New Delhi, Aug 19: India’s fertiliser sector is set for a significant investment cycle, with companies expected to commit around Rs 80,000-90,000 crore in capital expenditure over the next six months, according to rating agency ICRA.
Pic Credit: Pexel
The expected investment follows the government’s New Investment Policy for Urea-2026 (NIPU-2026), which seeks to encourage fresh urea production capacity and reduce the country’s dependence on imports. Projects approved under the policy are expected to be commissioned within around 3.5 to four years.
The proposed investments come against a continuing gap between domestic urea production and demand. India had an installed urea production capacity of around 30.6 million tonnes per annum in 2025-26, while demand stood at nearly 39.9 million tonnes. Imports therefore accounted for about 27 per cent of the country’s urea requirement.
The fresh capacity is expected to strengthen domestic availability and improve India’s self-reliance in urea production over the coming years, with the impact becoming more visible from 2030-31 as new facilities begin operations.
ICRA, however, noted that the new policy provides a narrower return framework for investors. The return on equity range has been revised to 12-16 per cent, compared with 12-20 per cent under the earlier policy. Despite the tighter range, the agency expects project returns and debt-servicing indicators to remain comfortable.
The investment cycle could also generate wider business opportunities across the industrial and energy supply chain. Companies involved in gas transmission, LNG terminals, gas trading, engineering, construction and specialised equipment manufacturing are expected to benefit from the development of new fertiliser plants.
Each new urea plant with a capacity of 1.27 million tonnes is estimated to create additional natural gas demand of around 2.2 million standard cubic metres per day.
However, access to competitively priced gas remains an important challenge for the sector. The share of imported LNG in fertiliser-sector gas consumption rose to around 85 per cent in 2025-26 from 64 per cent in 2020-21. ICRA has highlighted the need for companies to diversify their gas sourcing arrangements to manage supply disruptions and price volatility.
For the new projects, timely execution, effective cost management and high capacity utilisation will be critical to maintaining healthy financial performance. ICRA expects utilisation levels of more than 95 per cent to remain important for the viability of the upcoming facilities.
The proposed investment of up to Rs 90,000 crore is therefore expected to provide a major boost to domestic fertiliser manufacturing while creating fresh opportunities for businesses across the energy, engineering, infrastructure and industrial equipment sectors.