India’s urea consumption is set to touch 40 million tonnes (mt) in the current fiscal, due to surplus monsoon-induced demand and also the maximum retail price (MRP) of the nitrogenous fertiliser remaining unchanged for over a decade.Sales of the country’s most used fertiliser hit an all-time-high of 38.8 mt in 2024-25 (April-March). The first six months of this fiscal have registered a 2.1% year-on-year increase, which is likely to sustain or even go up with farmers planting more area under wheat, mustard, potato and other rabi (winter-spring) season crops.That could take total consumption closer to the 40-mt mark.Relentless growthTable 1 shows urea consumption doubling, from about 14 mt to 28.1 mt, between 1990-91 and 2010-11 and rising to 30.6 mt in 2013-14. Thereafter, it flattened and actually fell to 29.9 mt by 2017-18.That was partly thanks to the Narendra Modi government, in May 2015, making it mandatory to coat all indigenously manufactured and imported urea with neem oil.Neem coating was expected to enable a more gradual release of the 46% nitrogen in urea, prolonging its action and translating into better nutrient use efficiency. Besides reducing the number of bags required to be applied per acre, it was also intended to curb the illegal diversion of the heavily-subsidised fertiliser for non-agricultural use, from particle board, plywood and cattle feed manufacturing to milk adulteration.But neither neem coating, nor replacement of 50-kg bags with 45-kg ones (from March 2018) and the launch of liquid ultra-small particle size ‘Nano Urea’ by the Indian Farmers Fertiliser Cooperative (in June 2021), have lowered consumption after 2017-18. It crossed 35 mt in 2020-21 and could reach 40 mt this fiscal.Story continues below this ad“At this rate, consumption could top 45 mt by the decade end,” said an industry source. A key reason for it is price: The MRP has been fixed at Rs 5,360 per tonne since November 2012 and at Rs 5,628 with neem oil-coating from January 2015.Compare this with the per-tonne MRPs now of Rs 11,500-12,000 for single super phosphate (SSP), Rs 26,000 for triple super phosphate, Rs 27,000 for di-ammonium phosphate, Rs 28,000-29,000 for ‘20:20:0:13’, Rs 36,000 for muriate of potash and Rs 37,000-38,000 for ‘10:26:26’ and ‘12:32:16’ complex fertilisers.“Urea is available at the half the price of the next cheapest fertiliser, SSP. And it has 46% nitrogen, as against the 27% nutrient content (16% phosphorous and 11% sulphur) in SSP. Even if the government takes a political decision to double the urea MRP, there will be no significant demand reduction, leave alone destruction,” the source pointed out.The spectre of shortagesNot surprisingly, shortages have been developing. The recent kharif (monsoon) crop season witnessed a scramble for urea, with reports from many states of farmers standing in long queues for hours to procure their bare minimum requirement.Story continues below this adThe situation doesn’t look that good even in the just-begun rabi (winter-spring) season, with opening stocks of urea on October 1, at 3.7 mt, below the 6.3 mt for the same date last year.The consumption rise is, moreover, happening with no commensurate increase in domestic production. The latter, as can be seen from Table 1, peaked at 31.4 mt in 2023-24, before dipping to 30.6 mt in 2024-25 and by 5.6% during April-September 2025 over April-September 2024.In fact, things would have been worse but for six new urea plants, each with 1.3 mt annual production capacity, commissioned between 2019 and 2022.These units – Gadepan-III (Rajasthan) of Chambal Fertilisers and Chemicals; Ramagundam (Telangana) of Ramagundam Fertilizers and Chemicals; Panagarh (West Bengal) of Matix Fertilisers and Chemicals; and Gorakhpur (Uttar Pradesh), Barauni (Bihar) and Sindri (Jharkhand) of Hindustan Urvarak & Rasayan – helped boost India’s domestic urea output from 24.5 mt in 2019-20 to 31.4 mt in 2023-24.Story continues below this adHowever, not all of the new plants have been producing at full capacity, unlike the older ones belonging to the likes of IFFCO, National Fertilizers and Krishak Bharati Cooperative (Table 2).Also, two plants have shut down: Nagarjuna Fertilizers & Chemicals at Kakinada (Andhra Pradesh) and Kanpur Fertilizers & Chemicals at Panki (UP) with production capacities of 1.2 mt and 0.7 mt respectively. The former has ceased operations from this fiscal, while the latter’s assets were acquired by the Hyderabad-based AM Green for conversion into a renewable hydrogen-cum-ammonia project.The road aheadGiven its affordability (even a doubling of MRP will still make it the cheapest fertiliser), ease of application (unlike Nano Urea) and proven effectiveness (nitrogen is indispensable for plant growth), the demand for urea is unlikely to go down.It would, if anything, only go up with expansion in gross cropped area, irrigation coverage and farmers planting more nitrogen-loving crops, whether maize or leafy vegetables.Story continues below this adUrea consumption can, at best, be capped at around 45 mt through a mix of MRP rationalisation, rationing (not supplying say, more than 25 subsidised bags per farmer) and incorporation of urease and nitrification inhibitor chemicals (which slow down the release of nitrogen).On the supply side, the present installed capacities, after factoring in the closure of the two plants, allow for a domestic production of only 30-31 mt. If annual imports are to be contained within 10 mt, it would require roughly 5 mt of capacity addition – in other words, four new plants of 1.3 mt each.India now has seven operational liquefied natural gas terminals at Dahej, Hazira and Mundra (Gujarat), Kochi (Kerala), Dabhol (Maharashtra), Ennore (Tamil Nadu) and Dhamra (Odisha). These terminals (six more are coming up), along with the pipelines crisscrossing much of the country, have made it possible to import and transport gas to urea plants in the hinterlands.In such a scenario, urea imports would make sense primarily to feed the western and southern markets closer to the ports. For the markets in northern, central and eastern India, it would be more economical to import gas and “make” urea.Story continues below this adThis is as opposed to direct import of urea (“buy”) in bulk vessels, which entails additional costs and logistics of discharge at the port, bagging, reloading and transporting to these distant consumption centres.Managing supply and demand of urea is going to present a huge challenge, both economic and political, in the coming times.