecks, to around $925 per tonne. According to Business Standard, India currently imports around 26 per cent of its annual urea requirement, placing a heavy burden on the exchequer amid elevated global prices. The West Asia crisis has also pushed up the price of liquefied natural gas, the principal feedstock used in urea production, with LNG prices rising from around $10.4 per million British thermal unit in late February to over $18 per mBtu in early May. To strengthen agricultural markets, the government announced concessional loans and interest subsidies for businesses purchasing agricultural products directly from farmers.
In 2026-27 (FY27), some estimates have pegged India's fertiliser subsidy bill at over ₹3 trillion. As reported by Business Standard, if realised, this would make FY27 fertiliser subsidies the highest ever, surpassing the ₹2.51 trillion recorded in 2022-23 and exceeding the FY27 Budget Estimate of ₹1.79 trillion by more than 67 per cent, or around ₹1.29 trillion. The government has allocated ₹46.92 billion for agriculture and livestock development for the upcoming fiscal year, which is almost 70 per cent of the total agricultural budget. To boost agricultural productivity, the government has allocated ₹2.07 billion for the National Agriculture Modernisation Programme and ₹360 million in conditional grants for local governments to promote organic and green fertilizers.
The main changes in the extended NIP relate to revisions in exchange rate assumptions, while core provisions remain unchanged. According to Business Standard, the proposed floor price for gas for greenfield or revival projects has been set at $281 per tonne of urea, compared with $305 in the earlier policy, while the ceiling price has been proposed at $301 per tonne, against $335 earlier. Preliminary reports indicate that of the seven proposed units, three could be set up in the private sector, three in the government sector (including by state governments), and one in the cooperative sector. As part of agricultural modernisation, the government plans to establish mango processing centres in Siraha and Saptari districts, a tomato processing centre in Sarlahi, and operate fruit zones for apples, walnuts, and other produce in Karnali Province.
