Union Cabinet Approves National Investment Policy 2026 to Boost Urea Production

The Union Cabinet has approved the National Investment Policy 2026 to increase domestic urea production and reduce India's reliance on imports, according to the PTI reports. The policy aims to create an additional 10 million tonnes of urea production capacity through the establishment of new manufacturing facilities.

The decision was approved at a Cabinet meeting chaired by Prime Minister Narendra Modi. According to the government, the initiative is intended to support long-term fertiliser security and strengthen domestic production capabilities.

What Is National Investment Policy 2026?

The National Investment Policy 2026 is a new framework designed to encourage investments in domestic urea production. It is an extension of the New Investment Policy (NIP)-2012, which previously supported expansion in the fertiliser sector.

The government stated that the policy will facilitate the creation of fresh production capacity to meet rising demand for urea. The framework is expected to support the development of 8-9 new natural gas-based urea plants across the country.

Why India Is Expanding Domestic Urea Capacity

Urea is the most widely consumed fertiliser in India, and demand continues to increase steadily. According to the government, urea requirement is growing at around 5% annually.

India currently produces about 30 million tonnes of urea against an annual demand of approximately 40 million tonnes. The resulting gap of nearly 10 million tonnes is currently met through imports, making capacity expansion a key policy focus.

Key Features of the New Urea Investment Framework

The government has structured the policy around 3 major pillars aimed at attracting investment into the fertiliser sector. The first pillar involves separating fixed and variable costs for subsidy calculations, which is expected to provide greater clarity in the subsidy mechanism.

The second pillar offers assured returns in the range of 12-16% for companies establishing urea manufacturing plants. The third pillar focuses on mitigating foreign exchange risks, helping investors manage exposure to currency fluctuations linked to project operations and financing.

Policy Aims to Reduce Urea Imports

India has already expanded domestic fertiliser production through the addition of 6 new plants during the past decade. According to Information and Broadcasting Minister Ashwini Vaishnaw, this expansion has helped lower the country's dependence on imported urea.

The proposed 8-9 additional plants are expected to bridge the remaining supply gap and enable India to meet its entire urea requirement domestically. Government data shows that India's current domestic urea production capacity is about 26.9 million tonnes, while imports remain around 10 million tonnes annually.

Read More: India to Introduce Import Ban on Goods Made Using Forced Labour with New Trade Rules.

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Conclusion

The National Investment Policy 2026 represents the government's latest effort to strengthen India's fertiliser manufacturing ecosystem. By targeting an additional 10 million tonnes of urea production capacity, the policy seeks to address the gap between domestic demand and supply.

The framework includes measures such as assured returns, subsidy reforms and forex risk mitigation to encourage private sector participation. If implemented as planned, the policy could support greater domestic production and reduce reliance on imported urea over time.

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