Fertiliser cargoes in focus as Iran tightens Strait transit rules
Iran has tightened transit rules for commercial shipping through the Strait of Hormuz, significantly disrupting the movement of fertiliser cargoes from Gulf countries to India.
As many as 16 India-bound ships carrying fertiliser were stranded, including 8 ships with ~330,000 MT of urea, 4 ships with ~257,000 MT of di-ammonium phosphate (DAP), 1 ship carrying ammonia, and 3 ships carrying ~110,000 MT of sulphur.
Shipping transits through the Strait have collapsed by over 95%, disrupting energy and fertiliser flows — a significant economic and food security risk for India given its high dependence on Gulf-sourced fertiliser imports.
India imports ~70% of its urea from Gulf countries (Oman, Saudi Arabia, Qatar, UAE) and ~42% of DAP from Saudi Arabia; disruption to Strait of Hormuz transit directly threatens Kharif and Rabi sowing seasons.
UNCTAD has warned of fertiliser supply chain shock risks; India's government is exploring alternative procurement routes including longer sea routes bypassing the Strait.
Strait of Hormuz: Geography and Strategic Significance
The Strait of Hormuz is a narrow waterway connecting the Persian Gulf to the Gulf of Oman and the Arabian Sea. At its narrowest point, it is approximately 33 km (21 miles) wide, with only a 3.2 km (2-mile) wide navigable shipping lane in each direction. It is the world's most important oil and gas chokepoint: approximately 20–21 million barrels of oil per day (about 20% of global oil supply) transit through it. Beyond energy, it is also critical for global fertiliser trade — Persian Gulf nations account for ~43% of seaborne urea exports and ~44% of seaborne sulphur trade.
Key Details
- Location: between Iran (north) and Oman/UAE (south); connects Persian Gulf to Gulf of Oman
- Narrowest navigable width: ~3.2 km per direction
- Oil transit: ~20–21 million barrels/day (~20% of global oil supply and ~30% of seaborne oil)
- Countries dependent on Hormuz for energy exports: Saudi Arabia, UAE, Kuwait, Iraq, Qatar, Iran
- Global fertiliser transit: ~43% of seaborne urea, ~44% of seaborne sulphur, >25% of global ammonia
- Alternative route: Cape of Good Hope (adds ~15–20 days and significant freight costs)
Iran's ability to tighten or threaten to close the Strait gives it significant leverage over global commodity flows — the current episode demonstrates how geopolitical tension in the Gulf directly translates into agricultural and food security risk for a country 3,000 km away.
India's Fertiliser Import Dependence
India is the world's second-largest consumer of fertilisers (after China) and is heavily import-dependent for key fertiliser types. Urea consumption is ~33–36 million MT/year; domestic production covers ~55–60%, with the remaining ~40–45% imported. For DAP, India is almost entirely import-dependent — over 85% of consumption is imported. Muriate of Potash (MOP/potash) is 100% imported as India has no domestic potash deposits.
Key Details
- Urea: demand ~364 lakh MT/year; imports ~56 lakh MT/year (~15%); ~70% of imports from Gulf
- DAP: demand ~111 lakh MT/year; imports account for >85%; ~42% from Saudi Arabia
- MOP (Muriate of Potash): 100% imported; primarily from Canada, Belarus, Russia, Jordan
- Major fertiliser import sources: Saudi Arabia (SABIC, MAADEN), UAE, Oman, Qatar, Russia, China
- India's fertiliser subsidy bill: ~₹1.6–2 lakh crore/year — government bears price difference between import cost and retail price to farmers
- Strategic reserves: India typically maintains 4–6 weeks of urea buffer stock
With ~70% of urea imports and ~42% of DAP imports sourced from Gulf countries transiting the Strait of Hormuz, the current disruption is not merely a supply chain risk — it is a food security risk, as fertiliser availability and price directly determine the cost and success of India's Kharif and Rabi crop seasons.
Fertiliser Subsidy Regime and Food Security
India's fertiliser pricing is heavily subsidised: retail prices for urea are controlled under the Nutrient Based Subsidy (NBS) scheme and a separate urea pricing policy. Urea is sold to farmers at ₹5,360/bag (45 kg) — well below market cost. The government pays the difference between the import/production cost and the retail price as a subsidy to fertiliser companies (pass-through subsidy model). Any supply disruption or price spike in global fertiliser markets automatically increases India's subsidy burden.
Key Details
- Urea retail price (farmers): ₹5,360 per 45-kg bag (controlled by government)
- Nutrient Based Subsidy (NBS): per-kg subsidy on P&K fertilisers; urea handled separately
- India's fertiliser subsidy budget: ~₹1.6–2 lakh crore annually
- Supply disruption impact: higher import price → higher subsidy burden → fiscal stress
- Alternative sources: Russia, China, Canada (but longer logistics, different products)
- Kharif season: June–September (peak fertiliser demand); any disruption during sowing is critical
The Hormuz disruption hits at a critical moment — the Kharif sowing season — when fertiliser demand is at its peak. Beyond the immediate supply crunch, it will increase fertiliser import costs, add to the subsidy bill, and could trigger retail price pressures if buffer stocks are depleted.
Geopolitics of the Strait of Hormuz and India-Iran-Gulf Relations
Iran controls the northern shore of the Strait of Hormuz and has historically used the threat of closure as a strategic tool during periods of regional tension. Under international law (UNCLOS — United Nations Convention on the Law of the Sea), ships have the right of transit passage through international straits used for international navigation — but Iran, which is not a party to UNCLOS, disputes some of these rights. India maintains diplomatic relations with both Iran and Gulf Arab states, necessitating careful navigation of competing interests.
Key Details
- UNCLOS Part III: guarantees transit passage rights through international straits
- Iran's position: not a party to UNCLOS; asserts sovereign control over Persian Gulf transit
- India-Iran: Chabahar Port agreement (India developing Iran's Chabahar port for Central Asia access)
- India-Gulf: major trade and energy dependencies; large Indian diaspora in UAE, Saudi Arabia, Oman
- Previous Hormuz threats: Iran periodically threatened closure during US sanctions escalations (2012, 2019)
- Indian Navy: expanded its blue-water presence in the Arabian Sea for escort and anti-piracy operations
India's strategic dilemma is acute — it has economic stakes in both Iran (Chabahar, energy purchases) and Gulf Arab states (fertilisers, oil, diaspora remittances). The Hormuz disruption underscores India's vulnerability when geopolitical tensions in distant theatres directly affect its domestic agriculture and food prices.
- Strait of Hormuz: ~33 km wide at narrowest; navigable channel ~3.2 km per direction
- Oil transit through Hormuz: ~20–21 million barrels/day (~20% of global oil supply)
- Fertiliser transit: ~43% seaborne urea, ~44% seaborne sulphur, >25% ammonia (global)
- Ships stranded (India-bound): 16 vessels — 330,000 MT urea + 257,000 MT DAP + ammonia + 110,000 MT sulphur
- India's urea imports: ~56 lakh MT/year; ~70% sourced from Gulf (Oman, Saudi Arabia, Qatar, UAE)
- India's DAP imports: >85% of consumption; ~42% from Saudi Arabia
- MOP (potash): 100% imported by India — no domestic deposits
- India fertiliser subsidy: ~₹1.6–2 lakh crore per year
- Urea retail price (farmer): ₹5,360/45-kg bag (government controlled)
- India's fertiliser buffer stock: typically 4–6 weeks
- Hormuz transit collapse: >95% reduction in shipping transits (2026 episode)
- UNCTAD warning: fertiliser supply chain shock; food security risk for import-dependent nations
- UNCLOS Part III: right of transit passage through international straits — contested by Iran
- Chabahar Port (India-Iran): India-developed port in Iran for Central Asia trade access