The first-order impacts on India of the disruption of shipping through the Strait of Hormuz have been frightening enough. Even if the ongoing efforts to persuade Iran and the US to back down are successful, the damage already done to liquefied natural gas (LNG) infrastructure — primarily in Qatar and substantially in the UAE — will take months to repair and restore to pre-war levels.
This means, among other things, that India’s fertiliser production — hugely dependent on natural gas — will remain hit for the foreseeable future, making us even more dependent on urea and phosphate imports. That makes for dire portents for agriculture. While current buffer stocks are said to be sufficient for the coming cropping season, higher food prices are likely to kick in much earlier due to higher input costs. If fertiliser supply continues to be impaired into the next cropping season, we are looking at lower agricultural production at the end of the year and a further food price spiral. This is an emergency looming.
Because urea accounts for 55% of India’s total fertiliser consumption, and 31 out of its 32 urea manufacturing facilities are gas-based, natural gas supplies are crucial for our agriculture. Approximately 85% of the natural gas consumed by the fertiliser sector is imported as LNG, the majority of which comes to us through the Strait of Hormuz. With Qatar, our largest supplier, declaring force majeure after its Ras Laffan facility was hit by Iran’s missiles, disruption to our supplies is expected to continue for several months, even if the current choke on the Strait of Hormuz is eased now.
The Department of Fertilisers maintains that India currently has "formidable” buffer stocks to insulate farmers from immediate global shocks. Total fertiliser reserves are said to be about 18 million metric tonnes (MT), 36.6% more than last year. It has rushed to tie up contracts for 8.6 million MT from alternative suppliers like Russia and Morocco. As for domestic production, it issued an order last week placing the fertiliser sector in the priority list for LNG supply, under which plants are guaranteed at least 70% of their average LNG consumption to maintain operations. To shield farmers from cost increases, it has indicated willingness to increase the subsidy bill by up to Rs 25,000 crore.
Increasing domestic production, broad-basing suppliers — both of fertilisers and LNG — and prioritising gas allocations are all necessary measures in the face of this perfect storm. But it is also a time to start seriously implementing the recommendations of agriculture experts to optimise fertiliser use, switch to alternative nutrient regimes and adopt more efficient cropping patterns.
Overuse of urea is common in India. While the recommended ratio for nitrogen-phosphorus-potassium is 4:2:1, it reaches 10.9:4.1:1 in India, which, on a national scale, amounts to overuse of urea by 10-12 MT. We could save 25-30% of our urea bill if we could bring this ratio down to optimum.
Indian agriculture is at such a crisis that idealistic solutions begin to seem practical. This is a good time to put some heft into the Namo Drone Didi scheme to promote efficient application of nano-fertilizers, reducing waste and improving nutrient uptake. Another obvious solution, and a long dormant policy, is the switch from urea-hungry crops like rice and wheat to less ravenous ones like soybean and maize.