The reopening of the Strait of Hormuz to commercial vessels on 17 April 2026 came as a great relief for India. But the blocking of the strait revealed both how exposed Indian agriculture is to a single waterway and how heavily the government must lean on subsidies to insulate farmers from the consequences.
India’s agricultural sector narrowly avoided a fertiliser crisis when the Strait of Hormuz was blocked, but only because the government intervened heavily in spot markets for liquefied petroleum gas (LNG) and urea imports at prices well above pre-war levels. The bill for this fertiliser subsidy is likely to exceed 2 trillion rupees.
India is the world’s third-largest importer of crude oil and second-largest importer of LNG. Roughly 85 per cent of its liquefied petroleum gas, 55 per cent of its LNG and 50 per cent of its crude oil imports pass through the Strait. About 38 per cent of the US$135.4 billion in remittances to India also comes from the Gulf, underscoring how heavily India’s economy relies on West Asia.
In terms of fertiliser, even with the Strait blocked, India was reasonably well positioned to meet its requirements for the summer-monsoon kharif crop, though the winter rabi crop may be hit harder if the blockage continues. Urea accounts for 45 per cent of fertiliser consumption in India, 87 per cent of which it produces, with only 13 per cent imported. Complex fertilisers – diammonium phosphate (DAP) and nitrogen-phosphorus-potassium blends – account for another third. Single super phosphate and muriate of potash make up the rest. But even domestic urea depends on imported natural gas, while ammonia and phosphoric acid – raw materials for complex fertilisers – are also largely imported.
India had a stock of about 6 million tonnes of urea on 10 March 2026. The requirement for kharif is about 18 million tonnes. Domestic production is about 2.2 million tonnes per month but would have dropped to 1.8 million tonnes due to lower supply of LNG. To close this gap, the government purchased an additional 7.31 million metric standard cubic metres per day of LNG on the spot market. This increased total supply from 32 million to 39.31 million metric standard cubic metres per day – an approximate 23 per cent jump. For this, India paid approximately US$19 per million British thermal units, nearly double the long-term contract price of US$10.
With this additional LNG, domestic production of urea from April to August would have been about 9 million tonnes. That leaves a gap of just about 3 million tonnes to be filled by imports. Indian Potash Ltd, a public-sector company, invited bids on 15 April to purchase 2.5 million tonnes of urea. Bids came in for a much higher quantity of 5.6 million tonnes but at prices ranging from US$935–$1136 per tonne. In January 2026, the price was just US$400–$450 per tonne. This has forced Indian Potash Ltd to accept a much higher bill for imported urea.
Phosphatic fertilisers are largely sourced from China, Oman, Saudi Arabia, Jordan, Egypt and Morocco. But China suspended exports of DAP and other speciality fertilisers, forcing India to pursue alternative sources. Morocco, which holds the world’s largest rock phosphate reserves, agreed to export 1.7 million tonnes of phosphate fertilisers. Morocco’s reserves are high in phosphorus content and its industry for phosphoric acid — a feedstock for DAP — is highly developed. Long-term engagement with Morocco thus offers a highly beneficial prospect for India.
India also signed a five-year contract with Saudi Arabia in July 2025 for 3.1 million tonnes of DAP and related products per year. Saudi Arabia has large reserves of natural gas and its capacity to produce ammonia and urea is expanding. Imports from Saudi Arabia do not come through Hormuz, enabling India to circumvent the bottleneck.
Global DAP prices have risen from about US$625 per tonne before the US–Israel war on Iran to about US$865 per tonne. The Indian government decided not to pass these price increases on to farmers and kept the retail prices at Rs 1350 (US$14) per 50 kilogram bag, approving a 12 per cent subsidy hike to absorb the shock.
By paying above pre-war prices for LNG and urea, the government has shielded Indian farmers from retail price hikes. But the subsidy bill is likely to substantially exceed the estimate of Rs 1.70 trillion (US$17.9 billion).
Now that the Strait of Hormuz is closed again, prices of fertilisers and raw materials remain elevated. India faces the prospect of having to pay a much higher price to import fertilisers to meet the requirements of winter crop.
The episode underscores how exposed India remains to a single waterway for the gas, ammonia and phosphate rock that keep its fertiliser sector running. Subsidies can absorb a price shock, but they cannot substitute for diversifying suppliers.
Republished from East Asia Forum, 6 May 2026
