Nitrogen+Syngas 394 Mar-Apr 2025
19 March 2025
India’s hunger for urea
INDIA
India’s hunger for urea
India’s push to replace its sizeable urea imports with home grown capacity continues, but may not keep pace with rising domestic demand.
India’s urea buying has dominated urea markets for many years, but that has been changing as it attempts to replace imports with domestic urea capacity. India was until recently the largest global importer of urea, but that changed in 2024 when it lost that position to Brazil. India continues to be the world’s second largest consumer of urea overall, with demand of 36.2 million t/a in 2024, considerably ahead of the US, but below China’s huge total of 66 million t/a. Urea is the key nutrient for India’s farmers, and consequently ensuring a secure supply of urea has been a major concern for every Indian government. But India’s urea plant construction went through a hiatus from around 1995, when new building of capacity stopped as the government became concerned over spiralling subsidies to urea producers, and during the first decade of the 21st century the gap between demand and production began to widen until by the 2010s it had reached 10 million t/a, all of which had to be filled by imports(see Figure 1).
The Indian government has attempted to tackle this in two ways; by switching to slower release urea to try and reduce farmers’ demand for urea, and a programme of new plant construction which began in the late 2010s. The latter however remains constrained by feedstock cost and availability.
Feedstock availability
Feedstock availability became the key constraint on developing new urea capacity during the 2000s and 2010s. India’s first wave of urea capacity, which led to the ‘Green Revolution’ of the 1960s and 70s, had been based on naphtha feedstock, but high oil prices led to high naphtha prices and consequently a high subsidy bill to keep urea made from naphtha affordable. To keep bills lower, the government pressured plants to switch to using natural gas feedstock, and new plant construction during the 1980s and 90s was generally based on natural gas feedstock. This was cheaper, but India’s shortage of domestic natural gas meant that the plants often suffered gas supply curtailments, especially as its electricity industry also built gas-fired power capacity. During winter when more power was needed for heating, gas was often preferentially given to gas-fired power stations and urea plant suffered outages.
Attempts to develop domestic gas reserves in the Bay of Bengal did not generate as much gas as hoped, while pipeline import projects from Iran or Turkmenistan foundered on political issues with neighbour Pakistan, which the pipelines would have had to cross.
One alternative seemed to be to build Indian-owned capacity in gas-rich regions and import urea from these areas at prices hopefully cheaper than prevailing market prices. However, in spite of several proposals as far afield as Iran, Canada and the US, only one was actually built; the Oman-India Fertilizer Company (OMIFCO), a joint venture between the government of Oman (50%) and Indian state-owned fertilizer collectives Kribhco and IFFCO (25% each). OMIFCO operates two 2,500 t/d urea plants at Sur on Oman’s Indian Ocean coast, with the 1.65 million t/a offtake earmarked 100% for India.
Another potential solution for India’s urea conundrum was to move to a Chinese model and use coal gasification to produce large volumes of urea. Two coal gasification plants had been built during the 1970s, but these had been plagued by technical difficulties, and this proved a major stumbling block to new coal-based capacity. One major issue was the high ash content of Indian coal as compared to Chinese, making gasifiers less efficient and leading to ash agglomeration, which can lead to poor syngas quality, and increased operational challenges due to the ash buildup within the gasifier, potentially blocking gas flow and requiring frequent cleaning or even causing equipment damage. Only one coal gasification projected ended up greenlit, at the Talcher site, and this ran into problems of its own, significantly delaying its start-up.
Eventually India turned wholeheartedly to liquefied natural gas (LNG) imports in the 2000s to make up for its domestic natural gas shortfall, and LNG capacity rapidly ramped up, producing enough gas for both power and urea production and providing sufficient surplus to build a new wave of urea capacity in the 2010s and 2020s.
New urea capacity
The construction hiatus from 1995-2015 meant that what urea capacity increase that did occur was provided via incremental debottlenecking and upgrades of existing plants. There was one exception to this rule; the 1.3 million t/a Matix Fertilizer plant in Bengal, which was built to exploit reserves of coalbed methane in the region. However, when this facility was completed in 2015, the volume of gas that was able to be supplied from coal seam gas was only about 35-40% of the plant’s requirement, and the plant remained idle until 2021, when it could be connected to a pipeline from the LNG terminal at Dhamra.
The LNG boom of the 2010s meant that the Modi government was able to set urea self-sufficiency as a target, announcing its ambitious New Investment Policy in 2013, and in 2017 securing $8.7 billion of funding aiming to “end” imports of urea within five years. This would be achieved by reviving five mothballed urea plants and setting up two new facilities, bringing 7.5 million t/a of new urea capacity on-stream.
The five plants at existing sites included Ramagundam in Andhra Pradesh province; Gorakhpur in Uttar Pradesh; and Sindri in Jharkhand – all sites originally belonging to the Fertilizer Corporation of India Ltd (FCIL), and the fourth at the Hindustan Fertilizer Corporation Ltd Barauni site in Bihar province. All of these new plants were owned and operated by a new state venture, Hindustan Urvarak and Rasayan Ltd (HURL), a joint venture of Coal India (CIL), NTPC and the Indian Oil Corporation (IOCL), in cooperation with Fertilizer Corporation of India (FCIL) and Hindustan Fertilizer Corporation (HFCL). All four are fed from LNG via pipeline. The fifth was the Talcher coal gasification plant mentioned earlier, which will use a mix of petroleum coke as feedstock to avoid the ash content problems. The four LNG-fed plants were completed and started up from 20212023, with production ramping up during 2024. Talcher remains behind schedule however, and is not expected to start up until 2027.
In addition to the five government-backed projects, two privately funded projects have been approved. The first was the revival by Chambal Fertilizers and Chemicals of its old urea plant at Kota near Gadepan in Rajasthan state, which closed in 2015 due to unfavourable economics. A new 1.27 million t/a replacement plant began operation in 2019. However, in spite of government approval of a new brownfield 1.27 million t/a ammonia/ urea complex at the Brahmaputra Valley Fertilizer Corp (BVFCL) site at Namrup in Assam, development remains stalled, with BVFCL now looking at 2029 for a possible startup.
Subsidies
India’s demand for urea is predicated on its popularity with Indian farmers. India subsidises fertilizer costs to farmers to ensure that the country’s population is fed – India is now the most populous country on earth, overtaking China in 2023 with an estimated 1.44 billion people. Urea has always been the cheapest nitrogen fertilizer per unit N, which is why such a large proportion of Indian nitrogen consumption has been as urea. When the government changed the way it calculated fertilizer subsidies in 2010, urea was exempted from the move and continued to be subsidised at the old rate. This special treatment for urea has largely continued since then. In the most recent government budget, in which the government reduced fertilizer subsidies by 2.6% to $22.1 billion, urea subsidies remained largely unchanged at $14.3 billion, keeping the government set maximum retail price (MRP) for urea at the same level. This tends to skew fertilizer consumption towards urea and away from phosphate and potassium. While this leads to an imbalance in nutrient application, India’s reliance on imported phosphate and potash means that these fertilizers are often expensive and securing raw materials for P and K fertilizers remains a challenge for the government.
In an attempt to make existing supplies of urea go further, the government instead mandated in 2015 that all domestically produced urea must be coated with neem tree seed oil. The neem coating slows the conversion of urea to ammonium in the soil, making it available to plants for a longer period during the growth cycle, reducing volatilisation to ammonia and soil leaching of nitrates and meaning less urea is required for the same effect. The move effectively extends urea capacity by around 10%.
Import substitution
As Figure 1 shows, the spate of new capacity completed in the early 202s has closed the gap between Indian urea production and demand to around 5.4 million t/a in 2024, its lowest level in decades. However, with only the Talcher coal/coke based urea plant due to come onstream over the next few years, last year looks to be a minimum for Indian urea imports, and the gap is projected to widen again as demand continues to increase, with imports forecast to be around 6.4 million t/a by 2029. While India is likely to run second to Brazil in terms of imports going forward, it will continue to be a major urea importer in spite of all government attempts otherwise. India remains at the top of the global cost curve and is likely to be a major price setter.
Low carbon production
India is of course – like most of the nitrogen industry – looking towards low carbon hydrogen and ammonia production. The Indian government has established funding and policy initiatives via its National Green Hydrogen Mission, which aims to establish India as a major global hub for green hydrogen and ammonia, with a target of producing 5 million t/a of green hydrogen annually by 2030. A major plank of this is the Strategic Interventions for Green Hydrogen Transition (SIGHT) program, which is looking to identify and develop green hydrogen hubs – regions capable of supporting large-scale production and utilisation of green hydrogen in special economic zones (SEZs) or export oriented units (EOUs). An electricity transmission system is being planned to deliver power to green hydrogen/green ammonia manufacturing hubs in the states of Odisha, Gujarat, West Bengal, Andhra Pradesh, Tamil Nadu and Karnataka. However, given the high levelised cost of green hydrogen for domestic consumption in India, the plan anticipates that exports will play a crucial role in scaling up green hydrogen/ammonia production in India, with plants on the east coast at e.g. Paradip targeting customers in east Asia such as Japan, Singapore, and South Korea, where the governments are looking at using green ammonia as an extender for coal fired power plants.
Green ammonia projects
With this target in mind, a number of firms have been developing projects to meet the government mandate. Recent project announcements have included the conversion by AM Green of the Kakinada urea plants to renewable production. AM Green bought the Kakinada ammonia-urea complex from Nagarjuna Fertilizers and Chemicals Limited (NFCL) last year and is in the process of converting them to two 500,000 t/a green ammonia plants, in cooperation with Casale, Technip Energies and John Cockerill. AM Green is also looking at developing green hydrogen and ammonia production at other sites in India, including Tuticorin in Tamil Nadu, Kandla in Gujarat, and UNA in Himachal Pradesh.
Hygenco is licensing Topsoe technology for a 750 t/d green ammonia plant at Tata Steel’s Special Economic Zone Industrial Park (GIP) in Gopalpur, Odisha, India. The plant is expected to be operational by 2027.
ACME Group has also secured land in the Gopalpur Industrial Park for a new hydrogen and ammonia project. The new facility will be powered by renewable energy, producing up to 1.3 million t/a of renewable. Japan-based IHI will partner with ACME to develop the project.
In addition to these which have secured a final investment decision, there have been a flurry of other announcements as companies rush to fulfil the 5 million t/a government mandate by 2030. However, as ever with India the devil remains in the details and the financing, and how many come to fruition remains to be seen. Nevertheless, it seems likely that India will be switching a significant proportion of its existing ammonia production to renewables over the coming decade.
