India’s Response to the Gulf Conflict

Business

The crisis in the Strait of Hormuz has not only disrupted the oil supply globally but it has also placed the global fertilizer markets under severe stress. Specifically, India, who historically has mutually relied on many of the countries in the Gulf for both inputs and outputs. The complexity of these relationships is much deeper than what first meets the eye. When news broke that shipping through the Gulf had slowed, Amit Gupta Agrifields remarked in a discussion that few outside agribusiness realize how closely India’s fertilizers are tied to Middle Eastern energy and minerals. India manufactures roughly 87 percent of the urea it uses, but the cost of that urea is largely determined by natural gas imported from Qatar and other Gulf countries. Gas accounts for as much as seventy to eighty per cent of urea’s production cost; when supplies are disrupted, plants face rationing and prices climb.

The situation is even more acute for other nutrients. India imports nearly 60 percent of its diammonium phosphate (DAP) and all of its potash from abroad, much of it from producers in the Gulf. The country also relies on West Asia for over 65 percent of its sulphur supply, which is processed into sulphuric acid and used to manufacture complex fertilizers. In early March, as tankers queued outside the Strait, Indian fertilizer producers faced gas rationing: state-owned GAIL allocated only about seventy per cent of normal gas supplies to factories. Plants could keep running, but only by cutting margins or delaying maintenance.

These vulnerabilities are not new. Policymakers have long debated how to reduce import reliance. Yet the Gulf crisis accelerated both anxiety and innovation. For months, fertiliser companies and government agencies have scrambled to secure cargoes from alternative sources, drawing on reserves and expediting shipments from North Africa and Eastern Europe. There is renewed interest in building more diversified supply chains—perhaps importing sulphur from Russia or Kazakhstan, or investing in African phosphate mines. Some suggest that India’s network of urea plants should develop strategic stocks of natural gas or finished product, though such storage is expensive.

At the same time, the crisis has re-energised conversation about domestic production and green technologies. One idea gaining currency is to produce “green” ammonia and urea using renewable electricity to split water into hydrogen, and then capture CO₂ from industrial emissions. Analysts believe that capturing just 0.36 per cent of India’s industrial CO₂ could supply enough carbon for all of its urea production. Transitioning to green urea will require massive investments—around ₹45,000 crore according to recent estimates—but it could eliminate import dependence and cut subsidy costs over time. In the meantime, some plants are exploring technologies to partially substitute natural gas with biomass or to recover more heat from existing processes.

For farmers, the immediate concern remains availability and price. Many rely on subsidised urea and DAP delivered through government channels. If supply tightens, delays and price increases could jeopardize yields, particularly in rain-fed regions with narrow planting windows. The government has released additional stocks and asked states to closely monitor distribution. Yet experience suggests that structural issues—transport bottlenecks, outdated storage, inconsistent credit—can amplify shocks. As Amit Agrifields DMCC and others have pointed out, this crisis is not just a wake-up call about geopolitics; it is a reminder that supply chain resilience must be built from port to village. India’s challenge is to ensure that a blockade thousands of kilometres away does not leave its farmers empty-handed when they need inputs most.