India Faces Growing Fertilizer and Food Security Concerns Amid Escalating Tensions with Iran

Global Food Security Under Threat: LNG Supply Disruption and Fertiliser Shortages

Key Highlights

• $100/barrel oil prices breach due to strikes on major oil and gas facilities in the Gulf region and Iran
• 60-70% cost of fertiliser production attributed to liquified natural gas (LNG)
• Qatar, a key LNG supplier to India, has shut down production, leading to a shortage of LNG supplies and rising domestic LPG cylinder prices

Impact on Agriculture and Food Security

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The recent LNG supply disruption has sent shockwaves through the agricultural sector, with urea and complex NPK fertiliser production plants experiencing shutdowns or low productivity. This has led to uncertainty in production and delivery, exacerbating existing challenges in the sector.

Rising Fertiliser Demand Drives Inflation

As the Northern hemisphere enters summer, farmers will require increased urea supplies, leading to a scenario of over-demand and lesser supply. This has resulted in a 25% jump in urea prices in countries like Egypt, and is expected to drive up prices globally.

India's Dependence on LNG Imports

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India relies heavily on LNG imports from the Gulf region to supply domestic urea production plants. With LNG production halting and gas prices soaring, India may face lesser and more expensive LNG for its urea production, further driving up prices for farmers and taxpayers.

Hyper Inflation in Fossil Fuel Prices and Rising Shipping Costs

The blockade of the Strait of Hormuz and the Suez Canal has prevented oil and gas supplies from reaching India, further exacerbating the situation. Shipping blockades have also disrupted trade, with 60,000 tonnes of rice stuck in Indian ports awaiting shipment.

Decarbonising Indian Agriculture

In light of recent global food security scares, India needs to decarbonise its agriculture and adopt indigenous agrarian research and policy to build agrarian swaraj. This can be achieved by installing BIO-LNG/Bio-CNG to urea plants and promoting natural bio-fertiliser productions.

Diversifying Fertiliser Supply Source

India needs to diversify its suppliers and consider relationships with Russia and other suppliers to mitigate the impact of the Gulf region's shutdown. Additionally, the government should incentivise the production of newer generation agri-machinery that works well on ethanol, bio-diesel, or bio-cng.

Strengthening Food Reserves

The government should use this time to purchase excessive rice and food grains in the market and build up strategic food reserves to mitigate the impact of the crisis.