Key Takeaways

• Ammonia is India’s largest CBAM-covered fertiliser product for EU export purposes — both as direct product (anhydrous ammonia for industrial applications) and as embedded feedstock in urea and ammonium nitrate. India exported approximately 1.2 to 1.5 million tonnes of nitrogen fertiliser equivalent to EU-adjacent markets in FY2024-25, primarily via Gujarat and Maharashtra port clusters. The EU CBAM Regulation covers ammonia (CN 2814), urea (CN 3102), and nitric acid (CN 2808) — capturing the full fertiliser sector’s direct CBAM exposure.
• The grey ammonia production cost in India is dominated by natural gas feedstock. Steam methane reforming consumes approximately 25 to 27 MMBtu of natural gas per tonne of ammonia. At pre-war Indian LNG spot prices of $10 to $12 per MMBtu, the gas cost per tonne of ammonia was approximately $250 to $324. At current post-war LNG prices of $24 to $28 per MMBtu, the gas cost per tonne of ammonia is approximately $600 to $756 — more than double. At $26/MMBtu average, grey ammonia all-in production cost in India is approximately $680 to $820 per tonne — approaching or exceeding the production cost of green ammonia with SIGHT support at approximately $650 to $770 per tonne.
• The CBAM cost on grey ammonia exports to the EU adds approximately €140 to 165 per tonne (at EU ETS €84.20/tCO₂e and grey ammonia embedded emission of approximately 2.1 to 2.5 tCO₂e/t above the EU benchmark). Green ammonia — produced via electrolysis using renewable electricity with near-zero embedded emission — carries effectively zero CBAM obligation, since its embedded emission is below the EU benchmark. The combination of LNG price shock and CBAM creates a delivered-price advantage of approximately €250 to 320 per tonne for green ammonia over grey ammonia for an EU buyer in 2026 — despite green ammonia’s higher production cost.
• AM Green’s Kakinada green ammonia facility in Andhra Pradesh — India’s first commercial-scale green ammonia project, backed by Greenko and ACME Solar and financed partially through IFC — is targeting an initial capacity of 400,000 to 500,000 tonnes per year of green ammonia for export to Japan and Korea, with the European market as the second phase target. Kakinada’s competitive advantage is access to Andhra Pradesh’s wind-solar hybrid resources (capacity factor approximately 45 to 50 percent with wind-solar complement) and port infrastructure that minimises logistics cost to export markets. AM Green’s committed offtake agreements with Japanese trading houses and Korean chemical companies provide the revenue certainty for the project’s financial close.
• The LNG price shock has created an unexpected near-term advantage for green ammonia projects that were previously considered commercially marginal. Several Indian green ammonia projects that were at FID stage but waiting for financing terms have advanced to construction approval since October 2025, because the revised LNG-grey ammonia production cost makes the green-grey cost comparison far less unfavourable. The SIGHT programme’s production incentive — which was designed to close a $200 to $300 per tonne cost gap between green and grey at pre-war prices — now only needs to close approximately $50 to $150 per tonne, making SIGHT-supported green ammonia commercially viable at current LNG prices even before accounting for the CBAM advantage on EU-bound exports.
• The critical risk to green ammonia’s export competitiveness is LNG price normalisation. If the West Asia conflict is resolved and LNG spot prices return to $12 to $15 per MMBtu — the approximate pre-Hormuz disruption price — grey ammonia production cost falls back to $350 to $420 per tonne and the CBAM advantage alone (€140 to 165/t, approximately Rs 12,500 to 14,700/t) is insufficient to close the green-grey cost gap. Long-term green ammonia export commitments must be priced against a conservative LNG baseline rather than current spot prices to avoid the project economics becoming adversely dependent on sustained geopolitical disruption.