The two companies have signed arrangements with IFFCO, a producer in the cooperative sector which holds the patent for nano-urea, a person aware of the matter said on condition of anonymity. They will pay royalties to IFFCO for producing nano-urea, a nanotechnology-based product 100 times more efficient than conventional urea, which will shrink the quantity of fertilizer usage and thereby lower the subsidy burden. It also boosts nutrient availability, enhances productivity, helps soil health and reduces the carbon footprint in fertilizer production.
The strategy, built around the Narendra Modi government’s vision of self-reliance, may find mention in finance minister Nirmala Sitharaman’s budget speech on 1 February, the person cited above said, though the companies themselves will foot the bill for setting up the factories.
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Why India needs a fresh fertilizer policy
According to government’s estimates, two-thirds of India’s fertilizer subsidy burden— estimated at ₹2.15 trillion in FY23, but could go up by around ₹40,000-45,000 crore by the end of March—goes into ensuring that farmers get urea, the most commonly used fertilizer, at a reasonable cost.
“India is already making 170 million bottles of nano-urea a year now, which is equivalent to 7.5 million tonnes of conventional urea. The idea is to have eight production units that will produce 440 million bottles a year, which would be equivalent to 20 million tonnes of urea, by 2025, which will help in reducing the government’s subsidy burden as well as the environmental impact of fertilizer production," the person cited above said.
“Some of the private companies are also interested in setting up nano-urea production facilities," the person added.
Nano-urea production and consumption is at a nascent stage in India and its pace of adoption remains to be seen, according to Manish Gupta, senior director at CRISIL Ratings, . “However, if adopted, it could benefit India in terms of reduced urea import-dependence, which currently meets around 15-20% of consumption. Currently, India’s urea consumption is around 35 mt, with 3-4% annual growth rate expected. Given nano-urea sales does not fall within the ambit of government subsidy, a replacement of urea imports with nano urea can potentially reduce the government’s subsidy burden to that extent," Gupta said .
India’s fertilizer subsidy bill has shot up due to a spike in the price of natural gas—the feedstock for urea production—and the price of fertilizers in global markets in the aftermath of the Russia-Ukraine war. The uncertainty around the subsidy bill is expected to persist in FY24 as well, as there is no end in sight to the conflict in eastern Europe.
India also imports 25% of its urea requirement, in addition to importing 60% of the diammonium phosphate requirement and 15% of the NPK fertilizer requirement. The government’s strategy to ensure self-reliance also entails diversification of the sources of fertilizer imports by striking long-term supply contracts with newer markets. Also, India is exploring investments in mineral-rich countries to set up production facilities from where fertilizer could be imported to ensure fertilizer security. The government’s target for urea production this year is nearly 32 million tonnes.
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