New Urea Policy Aims to Add 10 Million Tonnes of Production

The Union Cabinet has approved the National Investment Policy for Urea-2026 (NIPU-2026) to encourage fresh investment in domestic urea manufacturing. The policy aims to narrow the gap between India’s urea demand and domestic production by supporting new gas-based manufacturing plants.

Kisan of India’s Hindi site has highlighted the policy as an important development for India’s fertiliser sector. The government says higher domestic production can reduce dependence on imports and improve the availability of urea for farmers.

The new policy is expected to facilitate around 8 to 9 new urea plants, with a combined production capacity of about 10 million tonnes a year. Each plant is expected to produce around 1.27 million tonnes annually.

India currently has 33 operational urea manufacturing units with a total reassessed installed capacity of 269.42 lakh metric tonnes. Domestic production still falls short of demand, so the country imports urea to bridge the gap.

The government expects the new investment framework to encourage companies to establish additional production capacity and strengthen domestic fertiliser supplies.

Policy Changes to Attract Investment

NIPU-2026 replaces the earlier New Investment Policy of 2012, whose investment window ended in October 2019.

The new framework separates fixed and variable costs to improve transparency. It also introduces a Return on Equity band of 12% to 16% and includes measures to reduce foreign exchange risks for investors.

The policy covers new gas-based urea plants as well as eligible expansion, revival and other investment proposals in the sector.

What It Means for Farmers

Urea is one of the most widely used fertilisers in Indian agriculture. Farmers depend on timely supplies, particularly during major sowing and crop growth periods.

Increasing domestic production could reduce the country’s exposure to international supply disruptions and import-related price pressures. A stronger domestic manufacturing base can also give the government greater control over fertiliser availability.

The policy is not a direct subsidy scheme for farmers. Its main purpose is to create conditions for companies to invest in additional urea manufacturing capacity.

India’s fertiliser requirement has grown with agricultural production, while domestic urea capacity has not always kept pace with demand. The new policy seeks to address this structural gap by encouraging investment in gas-based production.

The government has said the move supports the goal of greater self-reliance in fertiliser production. If the proposed plants are commissioned as planned, the additional capacity could reduce import dependence and strengthen the supply of urea for farmers over the coming years.