Background and Objective
The National Investment Policy for Urea-2026 for Atmanirbhar Bharat, known as NIPU-2026, seeks to attract fresh investment for establishing new gas-based urea manufacturing plants in India.
Its principal objectives are to:
- increase domestic urea-production capacity;
- reduce dependence on imports;
- provide long-term certainty to investors;
- ensure reliable fertiliser availability for farmers;
- strengthen fertiliser and energy security.
The policy became necessary because domestic production remains lower than national demand, requiring India to import urea.
Evolution of the Policy
The earlier New Investment Policy-2012 covered greenfield, brownfield, expansion, revival and modernisation projects in the urea sector. Its investment window expired in October 2019.
Six new plants were established under the earlier framework, including four joint-venture plants involving public-sector enterprises and two private-sector plants. Together, they added substantial domestic production capacity.
NIPU-2026 provides a fresh framework for new investments and applies to the establishment of new gas-based urea units.
Major Features
The policy introduces a more transparent system for determining the price at which urea produced by new plants will be supported.
Its major features include:
- separate calculation of fixed and variable production costs;
- a minimum Return on Equity of 12%;
- a maximum Return on Equity of 16%;
- conversion of eligible fixed costs into Indian rupees after four years;
- adjustment for foreign-exchange risks associated with imported equipment and external financing;
- assured policy treatment for eligible new gas-based plants.
The separation of fixed and variable costs is intended to improve transparency and prevent excessive compensation arising from changes in gas prices or currency values.
The government estimates that the revised framework may generate savings of more than ₹250 crore for each plant compared with the earlier policy.
Importance and Concerns
The policy can support:
- greater self-sufficiency in urea;
- reduction in the fertiliser import bill;
- establishment of modern manufacturing capacity;
- employment and industrial development;
- greater stability in fertiliser supply;
- reduced vulnerability to international price disruptions.
However, gas-based urea production remains dependent on natural gas, part of which may be imported. Therefore, reducing urea imports may not completely eliminate external energy dependence.
Other concerns include:
- high capital cost of new plants;
- large fertiliser-subsidy expenditure;
- fluctuations in natural-gas prices;
- environmental emissions from fertiliser production;
- excessive agricultural use of subsidised urea;
- imbalance in the use of nitrogen, phosphorus and potassium.
Way Forward
The investment policy should be combined with wider fertiliser-sector reforms.
Important measures include:
- improving energy efficiency of urea plants;
- securing reliable natural-gas supplies;
- encouraging green ammonia and low-carbon fertiliser production;
- promoting balanced fertiliser application;
- expanding soil-testing services;
- improving nutrient-use efficiency;
- preventing diversion of subsidised urea;
- gradually aligning production incentives with environmental performance.
Conclusion
NIPU-2026 seeks to increase domestic urea production by providing a predictable and financially viable framework for new gas-based plants. Its long-term success will depend on balancing self-sufficiency and investor viability with subsidy sustainability, energy security and efficient fertiliser use.
