The government is looking to boost domestic urea production through the commissioning of seven plants –- both greenfield and brownfield -– as part of its new investment policy. The old policy expired in December 2025.
Sources said the government in recent meetings with industry players raised the issue of using domestic ammonia produced from coal gasification as feedstock for running these new setups. The framework for this could be on the lines of the current mechanism through which fertiliser plants use imported LNG for making urea.
The move to opt for ammonia produced from coal gasification has gathered added urgency after the West Asia crisis exposed India’s urea sector steep price hikes and supply shocks. The sector suffered similar shocks during the Russia-Ukraine war in 2022. Almost 95 per cent of India’s domestic urea production capacity depends on natural gas, with a significant portion sourced through imported LNG. Sources said although coal-based urea projects require higher capital expenditure than conventional gas-based plants, they offer some significant advantages. These include lower operating costs; complete feedstock security; insulation from international LNG price volatility; lower carbon capture costs due to concentrated carbon dioxide streams and substantial long-term foreign exchange savings.
According to industry assessments, coal-based urea can reduce production costs by $50–75 per tonne compared with LNG-linked facilities under prevailing market conditions. “After capital recovery, production costs could potentially fall to $300–350 per tonne, making Indian coal-based urea globally competitive,” an industry official said.
The fact that the government has announced coal gasification support programmes worth over ₹37,500 crore, including the ₹8,500 crore exclusively for urea, can further help in synergising the two.
According to industry estimates, supporting 10-15 coal-based fertiliser projects today could save India tens of thousands of crores annually in import bills and subsidy outgo. Sources said the industry is seeking government support in the form of a dedicated coal-to-urea investment policy; parity support with gas-based fertiliser projects; infrastructure status for coal gasification plants; tax and customs incentives for capital-intensive projects; and long-term offtake assurance mechanisms.
On the new investment policy on urea, the sources said the policy which is in the works is aimed at raising India’s urea production by almost 9-10 mt over the next eight years.
Each unit is proposed to have an approximate annual production capacity of 1.27 million tonnes of urea.
This is projected to save the exchequer more than ₹10,500 crore annually in subsidies (as per conservative estimates) assuming an average imported urea price of $345 per tonne.
The guaranteed buy-back under the new policy, as per the sources, will be available to the units for a period of eight years from the start of production.
The new policy, the sources said, has taken the approximate project cost of 11,000 crore for greenfield category and ₹9,000 crore for brownfield category that is based on an exchange rate of ₹ 90 to a dollar. Some plants have already been announced pending the formal policy announcement.
Key advantages and targets for coal-based urea
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