Urea production drops from 24 liters to 18 liters due to conflict in West Asia

New Delhi: Domestic urea production took a hit due to the crisis in West Asia, with output falling to 1.8 million tonnes this month from an earlier average of 2.4 million tonnes. But officials said output would increase as more LNG becomes available through “spot purchases” every two weeks.The government insists fertilizer stocks are adequate and is tapping alternative sources to boost supplies, even as urea units that were put on annual maintenance shutdown this month began to resume production. The Center has also asked states to monitor the unusual surge in fertilizer sales during the “off season” to prevent any hoarding and black marketing, people familiar with the matter said. Strict action will be taken against any such activity, they said, while adding that farmers need not panic as supply of soil nutrients is adequate and available at current prices.Briefing the media on Monday, Aparna Sharma, Additional Secretary, Fertilizer Department, said that the current soil nutrient reserves are 180 million tonnes, which is 22 per cent higher than last year. Regarding source diversification, she said that a global tender for 1.31 million tons of urea has been launched, and long-term arrangements have been linked to countries such as Saudi Arabia and Oman. Additionally, there is a focus on sourcing from other countries, including Russia, Morocco, Australia, Indonesia, Malaysia, Jordan, Canada, Algeria and Egypt.On the impact of the conflict on the fertilizer industry, Sharma said the Gulf region accounts for about 20-30% of India’s urea imports, 30% of diammonium phosphate and 50% of LNG demand. In addition to increasing freight costs, the conflict has pushed up the cost of inputs such as liquefied natural gas, ammonia and sulfur.She added that notifications on natural gas supply allocations affected domestic urea production, resulting in a temporary reduction in output of 30,000-35,000 tons/day. After receiving the notice, the annual maintenance work of some units was carried out in advance.Sharma said that 27 urea units are currently receiving gas supply and the units undergoing maintenance are now ready to resume operations. The government has purchased “spot natural gas” to support domestic production, and the current supply rate of LNG is 75%-80%. Of the fertilizer plant’s daily natural gas demand of 52 million standard cubic meters, about 15mmscd is procured from the spot market.Spot purchasing prices were $19.5-19.6 per million BTU, compared with pre-war prices of $11-12 per million BTU.Officials say all of these factors will drive up the subsidy burden significantly.