NIPU-2026: A New Investment Policy for Urea

India still imports a real share of the urea its farmers use every year. A new Cabinet policy wants to close that gap for good.

📑 Contents

1Must Know
2Good to Know
3Test Yourself
4Great to Know
5Current Affairs

Must Know

Urea is India’s most widely used fertilizer, and the only major one still sold at a government-fixed Maximum Retail Price (MRP), regardless of its actual cost of production.
The Fertilizer Control Order, from 1957, first regulated urea’s sale, pricing, and quality.
On 15 July 2026, the Cabinet Committee on Economic Affairs (CCEA) approved the National Investment Policy for Urea-2026 (NIPU-2026). PM Narendra Modi chairs the CCEA, and the policy was proposed by the Department of Fertilizers.
NIPU-2026 replaces the earlier New Investment Policy of 2012 (NIP-2012), whose new-investment window had expired in October 2019.
Under NIP-2012, 6 new urea units were set up in total: 4 through joint-venture companies of PSUs, and 2 by private companies.
India currently has 33 operational urea manufacturing units, with a total installed capacity of 269.42 lakh metric tonnes (LMT).

Good to Know

NIPU-2026 makes three specific changes from NIP-2012. It separates fixed and variable costs, for greater transparency.
It also introduces a Return on Equity (RoE) band, with a floor of 12% and a ceiling of 16%.
It mitigates foreign-exchange risk too, by converting fixed costs into rupees after four years, based on the prevailing exchange rate.
These changes are estimated to save over ₹250 crore for each new plant built under NIPU-2026, compared to the older policy.
India still imports a real share of its urea demand, since domestic production doesn’t fully cover the gap with actual demand.
Urea’s mandatory neem-oil coating, in place since 2015, makes it bitter and unsuitable for industrial diversion, helping ensure it reaches farmers.

Test Yourself

Great to Know

Urea sits outside the Nutrient Based Subsidy (NBS) system that covers phosphatic and potassic (P&K) fertilizers since 2010. Urea alone still runs on a direct, government-fixed MRP. Don’t assume all fertiliser subsidies work the same way.
NIPU-2026’s core fix targets a real investor complaint from NIP-2012: foreign-exchange risk on fixed costs. It converts that risk into rupees after four years, instead of leaving investors exposed indefinitely.
The policy’s real goal is import substitution. There is a genuine gap between domestic urea production and national demand. Every new plant built under NIPU-2026 is meant to cut the import bill directly, not just add generic capacity.

Current Affairs

On 4 August 2026, the government detailed PM-PRANAM’s fertilizer-reduction incentives. (Source: PIB)
5 States and UTs cut chemical fertilizer use, by 0.18 lakh tonnes in 2025-26. (Source: PIB)
States earn 50% of the subsidy they save, as an incentive. (Source: PIB)
Separately, the government is pushing Nano Urea and Nano DAP adoption. (Source: PIB)
Kisan Drones now help with foliar spraying, and PMKSKs distribute the nano fertilizers directly. (Source: PIB)
Gujarat and Rajasthan both offer 50% subsidies, to boost farmer uptake. (Source: PIB)
On 24 July 2026, the government capped DAP prices, at ₹1,350 per 50-kg bag. (Source: PIB)
This special financial support held prices steady, through Kharif 2026. (Source: PIB)
Separately, West Asia’s conflict disrupted fertilizer supply chains, raising freight and insurance costs. (Source: PIB)
India responded with diversified sourcing, and collective procurement, through an industry consortium. (Source: PIB)
On 21 July 2026, the government said 2025-26’s total fertilizer requirement was assessed at 677.18 LMT. This was about 4% higher than 2024-25’s 649.43 LMT, not the 41% some reports had claimed. (Source: PIB)
During Kharif 2026 (1 April to 14 July), consumption of major fertilizers — Urea, DAP, MOP and NPKS — stood at 151.74 LMT. This was slightly lower than 157.05 LMT over the same period in Kharif 2025. (Source: PIB)
To secure supply, Indian companies signed 2025-26 import agreements for 31 LMT of DAP from Saudi Arabia. Further deals covered 25 LMT of DAP/TSP from Morocco and 30.10 LMT of DAP/NPKs from Russia. (Source: PIB)
Separately, the government detailed the 6 new urea plants set up under NIP-2012. Together, they added 76.2 LMTPA of capacity, including units at Ramagundam, Gorakhpur, Sindri, Barauni, Panagarh, and Gadepan-III. (Source: PIB)
Indigenous urea production capacity has risen from 207.54 LMTPA in 2014-15 to 269.42 LMTPA in 2026-27. Actual urea production rose from 225 LMT in 2014-15 to a record 314.07 LMT in 2023-24. (Source: PIB)
The government has also approved a new 12.7 LMTPA Brownfield Ammonia-Urea Complex at Namrup, Assam. It will be developed as the Assam Valley Fertilizer and Chemical Company Limited (AVFCCL). (Source: PIB)
To bridge near-term gaps, India secured 42.7 LMT of urea through global tenders in 2026. This came in two rounds: 25 LMT in April and 17.7 LMT in June. (Source: PIB)
15 July 2026: The CCEA approved NIPU-2026, to encourage new gas-based urea manufacturing investment. This supports the Atmanirbhar Bharat goal of self-sufficiency. (Source: PIB)
15 July 2026: NIPU-2026 introduces a Return on Equity band of 12% to 16%. It is projected to save over ₹250 crore per plant, compared to the outgoing NIP-2012 framework. (Source: PIB)