India's Urea Industry Nears Self-Sufficiency Amid New Capacities

India's urea industry is advancing toward self-sufficiency, reducing its import dependency to 10-15% from 30%. Driven by new capacity stabilization, the industry anticipates steady returns and stable profit margins backed by adequate subsidy allocations.

India's urea industry is making significant strides toward self-sufficiency, with import dependency expected to drop to between 10% and 15% from its high of 30% during the financial year 2020-21, according to a Crisil Ratings report.

This positive shift is largely driven by the commencement and stabilization of new production capacities. These facilities are anticipated to generate steady and regulated returns as their utilization improves. Furthermore, legacy capacities are projected to maintain stable profits this fiscal, aligned with raw material prices and government policies, Crisil noted.

Ensuring adequate subsidy allocation will keep the credit profiles of urea manufacturing companies stable, the rating agency said. Urea demand outpaced production from 2007 to 2012, raising import shares to 20-25% of consumption. The 2012 New Investment Policy (NIP) has been pivotal in reducing import dependence structurally. According to Anand Kulkarni, Director at CRISIL Ratings, the new plants are expected to operate at 100% capacity utilization this fiscal, compared to 85-90% in the previous year. The likely commissioning of an additional plant by next fiscal will further bolster domestic production. Higher utilization will enhance the operating efficiency and profitability of new plants.

Looking ahead, Crisil mentioned that an uptick in nano urea adoption could accelerate the journey toward self-sufficiency. The Department of Fertilizers has been bridging the production-demand gap by importing urea for agricultural purposes. In 2023-24, India imported 70.42 lakh tonnes of urea, costing USD 2.608 billion, as per official data.

(With inputs from agencies.)