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The ongoing conflict in West Asia involving Israel, the United States, and Iran is now beginning to manifest its geopolitical and geo-economic ramifications. A critical consequence of the conflict has been the effective closure of the Strait of Hormuz, a narrow yet strategically pivotal maritime passage along the Iranian coast, which facilitates 20 per cent of the world’s oil and liquefied natural gas. Beyond the immediate escalation in global oil and fuel prices, the geopolitical conflict is increasingly affecting the agricultural economy by spiking transportation expenses, supply-chain instability, and rising input costs, thereby amplifying inflationary stress and food insecurity in import-dependent economies.
The rising shipping costs and global shortage of fertilisers have been aggravated and exacerbated by damage to production facilities and infrastructure in the United Arab Emirates. Qatar’s state-owned fertiliser producer QAFCO shut down its urea plant with an annual capacity of 5.6 million tons over energy supply disruptions. Urea, the most critical fertiliser product, saw about 30 per cent to 40 per cent cost hike since the conflict began. US farmers were already reporting empty shop shelves ahead of spring planting.
Furthermore, around 15 per cent of the nitrogen, potassium, and phosphorus required for agricultural purposes in the US are imported from Gulf countries. However, due to the potential closure of the Strait of Hormuz, these vital imports are currently failing to reach their intended consumers. For a country like India, where agriculture remains central to livelihoods and security, the consequences of such geopolitical disruptions are especially severe. The agriculture sector is highly dependent on imported energy, fertilisers and trade connectivity. As a result, the closure of the Strait of Hormuz would severely impact India’s economy and agriculture, given its high external dependence nearly 40 per cent of India’s crude oil imports and a large share of LPG supplies transit through this route, while India imports around 85-90 per cent of its crude oil needs, making it highly vulnerable to supply shocks.
India imports large quantities of key fertilisers such as urea, DAP, MOP and NPK every year, with total imports reaching around 177 lakh metric tonnes (LMT) in 2023-24 out of total consumption of about 601 LMT. Import dependence is particularly high for critical nutrients. DAP production meets only about 40 per cent of demand, while MOP is almost 100 per cent imported. Additionally, recent trends indicate rising dependence, with fertiliser imports projected to exceed 22 million tonnes in 2025-26, reflecting growing demand and insufficient domestic production.
Since fertiliser production, especially urea, is also linked to imported natural gas, any disruption in Gulf supply routes would sharply increase input costs, directly affecting agricultural productivity, food prices, and farmer incomes in India. Due to reduced yields caused by climate change and the rising cost of diesel consumption, farmers are compelled to make higher investments. However, the currently escalating prices of chemicals and fertilisers threaten to plunge them into even deeper distress. Fertilisers play a pivotal role in boosting agricultural yields in India. Alongside high-quality seeds and reliable irrigation, they constitute one of the primary factors responsible for achieving higher crop productivity.
With the advent of the Green Revolution, the usage of fertilisers has witnessed a steady increase. According to the Union Ministry of Agriculture, Government of India, and the Economic Survey 2024-25, agriculture and allied sectors contribute approximately 16 per cent to India’s GDP and sustain over 46 per cent of the country’s population.
Consequently, agriculture has emerged as a fundamental pillar of the national economy. It not only facilitates food grain production but also plays a vital role in generating employment and fostering the growth of allied sectors. For the financial year 2024-25, the budget estimate for the Department of Fertilizers was increased from Rs 1,68,130.81 crore to Rs 1,91,836.29 crore through the ‘Supplementary Demands for Grants’ passed by Parliament. This allocation underscores the government’s strong support for this sector, taking into account projected fertiliser consumption, natural gas prices, and global market trends for fertilisers.
Today, India stands as the world’s second largest consumer and third largest producer of fertilisers. Numerous studies have clearly demonstrated a direct correlation between increased fertiliser usage and improved crop yields since with the rise in fertiliser consumption, the productivity of major crops also improves. This highlights the critical importance of fertilisers for the success of agriculture in India.
Recently the Parliamentary Standing Committee on fertilisers headed by Trinamool Congress MP Kirti Azad warned of an acute shortage of essential fertilisers. With regard to urea, which is one of the most vital fertilisers for crop growth, the committee panel noted that domestic production in 2024-25 stood at 306.67 LMT. Furthermore, imports of approximately 85 LMT were projected for 2026-27, necessitating a subsidy outlay of Rs 291,000 crore for domestically produced urea and Rs 231,999 crore for imported urea.
According to data from the Union Ministry of Chemicals and Fertilizers, a review of imported fertilisers over the past three years reveals that 70.80 LMT of urea, 27.52 LMT of NPK, and 65.83 LMT of DAP were imported in the year 2022-23, while as 70.42 LMT of urea, 22.17 LMT of NPK, and 55.67 LMT of DAP in 2023-24 and hence 56.47 LMT of urea, 45.69 LMT of DAP, and 35.41 LMT of NPK in 2024-25.
In the financial year 2024-25, approximately 63 per cent of India’s nitrogen fertilizer (urea) imports originated from Gulf nations such as Oman, Saudi Arabia, and Qatar, while the Gulf region accounted for roughly 32 per cent of India’s DAP imports. Saudi Arabia stands as a key partner. India imported 1.9 million tonnes (19 lakh tonnes) of DAP from Saudi Arabia.
Furthermore, the share of urea imports declined from 28.5 per cent in 2020-21 to 15.5 per cent in 2024-25, domestic urea production has remained stable at approximately 305-315 LMT against a consumption level of about 390-400 LMT; consequently, the volume of imports has consistently remained significantly high. Meanwhile, regarding future supplies, India has entered into long-term agreements to procure 3.1 million tonnes (31 lakh tonnes) of DAP annually from Saudi Arabia, commencing from the year 2025-26.
Muriate of Potash (MOP), which is almost entirely imported and utilised in both agriculture and industries, is a commodity of which India procures a significant portion from Oman. Regarding other fertilisers such as Rock Phosphate, domestic production meets only about 10 per cent of India’s requirements. The country imports almost its entire supply of Potash, and the domestic availability of Sulphur is also limited.
Due to shipping disruptions caused by the US-Iran conflict, India has witnessed a drastic decline in both coconut prices and exports. So, the farmers have two options. They can choose to buy the more expensive fertilisers and pass those costs onto their products. That pushes up prices in supermarkets. In other words, it fuels inflation. When farmers or consumers cannot afford those higher prices, the impact cuts deeper. Farmers use less fertilisers, which means lower yields and less food.
Consequently, the hurdles faced in exports particularly those destined for Gulf nations necessitated the diversion of coconut supplies to the domestic market. This resulted in the price of 1,000 coconuts plummeting from Rs 22,000 to a range of Rs12,000-Rs 13,000. India’s Basmati rice, which is a key export to the Gulf region, is already showing signs of impact moreover. Other export commodities such as tea and spices are unable to be shipped out due to these geopolitical tensions, the repercussions of which are being felt directly by the nation’s farmers.
Therefore, geopolitical turbulence, volatility in global commodity prices, and foreign exchange risks are having a direct impact on India’s fertiliser supply chain. However, the ongoing tensions in West Asia now raise concerns regarding food security. Specifically, export-oriented crops may not receive adequate fertiliser supplies, potentially leading to reduced yields and, consequently, a decline in export volumes.
Maga Ram is currently pursuing his Masters in Political Science from Jawaharlal Nehru University, New Delhi
Views expressed are the author’s own and don’t necessarily reflect those of Down To Earth