India’s urea production has dropped sharply after liquefied natural gas (LNG) supply disruptions through the Strait of Hormuz forced fertiliser plants to operate at significantly reduced capacity. Industry sources said several ammonia–urea plants across the country are currently running at around half capacity following force majeure declarations by LNG suppliers amid escalating tensions in West Asia. The disruption highlights the vulnerability of India’s fertiliser sector to global energy supply shocks, particularly because natural gas is the primary feedstock used in urea production.
Force Majeure Declared After LNG Supply Disruptions
The situation escalated after Petronet LNG Ltd, which operates India’s largest LNG receiving terminal, declared force majeure. According to industry sources, upstream suppliers informed the company that they were unable to deliver contracted LNG cargoes due to disruptions affecting shipments passing through the Strait of Hormuz, a critical global energy transit route. As a result, the reduced LNG availability has triggered a ripple effect across India’s gas supply chain.
Gas Supply Curtailments Hit Fertiliser Plants
Following the disruption, state-owned gas distributors—GAIL (India) Ltd, Indian Oil Corporation (IOC), and Bharat Petroleum Corporation Ltd (BPCL)—curtailed gas supplies to fertiliser plants that receive LNG under RasGas contracts. Gas deliveries to fertiliser units have been reduced to approximately 60–65 percent of normal levels. However, when scheduled plant maintenance and turnarounds over the past six months are considered, effective gas availability at some facilities has dropped below 50 percent. Consequently, urea output at affected plants has declined by around 50 percent, significantly impacting domestic fertiliser production.
Lower Production, Higher Energy Consumption
Operating large ammonia-urea plants at partial loads has also created serious efficiency challenges. Plant officials said energy consumption at some facilities has increased by up to 40 percent, despite reduced output. This is because large industrial units are designed to run at stable loads rather than fluctuating production levels.
Operational Challenges and Safety Concerns
In addition to supply shortages, fertiliser companies have faced operational challenges due to sudden gas allocation changes. After Ras Laffan LNG Company invoked force majeure, fertiliser plants reportedly received updated gas consumption limits at very short notice, sometimes late at night. Plant operators say such abrupt load adjustments are difficult for large train-based ammonia-urea plants, which require stable operating conditions.
Pricing Changes Add Financial Pressure
The supply disruption has also introduced pricing uncertainty for fertiliser producers. GAIL informed fertiliser companies that long-term regasified LNG (RLNG) supplies would now be invoiced at multiple price points, including the contract price, GAIL Pooled Price, and Gazette Pooled Price, with effect from March 1, 2026.
Industry sources said the pooled price mechanism is provisional and subject to retrospective adjustments under government guidelines, which could create additional financial challenges for fertiliser manufacturers already coping with lower production and higher energy costs.
Potential Impact on Fertiliser Supply
India is one of the largest consumers of urea globally, and prolonged supply disruptions could affect fertiliser availability ahead of the kharif sowing season, when demand for nitrogen fertilisers typically rises. However, current inventory levels offer some short-term relief. As of March 19, India’s urea stocks stood at 61.14 lakh tonnes, compared with 55.22 lakh tonnes during the same period last year. As reported by thehindubusinessline.com, industry analysts warn that continued LNG supply disruptions or prolonged geopolitical tensions could place additional pressure on the country’s fertiliser production and supply chain in the coming months.
