Beyond Urea: India’s DAP and MOP Crisis, the Subsidy Architecture, and What Decarbonisation Means for Non-Urea Fertilisers
India imports virtually all of its MOP and 70–80% of its DAP. With the West Asia War driving DAP to $750–770/t and MOP to $350–400/t, the non-urea fertiliser subsidy bill has reached Rs 65,000–75,000 crore for FY2025-26. Unlike urea, there is no domestic production alternative at scale. The decarbonisation question for DAP is not feedstock substitution — it is supply chain sovereignty and CBAM exposure on the ammonia component.
Key Takeaways
- India’s fertiliser consumption is approximately 28 to 32 million tonnes of nutrients annually, covering three primary nutrient streams: nitrogen (N, primarily as urea), phosphate (P, primarily as DAP and single superphosphate), and potash (K, primarily as muriate of potash or MOP). India is essentially self-sufficient in nitrogen through domestic urea and ammonium sulphate production. India is structurally import-dependent for both phosphate and potash: it has modest domestic phosphate rock reserves (Rajasthan, Uttar Pradesh) but no economically viable domestic potash deposits, making 100 percent of MOP imports essential and approximately 70 to 80 percent of DAP imports necessary beyond domestic SSP and DAP production.
- DAP (Diammonium Phosphate, (NH₄)₂HPO₄) is the most widely used complex fertiliser in India — approximately 10 to 11 million tonnes per year in consumption. DAP is produced from phosphoric acid (derived from phosphate rock) and ammonia. The ammonia component of DAP accounts for approximately 18 to 20 percent of the molecule’s weight and approximately 35 to 45 percent of DAP’s production cost. DAP’s CBAM coverage — under EU Regulation 2023/956 Annex I, CN code 3105 — includes the embedded emissions from both the phosphoric acid production process and the ammonia inputs. Green ammonia substitution in DAP production would reduce the DAP CBAM embedded emission, but CBAM exposure from India’s DAP exports to the EU is currently modest because India exports relatively little DAP to the EU compared to urea and ammonia.
- MOP (Muriate of Potash, KCl) is a mined product — it does not have a manufactured alternative. India has no domestic potash reserves of commercial scale. All MOP is imported, primarily from Canada (Nutrien), Russia/Belarus (Belaruskali, EuroChem), and Jordan (Arab Potash). The West Asia War has compounded MOP supply disruption by limiting Red Sea shipping that connects Jordan’s Aqaba port to India — diverting some Jordanian MOP to longer Cape of Good Hope routing at higher freight cost. At $350 to 400/t, MOP is at approximately 40 to 50 percent premium to its 2022 to 2023 price range of $240 to 280/t. MOP is not CBAM-covered — it is a mined mineral fertiliser, not a manufactured product from combustion or chemical processes. There is no CBAM exposure on MOP imports to the EU.
- The Nutrient-Based Subsidy scheme governs the fiscal architecture of non-urea fertiliser support. Under NBS, the government fixes the subsidy per kg of nutrient (N, P, K, S) quarterly, and fertiliser companies sell to farmers at market-determined prices — unlike urea, which has a fixed MRP. At $750/t DAP and the current NBS P subsidy of approximately Rs 45/kg P content, the government’s total DAP support covers approximately 40 to 50 percent of the retail DAP cost — leaving farmers paying Rs 27,000 to 32,000/t in the open market, against a subsidised price of approximately Rs 1,350 per 50 kg bag (Rs 27,000/t). The fiscal gap between NBS subsidy and full import cost has reached approximately Rs 25,000 to 30,000 crore for DAP alone in FY2025-26.
- India’s domestic DAP production capacity is approximately 4 to 5 million tonnes per year against consumption of 10 to 11 million tonnes. The gap — 5 to 7 million tonnes of imports — comes from Saudi Arabia (SABIC, Ma’aden), Morocco (OCP), China, and Russia. The West Asia War has disrupted Saudi and some Jordanian phosphate supply, with OCP Morocco emerging as the most reliable large-volume supplier at current crisis prices. India’s DAP diversification strategy — announced by the Ministry of Chemicals and Fertilisers in March 2026 — includes new long-term supply agreements with OCP, Kazakh potash and phosphate producers, and Canadian Nutrien for MOP.
- The decarbonisation pathway for non-urea fertilisers is fundamentally different from urea. For urea, the pathway is clear: replace natural gas hydrogen with green hydrogen, dramatically reducing emission intensity. For DAP, the pathway requires decarbonising the phosphoric acid wet process (which generates gypsum waste and uses sulfuric acid from sulfur combustion) and substituting green ammonia for grey ammonia in the ammoniation step. The phosphoric acid process itself has limited emission reduction potential without CCUS — the sulfuric acid production generates CO₂ that must be captured. Green ammonia substitution reduces the ammonia-related emission by approximately 40 to 45 percent of total DAP embedded emission. MOP decarbonisation requires decarbonising mining and beneficiation processes — electrification of mine operations and processing is the pathway, with limited near-term scope for major emission reduction given the physical nature of potash mining.
India’s fertiliser security debate has been dominated by urea — the nitrogen fertiliser that India produces domestically in large volumes and sells at a government-mandated fixed price with heavy subsidy. The West Asia War’s most dramatic fertiliser price spike was in urea, and the policy response — emergency imports, HPO acceleration, green ammonia break-even analysis — has been correspondingly focused on urea. But the import dependency crisis affecting DAP and MOP is structurally more severe, because unlike urea — where domestic green ammonia production offers a genuine alternative — both DAP (to a large extent) and MOP (completely) are irreplaceable imports that India cannot manufacture domestically at scale regardless of what technology transitions occur.
This structural distinction is the most important analytical point for understanding India’s long-term fertiliser security strategy. Urea security can theoretically be achieved through domestic green hydrogen and green ammonia production — an expensive but achievable pathway that the NGHM and HPO are designed to enable. DAP security requires either domestic phosphate rock development (India has reserves at Maton in Rajasthan and Uttarakhand, but of lower quality than Moroccan and Jordanian ore) plus sulfuric acid and green ammonia for the wet process, or a shift in India’s crop nutrition mix toward alternative P delivery mechanisms. MOP security has no domestic production alternative — India must diversify its supplier base geographically and build strategic reserves, as it has been doing through agreements with Canada, Morocco, and Kazakhstan.
The CBAM exposure on DAP: modest but growing
DAP is covered under CBAM Annex I CN codes in the fertiliser category. The embedded emissions of DAP include Scope 1 emissions from the ammonia synthesis (if grey ammonia is used), the sulfuric acid production (from sulfur combustion), and the phosphoric acid wet process (which is relatively low-emission but energy-intensive). For Indian DAP exported to the EU — a relatively modest flow compared to urea and ammonia — the CBAM certificate obligation per tonne of DAP is approximately €15 to 35/t at current EU ETS prices, reflecting the ammonia and sulfuric acid production emissions embedded in the DAP molecule.
India Fertiliser Sector — Non-Urea Import Profile and CBAM Coverage · April 2026
| Fertiliser | India Import Volume | Crisis Price (Apr 2026) | Primary Suppliers | CBAM Coverage | Decarbonisation Pathway |
|---|---|---|---|---|---|
| DAP (CN 3105) | 5–7 MMT/yr imported | $750–770/t (vs $520–540 pre-war) | Saudi Arabia, Morocco (OCP), China, Russia | Covered under 3105 — embedded emissions from ammonia + sulfuric acid | Green ammonia substitution reduces 40–45% of embedded emission; sulfuric acid requires CCUS or electrification |
| MOP (CN 3104) | ~4–5 MMT/yr (100% imported) | $350–400/t (vs $240–280 pre-war) | Canada (Nutrien), Russia/Belarus, Jordan (APC) | Not CBAM-covered — mined mineral, no combustion embedded emissions | Mining electrification; strategic reserve building; supplier diversification only realistic pathway |
| Single Superphosphate (SSP) | Largely domestic | Linked to imported sulfur and phosphate rock | Domestic production at Udaipur, Jodhpur (Rajasthan phosphate rock) | Partially covered if exported to EU (CN 3103); minimal India→EU export flow | Sulfuric acid electrification; domestic phosphate rock quality improvement |
| NPK complex | ~2–3 MMT/yr imported | Linked to DAP and MOP component prices | China, Russia, Europe | Covered under 3105 for N-P containing grades | Mixed: green ammonia for N component; no alternative for P and K components |
India’s strategic phosphate reserve and the Rajasthan phosphate rock question. India has estimated phosphate rock reserves of approximately 265 million tonnes at Maton, Jhamarkotra, and other Rajasthan deposits, plus smaller deposits in Uttarakhand and Madhya Pradesh. These reserves have historically been considered low-grade (18 to 22 percent P₂O₅ versus 28 to 33 percent for Moroccan ore) and economically marginal for large-scale DAP production. The West Asia War-driven crisis has changed this calculus: at $770/t imported DAP, the economics of beneficiating Rajasthan phosphate rock to 28 percent grade and producing domestic DAP become commercially viable for the first time in a decade. RSMML (Rajasthan State Mines and Minerals Ltd) has been asked by the state government to accelerate its Jhamarkotra mine expansion, and IFFCO has signed an MOU to co-develop a domestic DAP plant using beneficiated Rajasthan ore. If this initiative progresses, it could add 1 to 2 million tonnes of domestic DAP capacity by 2028 to 2030 — reducing India’s import dependency from 70 to 80 percent toward 50 to 60 percent. This is not decarbonisation — it is supply security. But domestic production with green ammonia (rather than imported DAP made with grey ammonia) would simultaneously deliver a supply chain improvement and an emission reduction.
Frequently Asked Questions
What exactly does CBAM cover in India’s fertiliser exports — does it include all DAP?
CBAM Annex I covers specific fertiliser products under Chapter 31 CN codes. DAP (diammonium phosphate) is covered under CN code 3105 30 and related subheadings. The embedded emissions include the ammonia synthesis emissions (from the ammoniation step), the sulfuric acid production emissions (from sulfur combustion in the Claus process), and any direct fossil fuel combustion in the phosphoric acid production process. Single superphosphate (3103) is covered if exported to the EU. MOP (3104) is not covered — potassium chloride is a mined mineral with no combustion-related embedded emissions in its scope. India’s actual DAP exports to the EU are modest — approximately 200,000 to 400,000 tonnes per year — limiting the financial impact of CBAM on DAP relative to the much larger urea and ammonia CBAM exposure.
Is there any domestic alternative to MOP for India’s agricultural sector?
There is no domestic commercial potash deposit that can substitute for MOP at scale. India has small deposits of langbeinite (a potassium-magnesium sulfate mineral) in Rajasthan, but these are economically marginal at current prices. The more strategically significant alternative to MOP is potassium recovery from organic waste streams — specifically from sugarcane bagasse ash (which contains significant potassium) and from agricultural residue burning. Biochar from agricultural residue contains potassium that can substitute for some MOP on smallholder farms. The Central Soil Salinity Research Institute has demonstrated that potassium-rich biochars from rice straw can reduce MOP application requirements by 20 to 30 percent on pilot plots. At scale, this is not a full substitute for MOP imports, but a meaningful reduction in import dependency that also addresses the stubble burning problem contributing to North India’s winter air pollution.
How does the Nutrient-Based Subsidy mechanism differ from the urea subsidy for CBAM purposes?
The urea subsidy fixes the Maximum Retail Price at Rs 242 per 45 kg bag and pays the gap to producers and importers through a direct subsidy reimbursement. The NBS scheme for DAP, MOP, SSP, and complex fertilisers provides a fixed per-kg subsidy on the nutrient content (N, P, K, S) rather than fixing the retail price — allowing retail prices to fluctuate with market prices while the government pays the defined NBS rate. For CBAM purposes, neither subsidy mechanism affects the embedded emission calculation — CBAM assesses the carbon content of the imported product regardless of how the purchase is subsidised. The NBS rates are periodically revised to partially track international prices, but the government has been reluctant to pass through the full price increase to farmers — creating the fiscal gap that the West Asia War has made acute.
Sources
- Department of Fertilisers — Nutrient-Based Subsidy rates FY2025-26 — N, P, K, S per kg rates
- IFA — World Fertilizer Trends and Outlook 2026 — DAP and MOP price data
- Ministry of Chemicals and Fertilisers — India fertiliser import data and supplier diversification strategy March 2026
- RSMML — Jhamarkotra phosphate mine expansion — capacity and grade data
- European Commission — CBAM Regulation EU 2023/956 — Chapter 31 fertiliser coverage
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