National Investment Policy for Urea announced, 9 gas-based plants to produce 10 million tonnes
India currently imports about 26% of its annual urea requirement despite being one of the world's largest consumers
A new National Investment Policy for Urea (NIPU-2026) was announced on Wednesday, paving the way for fresh investments in gas-based urea manufacturing plants as the government seeks to reduce India’s dependence on imports and strengthen long-term fertilizer security.
Under the new policy, around nine new gas-based plants with a production capacity of 10 million tonne will be set up.
The decision was taken by the Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi.
The new policy replaces the New Investment Policy (NIP)-2012, which expired in 2019, and introduces a revised financial framework aimed at making new urea projects more attractive while improving transparency and reducing government subsidy costs.
“Currently, India operates 33 urea manufacturing units with a total reassessed and installed capacity of 269.42 Lakh Metric Tonnes (LMT). However, a persistent gap remains between domestic production capabilities and the country’s overall urea demand, which is currently being met through imports,” the Ministry of Chemicals and Fertilizers said.
Compared with the 2012 policy, the new framework introduces several key reforms, including the separation of fixed and variable costs to improve transparency, the introduction of a Return on Equity (RoE) band ranging from 12 per cent to 16 per cent, and measures to mitigate foreign exchange risk by converting fixed costs into Indian rupees after four years based on prevailing exchange rates.
The government estimates that these changes will result in savings of more than Rs 250 crore, for each new urea plant established under the new framework.
India remains one of the world’s largest consumers of urea, but domestic production continues to fall short of demand, making imports necessary every year.
The ministry noted that it has received several proposals for setting up new urea plants, making a fresh investment policy necessary after the expiry of the earlier framework.
The New Investment Policy-2012 was introduced to revive investment in India’s urea sector through greenfield, brownfield, expansion and revival projects. Under that policy, six new urea plants were established, including four through joint ventures promoted by public sector companies and two by private firms. The policy remained open for new investments until October 2019.
“The new policy comes amid the government’s broader strategy to improve fertilizer security following heightened concerns over global supply disruptions and volatile energy prices during the past year. India relies heavily on imported natural gas for urea production and also imports substantial quantities of finished urea to bridge the domestic supply gap.
Geopolitical tensions in West Asia have underscored the importance of expanding indigenous manufacturing capacity,” Union minister Ashwini Vaishnaw said at the press briefing.
He also said that NIPU-2026 forms part of its broader Atmanirbhar Bharat initiative aimed at strengthening domestic manufacturing capacity, improving supply security and ensuring uninterrupted availability of fertilisers for Indian farmers.
Ministry officials also said the new investment policy could also explore the possibility of using ammonia derived from coal gasification as feedstock for these plants instead of conventional imported LNG to reduce dependence, particularly on Gulf countries.
India currently imports around 26 per cent of its annual urea requirement, which has been putting a heavy burden on the exchequer because of the West Asia crisis.
