From Bans to Gas Cuts: India's Fertiliser Sector Struggles

India’s fertiliser sector is one of the most tightly regulated industries in the country. Now, the industry is facing pressure from multiple directions at once, including state-level bans on non-subsidised products, tightening distribution controls, and increasing natural gas shortages.

India’s fertiliser industry started struggling when the Uttar Pradesh Government issued an order on January 9, 2026, banning the sale of non-subsidised fertilisers by companies and distributors authorised to sell subsidised products. This ban was retrospectively effective from January 1.

The stated reason for this ban was the practice of “tagging,” where farmers were compelled to purchase non-subsidised products alongside subsidised ones.  Letters were sent to major fertiliser manufacturers, including IFFCO, KRIBHCO, Chambal Fertilisers, and others.

Now, Madhya Pradesh has followed suit, banning urea manufacturers from selling non-subsidised fertilisers, amplifying the industry's concerns. The two states are the country’s largest agricultural producers. Madhya Pradesh is the second-largest producer of food grains and the top producer of pulses and oilseeds, while Uttar Pradesh accounts for around 20% of India's agricultural output.

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UP Doubles Down With ID Checks and Purchase Caps

Recently, on 18 May, UP added another layer to the restrictions, as per which subsidised fertilisers, including urea, DAP, NPK, MOP, and SSP can only be purchased by farmers possessing a valid Farmer ID linked to landholding records. The government has also set a purchase limit, a maximum of five bags of DAV and seven bags of urea per hectare.

The Government has further appealed to farmers not to buy fertilisers in excess of actual requirements, warning that prolonged exposure to air and moisture can reduce fertiliser effectiveness.  Monitoring committees were also set up to keep strict surveillance on fertiliser sales. The government said that raids and legal actions were carried out under the Essential Commodities Act, 1955, against illegal storage and black marketing of fertilisers.

Speciality Fertilisers Bear the Brunt

While these bans aim to reduce malpractices, industry experts warn that this will impact the speciality fertilisers, including soluble products, micronutrients, and bio-stimulants that serve specific crop requirements.

A blanket ban deprives farmers of crop-specific solutions and discourages investment in next-generation fertiliser technology. Across India, Urea accounts for nearly 400 lakh tonnes, while DAP contributes around 100 lakh tonnes. A sweeping restriction in two of the country's largest agricultural states risks setting back innovation across the sector.

A Gas Crisis That Could Derail the Kharif Season

Adding to the regulatory pressure is a supply-side emergency. The ongoing West Asia conflict has disrupted global LNG flows, reducing the availability of Liquefied Natural Gas in fertiliser plants by 50 to 60 percent of normal levels. Since LNG accounts for more than 80 percent of fertiliser production costs, several plants have already reduced operations or scheduled maintenance shutdowns.

India's kharif season demands around 32 to 33 million tonnes of fertiliser, and a prolonged gas shortage risks pushing monthly output below 1.7 million tonnes, a level that would directly threaten crop yields, food prices, and inflation.

To counter the gas shortage, the government is planning to set aside Rs 600 crore for spot-market LNG purchases, while also exploring higher fertiliser imports and diversified sourcing. But with state bans tightening farmer choice, gas shortages squeezing production, and global energy markets remaining volatile, India's fertiliser sector is caught between regulatory and supply-side fragility, and it is the farmer, standing at the end of that chain, who may ultimately bear the cost.