Govt eyes GSFC to boost automotive-grade urea supply amid Gulf disruptions

New Delhi: India is stepping up efforts to resolve the long-pending issue of manufacturing technical-grade urea (TGU) and plans to rope in Gujarat State Fertilizers and Chemicals (GSFC) for producing this key component used in diesel exhaust fluid (Adblue), critical to making diesel vehicles, two people aware of the development told Mint.

India has a capacity to manufacture 1.5 lakh tonnes of the solid compound annually, as against the automotive industry's requirement for 6 lakh tonnes, with the gap met through imports from the Gulf. However, as the West Asia war continues to disrupt supply chains, the Centre is now considering bolstering domestic production, the people cited above said, requesting anonymity.

Urea used in agriculture and technical-grade urea are chemically the same compound. However, technical-grade urea is a highly purified form with a wide range of industrial applications, including in adhesives, and in the manufacture of dyes, pigments, and cosmetics.

“There is thinking now to prepare for future supply disruptions also, so that there is lesser import dependence for TGU,” said the first of the two persons cited above, adding that GSFC was being considered for this plan.

In the weeks after the war broke out in West Asia, discussions began between the ministries of chemical and fertilizers, and heavy industries about TGU supplies for diesel vehicle manufacturers, after industry lobby group Society of Indian Automobile Manufacturers (Siam) sought to increase TGU output from Gujarat Narmada Valley Fertilizers and Chemicals (GNFC), which according to automakers is the sole maker of the urea used in making Adblue, Mint reported on 15 April.

“While automakers procure TGU from GNFC, its parent company GSFC also has some capacity to make the compound, due to which it is being considered as another source,” said the second person.

Queries emailed to the spokespersons of the ministries of chemicals and fertilizers, heavy industries, GSFC, GNFC, Siam, diesel vehicle makers Tata Motors, Mahindra & Mahindra, and Ashok Leyland remained unanswered.

Increasing local TGU manufactuting capacity would help the auto sector cut reliance on imports. “It will be easier to procure TGU locally for auto companies, but there needs to be a check on the quality of the compound that is supplied from new facilities,” said I.V. Rao, distinguished fellow at the transport and urban governance department at The Energy and Resources Institute (Teri).

The development assumes importance for India, the second-largest global consumer of fertilizer and the world’s largest urea importer. It has ₹1.77 trillion as budgeted fertilizer subsidy bill, the bulk of which continues to be directed towards urea.

Saudi Arabia, the United Arab Emirates (UAE) and Qatar together account for a third of India’s urea imports, but the war in the region has disrupted supplies.

Urea, which accounts for about 55% of India's total fertilizer consumption by volume, has an import dependency of around 15%.

The fertilizer requirement for the kharif 2025 season (June to October) was 18.5 million tonnes of urea. According to government data, urea availability stood at 7.66 million tonnes as on 11 May, compared to 7.54 mt in corresponding period of last year.

Due to the high demand of urea in fertilizers, and consequently, India’s massive agriculture sector which employs about 40-50% India’s workforce, the diversion of any urea to other user industries should be limited, and carefully carved out, he said.

“We had anticipated that the conflict situation would improve, but that has not happened. It has evolved into a severe problem,” said Nand, who also previously worked with the Fertilizer Association of India, an industry lobby group.

Some other experts said diverting urea demand is a crucial balancing act. "The government’s move to double down on technical-grade urea (TGU) production is being seen as a calibrated and informed balancing act aimed at supporting industrial demand while safeguarding adequate fertilizer availability for the agriculture sector," said Nutan Kaushik, director general of Amity Food and Agriculture Foundation, a think-tank.

Farmer associations were of the view that agriculture should not suffer on account of industry producing more TGU. "While urea has wide-ranging applications across multiple sectors, the government’s priority should remain ensuring uninterrupted availability of the fertilizer for agricultural use during the ongoing kharif season," said Ranbir Singh, a sugarcane farmer and president of the Saharanpur-based Kisan Nyay Morcha, a farmers' group.