The Middle East crisis is disrupting fertiliser and energy supply chains, raising cultivation costs, straining subsidies, and increasing food inflation risks in India
The ongoing conflict in the Middle East—particularly involving Iran and disruptions around the Strait of Hormuz—has evolved from a geopolitical confrontation into a systemic shock for global food and energy systems. For India, a major agricultural economy that remains heavily dependent on imported fertilisers and energy, the implications are both immediate and structural. The conflict is transmitting through rising input costs, disrupted supply chains, fiscal pressures, and inflationary risks, with early signs already visible and potentially intensifying if the crisis endures.
At the heart of the crisis lies India’s dependence on fertiliser imports from the Gulf region, particularly nitrogen-based fertilisers that rely on natural gas feedstock. The Strait of Hormuz, increasingly exposed to geopolitical tensions and maritime security risks, is a critical chokepoint through which India sources much of its urea, ammonia, and liquefied natural gas. Shipping disruptions and heightened security risks have constrained supply, pushed up freight costs, and tightened global markets.
At the heart of the crisis lies India’s dependence on fertiliser imports from the Gulf region, particularly nitrogen-based fertilisers that rely on natural gas feedstock.
India, the world’s second-largest fertiliser consumer after China, imports significant volumes of both raw materials and finished fertilisers, with nearly 40 million tonnes of urea used annually. In addition, India remains highly dependent on imports for phosphatic fertilisers and almost entirely reliant on imports for potash, further amplifying its exposure to global supply shocks. Current domestic stocks are considered adequate for the upcoming sowing season, but analysts warn of shortages if the conflict persists.
Disruptions in ammonia and gas supply have also raised production costs and tightened operational margins for domestic fertiliser plants, highlighting structural vulnerabilities in India’s dependence on Gulf gas imports. In response, the government has accelerated efforts to diversify sourcing, engaging with alternative suppliers—including Russia, Belarus, and Morocco—to stabilise availability and secure long-term contracts.
Higher fertiliser prices have fed directly into increased cultivation costs for Indian farmers. Fertilisers remain indispensable for maintaining yields of staple crops such as rice and wheat. When prices rise, farmers often compensate by reducing application rates, which can depress productivity and jeopardise future food security. Experts caution that if fertiliser shortages continue into subsequent crop cycles, output losses and lagged increases in food prices could follow.
Higher fertiliser prices have fed directly into increased cultivation costs for Indian farmers.
The conflict has simultaneously triggered volatility in global oil and gas markets. As tensions disrupt the Hormuz corridor, crude prices have risen sharply, mirroring past episodes such as the Russia–Ukraine conflict (2022–23). This poses a twofold challenge for India: costlier fuel imports drive broader inflation, while higher LNG prices constrain fertiliser production capacity. Agriculture, though biological in nature, is deeply energy-dependent—diesel fuels for irrigation, mechanisation, and transportation; natural gas underpins fertiliser manufacturing. The escalation of oil prices, therefore, translates directly into cost-push inflation across India’s agri-value chain. These pressures are further compounded when global uncertainty triggers currency depreciation, increasing the landed cost of imports.
Trade channels have also been affected as the Middle East represents a key but variable export destination for Indian agricultural products such as rice, sugar, and tea. Rerouted shipping, higher insurance premiums, and vessel delays have disrupted trade reliability and competitiveness. Concurrently, imports of fertilisers and energy inputs are arriving late and at elevated costs. Together, these dynamics create dual pressures on India’s farming system: higher input costs reduce profitability, while export bottlenecks limit revenue potential.
India’s fertiliser subsidy regime—crucial for shielding farmers from global market volatility—faces renewed stress. Rising international prices amplify total subsidy outlays, straining public finances. As the government absorbs much of the imported price shock, fiscal space narrows, limiting resources for rural development or infrastructure spending. Policy experts warn of a repeat of subsidy escalation observed during the Russia–Ukraine crisis, when fertiliser subsidy bills surged under similar external shocks. This creates an economic trade-off: protecting farmers sustains production but widens fiscal deficits; transferring the burden risks reduced fertiliser use and lower yields. Carefully calibrated policy management will be vital in balancing these competing concerns.
Rising input costs elevate farm gate prices, while supply-chain inefficiencies amplify retail inflation.
The combined pressures of fertiliser shortage, energy price escalation, and transport disruption have created conditions ripe for food inflation. Rising input costs elevate farm gate prices, while supply-chain inefficiencies amplify retail inflation. Such inflation disproportionately affects lower-income households and can strain India’s food security mechanisms, including the Public Distribution System (PDS). Experts warn of a potential ‘second-round food price shock’ if disruptions persist through the monsoon cropping period.
Beyond immediate disruptions, the crisis exposes India’s structural vulnerabilities, including:
In response, India is pursuing reforms aimed at expanding domestic fertiliser production, diversifying import sources, and promoting bio-fertilisers and renewable energy in agriculture. These measures aim not only to stabilise short-term supply but to enhance long-term resilience.
India is pursuing reforms aimed at expanding domestic fertiliser production, diversifying import sources, and promoting bio-fertilisers and renewable energy in agriculture.
The ongoing Middle East crisis has transcended regional boundaries to become a full-spectrum food systems shock. For India, it has simultaneously affected fertilisers, energy, trade, fiscal stability, and food prices. While immediate impacts—rising input costs and shipping delays—are already evident, the long-term outcome will depend on how effectively India adapts. Strengthening domestic capacities, diversifying supply chains, and enhancing resource efficiency will be critical to insulating Indian agriculture from future geopolitical and energy shocks.
Shoba Suri is a Senior Fellow with the Health Initiative at the Observer Research Foundation.
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.
Dr. Shoba Suri is a Senior Fellow with ORFs Health Initiative. Shoba is a nutritionist with experience in community and clinical research. She has worked on nutrition, ...
Read More +
PREV
