Context
The Union Cabinet has approved the National Investment Policy for Urea (NIPU)-2026 to promote fresh investments in gas-based urea plants and enhance domestic urea production. The policy aims to reduce India’s import dependence, strengthen fertilizer self-reliance and ensure adequate urea availability for agriculture.
Explanation
- Urea is the most widely used nitrogenous fertilizer in India, containing 46% nitrogen, making it essential for improving crop productivity, especially during the Kharif and Rabi seasons.
- India is among the world’s largest consumers of urea, but domestic production is insufficient, requiring significant urea imports, which expose the country to global price and supply disruptions.
- The National Investment Policy for Urea (NIPU) was first introduced in 2012 and subsequently amended in 2013, 2014 and 2015 to encourage investment in gas-based urea plants and revive domestic manufacturing.
- NIPU-2026 introduces a clearer incentive structure by separating fixed and variable costs, providing a Return on Equity (RoE) band of 12–16%, and reducing foreign exchange risk through rupee-denominated cost conversion.
- Fertilizers are sold to farmers through the Direct Benefit Transfer (DBT) system using Point of Sale (PoS) devices linked with Aadhaar authentication, while the Government compensates manufacturers through fertilizer subsidy.
- India is also promoting Integrated Nutrient Management (INM), balanced fertilizer use and alternatives such as Nano Urea to improve nutrient-use efficiency and maintain long-term soil fertility.
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