The government on Monday granted in-principle approval to the Agriculture Inputs Company to procure 80,000 tonnes of chemical fertiliser from India under a government-to-government (G2G) arrangement, as global supply disruptions and soaring prices triggered by the West Asia war strain Nepal’s farm input system.

The one-time procurement, to be made within the framework of the 2022 G2G agreement, includes 60,000 tonnes of urea and 20,000 tonnes of Di-Ammonium Phosphate (DAP). Nepal had originally requested 150,000 tonnes.

“We will move ahead with the import process immediately after receiving the Cabinet’s formal decision,” said Ram Krishna Shrestha, joint secretary at the Ministry of Agriculture and Livestock Development. “The Agriculture Inputs Company will place purchase orders once all procedures are completed.”

Shrestha, who also chairs the Agriculture Inputs Company, said the ministry sought Cabinet approval following a positive response from an Indian state-owned supplier Rashtriya Chemicals and Fertilisers Limited. He added that the consignment is expected to arrive by mid-August, aligning with the critical top-dressing period for paddy cultivation.

The government has allocated Rs28.82 billion in subsidies for fertiliser imports in the current fiscal year, initially targeting procurement of 550,000 tonnes. However, escalating global prices—largely driven by geopolitical tensions—have reduced purchasing capacity to around 440,000 tonnes.

At present, the Agriculture Inputs Company holds 171,000 tonnes of fertiliser in stock, while contracts for 94,450 tonnes are likely to be cancelled due to suppliers’ inability to deliver.

While 250,000 tonnes are required for the plantation season, a shortfall is anticipated, putting pressure on farmers and potentially impacting yields.

“As issuing fresh tenders can take at least 225 days, it risks creating an acute shortage,” Shrestha said. “We invited suppliers to honour their contracts, and while they remain optimistic, we cannot depend entirely on them.”

Suppliers often default during periods of high price volatility, choosing to forfeit performance bonds rather than deliver at a loss. In 2019-20, when fertiliser prices peaked globally, seven out of ten suppliers failed to meet delivery deadlines in Nepal, exposing systemic vulnerabilities in procurement.

Nepal’s paddy transplantation season begins in June, placing immediate pressure on the government to secure fertiliser supplies. The country relies heavily on imports from the Gulf region, while Russia serves as an alternative source. However, officials say Nepali banks are reluctant to open letters of credit involving Russian suppliers, further complicating procurement.

Rice remains Nepal’s primary staple, accounting for about 67 percent of total cereal consumption and over half of calorie intake. With an average annual per capita consumption of 137.5 kilograms, rice is central to food security. Combined with legumes, it provides roughly 23 percent of total protein intake, making it one of the most affordable protein sources.

A shortage of fertiliser directly affects crop yields, driving up food prices, lowering farm incomes, and increasing reliance on imports.

Currently, subsidised urea is sold at Rs18 per kg, while DAP is priced at Rs46 per kg through government-designated cooperatives. These rates reflect subsidies of around 92 percent for urea and 80 percent for DAP, whose market prices stand at approximately Rs160 and Rs162 per kg, respectively.

“It is beyond the government’s capacity to fully subsidise fertiliser at current global prices, as it would require nearly Rs80 billion,” Shrestha said, warning that rising subsidy burdens could further strain public finances.

Chronic fertiliser shortages in Nepal stem from multiple factors, including low buffer stocks, weak distribution systems, policy gaps, and exposure to global price shocks. These recurring issues continue to affect tens of thousands of farmers already vulnerable to climate risks such as droughts and floods.

Nepal and India signed a five-year G2G memorandum of understanding on February 28, 2022, to ensure steady fertiliser supplies and mitigate recurring shortages. The agreement guaranteed at least 30 percent of Nepal’s annual requirement, with volumes rising from 150,000 tonnes in the first year to 210,000 tonnes by the fifth year.

The MoU expired on March 31, 2026, but officials say efforts are underway to renew it.

“The G2G framework remains valid through 2026, and we have already sent a draft for extension to the Indian side,” Shrestha said. “We have been informed that it is under consideration.”

The outlook for Nepal’s agriculture sector this year remains uncertain. Experts cite multiple risks, including below-normal rainfall, fertiliser shortages, rising fuel costs, and tightening cross-border trade conditions.

Meteorologists warn that Nepal could experience below-average monsoon rains after three consecutive years of above-normal precipitation. Since monsoon rains provide nearly 80 percent of the water required for agriculture, any shortfall could have widespread consequences.

Lower rainfall, combined with input shortages, may reduce farm productivity, weaken rural purchasing power, increase food prices, and push up import bills. It could also lower river flows, reduce hydropower generation, and limit groundwater recharge, ultimately weighing on overall economic growth.

The World Bank has warned that fertiliser affordability is set to decline to its lowest level since 2022, eroding farmers’ purchasing power and threatening future harvests. Meanwhile, the World Food Programme has cautioned that prolonged global conflict could push up to 45 million additional people into acute food insecurity this year, underscoring the broader risks to global and domestic food systems.