India's urea industry, which contributes to a significant portion of chemical fertiliser demand, has taken strong strides towards self-sufficiency. As per a Crisil Ratings report, the import dependency in the sector is expected to reduce to 10-15 per cent in the near to medium term from its peak of 30 per cent seen in financial year 2020-21.
This, the rating agency believes, will be mainly driven by the commencement and stabilisation of new capacities. "These new plants will see steady, regulated returns as utilisation improves. As for the legacy capacities, profits will remain stable this fiscal, in line with raw material prices and policies," Crisil said.
Also, adequate subsidy allocation will keep the credit profiles of urea industry companies stable, the rating agency said.
Urea demand growth had outpaced production between fiscals 2007 and 2012, because of which the share of imports rose to 20-25 per cent of consumption. According to Anand Kulkarni, Director, CRISIL Ratings, "The NIP (New Investment Policy) 2012 has played a crucial role in reducing import dependence structurally. The new plants are expected to operate at 100 per cent capacity utilisation this fiscal, as against 85-90 per cent in the previous fiscal, as operations stabilise. The likely commissioning of one more plant by next fiscal will further boost domestic production.
"Higher capacity utilisation will improve operating efficiency and profitability of the new plants this fiscal. Going ahead, the rating agency said a possible uptick in nano urea adoption over the medium term can accelerate India's self-sufficiency.
The Government of India through the Department of Fertilizers imports urea (agriculture purpose) on government account to bridge the gap between production and demand. In 2023-24, India imported urea to the 70.42 lakh tonne, costing $2.608 billion, official data showed.