Fertiliser Plants: When will fuel switching to hydrogen make economic sense in India?: Dr. Siba Prasad Mohanty, Managing Director, HURL

India generates approximately 35 million tonnes of urea each year, with ammonia production responsible for nearly 60% of the fertilizer sector's total emissions. Transitioning to green ammonia production could eliminate more than 30 million tonnes of CO₂ annually

India’s fertiliser sector occupies a unique and strategic position in the country’s industrial and economic landscape. It is not only a backbone of agricultural productivity and food security, but also one of the most energy-intensive segments of the chemical industry. As India advances towards its net-zero commitments and accelerates the clean energy transition, fertiliser plants are increasingly under the spotlight for decarbonisation.

At the centre of this transformation lies a critical question: When will fuel switching to hydrogen, particularly green hydrogen, make economic sense for Indian fertiliser plants? The answer depends on the interplay of cost competitiveness, infrastructure readiness, policy support, and long-term strategic vision.

Hydrogen and Fertilisers: An Indian Perspective

Hydrogen is already integral to fertiliser production. Ammonia synthesis-the core process for urea and other nitrogenous fertilisers, consumes nearly 70-75% of a fertiliser plant’s total energy, with hydrogen as the primary feedstock.

In India, hydrogen is predominantly produced using natural gas through Steam Methane Reforming (SMR) or coal gasification, both of which are carbon-intensive. With India importing over 50 per cent of its natural gas requirements, the fertiliser sector remains vulnerable to global price volatility and supply disruptions.

Green hydrogen-produced through electrolysis using renewable power, offers a compelling alternative by enabling low-carbon or near-zero-carbon ammonia production. However, its adoption hinges on economic viability within India’s regulated fertiliser pricing framework.

India – Hydrogen Cost Snapshot (Indicative)

Source: MNRE, NITI Aayog, Industry Estimates

Why Green Hydrogen Is Not Yet Economical-But Inevitable

At present, green hydrogen in India is nearly 2.5-3 times costlier than fossil-based hydrogen. Given that hydrogen cost directly influences ammonia and urea prices, fertiliser manufacturers, operating under government-controlled MRPs and subsidy mechanisms, cannot absorb this differential without support.

Yet, three India-specific developments are rapidly changing the equation: India has some of the lowest renewable energy tariffs globally, with solar and wind power available at Rs. 2-2.5 per kWh; electrolyser costs are declining, supported by domestic manufacturing incentives under the National Green Hydrogen Mission; and carbon considerations are entering trade and finance through ESG norms, green finance, and emerging carbon markets. 

Together, these factors point to a future where green hydrogen becomes economically viable within the next decade.

For India’s fertiliser sector, green hydrogen is not just an environmental choice-it is a strategic necessity. 

Why Fertiliser Plants are Ideal Hydrogen Anchors

Fertilizer plants are ideal for anchoring India's green hydrogen ecosystem because they offer large, continuous (TPD scale) and 24x7 base-load hydrogen consumption, which is perfect for electrolysis. They also bring existing expertise in hydrogen handling and safety, and their role is vital for national food security. 

India generates approximately 35 million tonnes of urea each year, with ammonia production responsible for nearly 60% of the fertilizer sector's total emissions. Transitioning to green ammonia production could eliminate more than 30 million tonnes of CO₂ annually.

What Will Make Hydrogen Economically Viable in India?

Fuel switching to green hydrogen becomes economically viable when four critical enablers are in place:

Green Hydrogen at Rs. 50/kg or Below: Economic parity with fossil fuels emerges when green hydrogen costs approach Rs. 150 per kilogram. This price point is achievable through a combination of low-cost renewable energy, the use of high-efficiency electrolysers, and the benefits of large-scale production (economy of scale).

Integrated Renewable-Hydrogen-Ammonia Hubs: Developing co-located hubs that integrate fertilizer plants with renewable energy sources and electrolysis infrastructure can significantly reduce overall costs by minimizing energy transmission losses and storage expenses.

Policy and Fiscal Support: Early adoption requires supportive government intervention. This includes measures such as Viability Gap Funding (VGF), mechanisms for carbon credit monetization, a stable, long-term policy environment, and preferential treatment for green ammonia in the market.

Carbon Cost Internalization: The structural competitiveness of green hydrogen improves as the environmental costs (externalities) of using fossil fuels are factored into market prices, either through government regulations or specific carbon trading mechanisms.

A Phased Transition: The Most Practical Path

It is neither realistic nor prudent to envision an overnight shift. The path forward lies in phased integration. For Indian fertiliser plants, hydrogen adoption will be evolutionary, not disruptive.

In the near term, fertiliser plants can begin with blending green hydrogen into existing systems-5 to 10 per cent substitution, without major process overhauls. This allows operational learning, risk mitigation, and gradual emissions reduction.

In the medium term, dedicated green ammonia production units can be developed, particularly for non-urea applications, exports, or specialised fertilisers. This creates parallel value streams while building confidence and capability.

In the long term, as hydrogen economics improve and infrastructure matures, full fuel switching becomes viable, positioning fertiliser plants as near-zero-carbon facilities. 

A pragmatic starting point lies in fertiliser segments where MRP is not fixed, such as NPK, allowing greater pricing flexibility while scaling green hydrogen adoption.

India’s Strategic Advantage

India is leveraging three key strengths to drive progress: 

Lowest renewable energy costs: The country benefits from having the most competitive renewable energy costs, making clean power economically viable and scalable.

Large fertiliser capacity with assured demand: India possesses significant domestic capacity for fertiliser production, supported by consistent and reliable demand, which is crucial for the agricultural sector.

Strong public sector leadership: Decisive leadership and proactive policies from the public sector are guiding the strategic direction and expansion of key industries, including the green energy transition and infrastructure development.

Public sector fertiliser companies can act as first movers, de-risking investment, building scale, and catalysing the hydrogen economy, while ensuring farmer affordability remains protected.

Leadership Beyond Economics

Fuel switching to hydrogen is not merely a techno-economic decision. It requires a comprehensive approach that addresses several critical factors. The successful transition demands a long-term capital vision to ensure sustained investment in infrastructure, production, and technology. It also necessitates widespread workforce reskilling to prepare the labor market for new roles and technical demands in the hydrogen economy. Additionally, the transition calls for enhanced safety and digital systems to manage the unique physical properties of hydrogen (e.g., storage challenges and leak potential) and optimize the new value chains. Finally, cross-sector collaboration is essential to coordinate efforts across energy, transportation, and manufacturing industries, ensuring a cohesive and effective transition.

Fertiliser plants have historically driven industrial transformation, from coal to gas, from manual to automated operations. Hydrogen represents the next chapter in this evolution. Those who invest early in learning, partnerships, and pilot projects will be best positioned to lead when economics turn favourable.

Conclusion

Fuel switching to hydrogen in Indian fertiliser plants is not a question of if, but when. As green hydrogen costs decline, infrastructure matures, and policy frameworks strengthen, the economic case will align with strategic necessity.

For the fertiliser sector, embracing hydrogen is about future-proofing relevance, enhancing energy security, and supporting India’s journey towards sustainable agriculture and industrial decarbonisation, while continuing to fulfil its foundational role of feeding the nation.