The Iran war and India's fertilizer problem

0:00In today's episode, we'll break down two important stories. First we'll talk about the Iran War and India's fertilizer problem, and then we'll talk about the Apple-India relationship growing deeper. Welcome back to the Daily Brief by Zeroda, where we cut through the noise to help you understand what's actually happening in the most important stories from business and markets. I'm your host Akshira and today is Thursday 12th March. Coming to the first story. We've previously covered how the Iran Hormuz conflict is disrupting oil flows, shipping lanes and marine insurance, but lately the war is also hitting something closer to the ground. Fertilizers. Prices have risen anywhere from 20% to 30% in a matter of days. The Rabobak's Urea Fertibility Index has fallen to its 2nd lowest level since 2010, next only to where the Russia Ukraine war had driven it in 2022. India is one of the world's largest consumers of fertilizers, a big chunk of what we need either as finished product or as the gas and chemicals that go into making fertilizers

1:03domestically makes its way through the Persian Gulf. This trade of Hormuz to us isn't just an oil choke point, but a fertilizer 1-2. Now there are many layers through which the shock travels to us, but to make sense of them, you have to start from what fertilizers actually are. So fertilizers are at their core about 3 primary nutrients, nitrogen, N, phosphorus, P, and potassium K. Every bag of fertilizer, Urea, DAP, MOP, those 10, 26, 26 NPK blends is some combination of these 3. Now each nutrient has a completely different supply chain making it vulnerable to this war in a completely different way. Let's start with nitrogen. So India produces about 87% of its Urea domestically. On the surface, this should sound reassuring, but Urea is made from ammonia and ammonia is made from natural gas. Not powered, mind you, made. Now ammonia has 3 hydrogen atoms for every one of nitrogen. One of the cheapest, most abundant sources of hydrogen, at least until we learnt how to

2:07break apart water molecules for cheap, has been natural gas. And so about 70-80% of the cost of making Urea is just natural gas which serves as both feedstock and fuel. India's domestic gas supply covers only a portion of what its Urea plants need. The rest is imported. So when LNG stops flowing through hormones, Indian Urea plants don't just lose a cheap energy source. They lose their primary raw material. Fosphate fertilizers have a different problem. So India imports about 60% of its DAP or phosphate fertilizer mostly from Saudi Arabia and the Middle East. Only many of the region's largest commercial ports sit within the Persian Gulf where trade has tapered to a standstill. Meanwhile, the remainder, the DAP we produce locally, is vulnerable to. DAP2 requires ammonia which needs natural gas. And it also needs sulfuric acid which is made from sulfur you get by refining oil and gas. Much of the global supply of both raw materials moves through the street of hormones. Port ash is the least exposed to natural gas.

3:09But it's also something we import entirely. India has no commercially exploitable port ash reserves and while the water doesn't directly hurt these imports, it does affect freight costs, shipping insurance and cargo timing. So keep these ideas in mind because they inform everything that follows. Now together, this creates multiple linked channels, each reinforcing the others through which the war spills on to Indian farms. The raw material for making fertilizers could stay stuck in the Gulf. The EIA estimates about 20% of global LNG trade transits through the street of hormones and roughly 83% of that is headed to Asian markets. If those cargoes are disrupted, gas importing countries like India face physical shortages. It's not just gas. For instance, a full closure of the street could hit sulfur by 44% and those can ripple the domestic fertilizer industry as we'll see later. Meanwhile, the Gulf is also a fertilizer production hub. Countries directly exposed to the hormones disruption account for nearly half of global Urea exports.

4:11If the conflict persists, the world's Urea supplies could take a 30% hit. And it doesn't matter if we specifically bought fertilizer from the region. These are internationally traded commodities which see their prices shoot up as the supply dries up anywhere. That is, a disruption in the street of hormones at once raises the price of imported Urea bags while it physically constrains India's ability to make Urea at home. And then they're shipping. Even if production is open and fertilizer stocks are available at the factory, ships could stop bringing it home. The war has pushed marine insurers to pull war risk coverage or demand super high premiums and many ships have decided to stop buying. As the fertilizer institute notes, cargo insurance cancellations immediately constrain fertilizer supply. So to what extent? About a third of the world's fertilizers move through the 33 km wide street of hormones. So in other words, many nodes in a massive relay are breaking down together. Now this is how things worked in better times.

5:13So Katar produced LNG at its Ras Lafant terminal. PetroNet LNG, India's largest gas importer would buy it under long term contracts and ship it to Indian regassification terminals. From there, Gail, the state-owned gas utility would take this regassified LNG called RLNG and distributed to industrial customers including fertilizer plants. A single chain connected all of this. On March 3, 2026, the first link broke. PetroNet told stock exchanges that its LNG vessels could no longer safely transit hormones to reach Ras Lafant. It invoked force measure, a legal clause in most contracts that says, essentially, something extraordinary has happened entirely beyond our control because of which it's impossible to fill our promises. PetroNet served these notices on its major customers, Gail, IOC and BPCL. Suddenly, Gail couldn't get LNG from PetroNet. It still had other gas sources, like domestic production or other import contracts, but one of its biggest supply lines had simply been switched off.

6:15That hit fertilizer plants almost immediately. So GNFC Gujarat Narmada Valley fertilizers and chemicals disclosed that its allocation from Gail was cut to 60% of its daily contracted quantity starting sixth March. The company explicitly said this would affect production, and GNFC wasn't alone. Reuters reported Gail and IOC had already started reducing gas supplies to other industrial customers too. By 9th to 10th March, the government stepped in to formalize what was already happening on the ground. The natural gas supply regulation audit, 2026, issued under the Essential Commodities Act, which gives the government emergency powers over essential goods, established a strict priority hierarchy for India's remaining gas pool. It essentially answered, when there isn't enough gas for everyone, who gets served first. The answer, households come first. Piped natural gas for cooking, CNG for transport and LPG production get 100% of their allocation. They're fully protected. Fertilizer comes second, but at only 70% of the sector's average gas consumption over

7:18the previous six months. The order also bars gas from being diverted from one fertilizer unit to another, even within the same factory. Every plant is capped at its own 70%. And others are hurt too. General manufacturing gets 80%, refineries and petrochemical plants get the least 65%. So is India in a crisis? Not yet. The government has stocked up some gas. As of 6th March, 2026, our total fertilizer reserves are up 36.5% year-on-year. So how much is that? Using July 2024, Karif sales as a rough benchmark, with some back of the hand calculations, the current stock pile gives you roughly 1.8 months of urea cover, about 3.4 months of DAP and around 3.3 months of NPK. But not yet is doing a lot of work in that sentence. The Fertilizer Association of India's Director-General told PTI that immediate availability looks okay and current stock should cover the forthcoming Karif season.

8:20But it also said some shortage in imported fertilizers is expected if the war continues. That actually happens, depends almost entirely on timing. So Karif's sewing picks up with the southwest monsoon in June, and DAP is typically applied at sewing for root establishment. Urea comes later as a top dressing. Fertilizers don't hit the field right now in March, but it is the critical stocking and planning window. For now, companies have deliberately moved their scheduled maintenance shutdowns into March saving gas for when plants need to run flat out closer to June. Now this gives us some breathing room, but only if the disruption doesn't outlast it. If we see a short shock resolved by mid April, that mostly just raises import costs. It'll be painful, but manageable. But a prolonged disruption that runs into May and June is a different story entirely. And that's when we might see serious shortages. India's Fertilizer situation is tricky to read from the outside. Urea is the only fertilizer with a statuately controlled retail price.

9:22Meanwhile, potassium and phosphate fertilizers sit under the nutrient-based subsidy framework with indicative MRPs. So when global prices spike, the first hit won't be to the farmer at the retail counter. It'll be to the government's subsidy bill to import us working capital and to the margins of anyone making fertilizer. The system would look comfortable given that we have some stock, but underneath the surface it'll become increasingly expensive, more rationed and more fragile to manage. Whistle explicitly warns that higher international prices combined with reduced energy availability would push subsidy needs well above budget. So the government had provisionally set its 2026-27 fertilizer subsidy at Rs.1.71 lakh crore, a number that was already looking tight before the war. We faced similar situations back in 22 when fertilizer prices spiked because of the Russia-Yukrain war. So the state absorbs the shock before the farmer does, but its absorption capacity isn't infinite. Right now, prices are rising while supply chains are stressed.

10:26Some rationing has begun, but this is not yet a repeat of the 2022 Russia-Yukrain fertilizer shock when Uriah briefly touched $900 per ton and global supply chains were broken for months. Current international Uriah prices are around $540 to $675 depending on the benchmark. The situation is serious, but it isn't a full-blown crisis. India's buffer stocks too are materially higher than in 2022, and the lean season provides a natural cushion that wouldn't exist if this had hit in June. But it all depends on how long the disruption lasts. If you want to gauge where we are, look at whether Petronet and Gail restore allocations, whether more fertilizer producers disclose gas cuts, whether ammonia and Uriah prices stabilize, and whether the Department of Fertilizer stockpile keeps replenishing ahead of car age. But if shortages grind into May and June, this comfortable story can flip into a huge problem, hitting specific states, specific crops, and specific farmers at exactly the wrong

11:31moment. For all the sources mentioned in this video, don't forget to check out our newsletter. The link is in the description. Coming to the second story. Now this story starts with a milestone. As of today, India makes around 25% of all iPhones in the world. A decade ago, we hardly registered in Apple's manufacturing plans. But the biggest criticism against this is that making is a generous description. Most of the high-value parts inside an iPhone, the display, the processor, the camera module, are still imported mostly from China. All that India provides is cheap labour to assemble those parts into a phone. And by that reading, India is not running an industrial revolution. However, that framing may be changing. Now we've never really looked at what Apple's supplier ecosystem in India looks like. And it turns out that has been growing. We know the big names like Foxconn and Tata, but the suppliers sitting beneath them are

12:32what really determines whether Apple's presence in India amounts to something lasting. Let's start with a theoretical framework that will help us think through this story. So our country's development isn't just about huge anchor factories of the kind that are multinational like Apple sets up. What matters more is the economic activity that such a factory pulls in around it, also known as backward linkages. See, when a large MNC starts sourcing parts from locally-based suppliers, it sets a flywheel in motion. And those suppliers must upgrade to meet the anchor firms' high standards. That means investing in machinery, management practices and skills. An industrial base begins to form around the anchor investor. And the hope is that once enough of a domestic base is built, workers leave to start their own firms and standards rise across the sector. The deeper the industrial base becomes, the harder it is for the anchor investment to leave the country. Economists Beata Yavarchik and Theodore Moran have shown that in the most successful cases of development through foreign investments, the metric of success isn't how big an anchor

13:34factory like Apple is. To win when both foreign suppliers are investing alongside the anchor and more importantly, local entrepreneurs are also entering the value chain. On the flip side, FTI can also fail disastrously. A foreign firm sets up assembly, imports almost all of its components, exports the finished product, but remains entirely disconnected from the domestic economy. Jobs exist and export numbers look good, but there are no backward linkages, no technology transfer and no upgrading of local firms. The investment sits in the country like an island. This is the lens through which we should evaluate Apple's India experiment. And Apple is known to have strict standards for suppliers, or Apple's India operations building strong backward linkages or are they stuck at mere assembly hardly moving beyond it. See, a manufacturing ecosystem doesn't arrive all at once, but build sequentially in stages. As the country progresses through each stage, the industrial base gets deeper and stronger, and the value captured by a country from every device produced is higher.

14:37For simplicity, we will divide India's iPhone or overall phone ecosystem into four sequential stages. First, device assembly. Second, a subassembly layer of mechanical parts, cables, casings and batteries. Third, an electronics layer of high-value parts like circuit boards and camera modules. Lastly, a clustering effect where all of these stages concentrate in the same geography and begin to compound. Now India's progress through this journey will help us truly answer the question of how Apple's India experiment is working. So the first stage involves large EMS firms like Foxconn and data electronics. We have covered how they work multiple times in the past. They make the biggest anchored investments employing long sets of assembly lines and machines to assemble the final iPhone. They kickstart the whole process. Foxconn's long-standing relationship with Apple is well known. It's the most important iPhone maker. And Foxconn has committed billions across several southern states of India, a Rupees 22,000 crore iPhone assembly plant in Garnataka, a Rupees 4,600 crore AirPods facility in

15:39Telangana, and a plant in Tamil Nadu that has operated since 2017. But interestingly, Foxconn isn't just making phone-related investments in India. It is also branched into battery energy storage and EV manufacturing units in Tamil Nadu. Now India represents a huge opportunity for Foxconn. They are mentioned in their earnings calls how they see India as one of their most important markets. The sunk capital is already huge and walking away from India can be genuinely costly. The more consequential development at stage one though is data electronics. After all, it's the first indigenous anchor firm and the second biggest firm in Apple's India ecosystem. After making two big EMS acquisitions, data now assembles iPhones at scale. Though it may not be as efficient as Foxconn yet, it's a signal that we are not entirely dependent on foreign contractors for critical assembly work. An added benefit of this is that data subsidiaries could even use this foothold to move deeper into Apple's supply chain. We'll come back to this later. Perhaps the most important signal of success in this stage is this.

16:43Initially, Apple's India operations only made older tier iPhones. It lagged the China launch of the newest model by months. But that gap has now shrunk two weeks, primarily because our anchor factories have picked up speed. Now, the next stage is where the backward-linked story starts to get interesting. And Foxconn arrival has done what anchor investments are supposed to do. Pull in suppliers. Apple's official supplier list in India now includes foreign firms that make power cables, connectors, chargers, battery packs and phone casings. Some of the major foreign suppliers who have invested in India include Uto, Jubil electronics, battery maker, ATL, etc. Now these parts are mostly meant for the outer shell of the iPhone and aren't very complex to make. But they're necessary and represent a step up from stage 1. These firms aren't independently drawn to India but came because of their biggest customer. Foxconn. Moreover, domestic firms are entering this layer too. Take for instance the auto-encillary mothers and group. It has a joint venture with a Chinese firm to make glass-related parts for Apple.

17:47Take was one of India's largest aerospace part makers makes MacBook enclosures and mechanical Apple Watch components. Now in this stage, India has genuinely made good progress capturing more value from an iPhone over time. India's total domestic value added or DVA in iPhones now sits between 15% to 20% up from single digits a few years ago. In fact, as we've covered before, the DVA across Indian iPhone manufacturing overall has grown significantly before and after the PLI scheme was introduced. Stage 3. The most technical knowledge-intensive stage is still lacking. Most of the iPhone's value truly sits in the complex high-tech electronic parts that it houses. Think camera modules, printed circuit boards, sensors, display assemblies and so on. Building these parts at scale requires not just capital but years of technical know-how. Some presence here is emerging. For instance, Conning, the manufacturer of Gorilla Glass. This is no mere glass and is extremely difficult to make.

18:48But through its joint venture with Indian firm Optimus Infracom, Conning has made investments in India to supply Gorilla Glass this year. Or take sunny optical, a Chinese firm making camera modules through a joint venture with Indian firm Selcon. They invested over $300 million in 2023 in an Indian facility meant mostly for Apple. In fact, Titan, the watchmaker and also a data subsidiary, was also in talks to supply the iPhone's camera module. But this layer is still really thin. We still import most of these highly technical specialized parts from China, which is enjoyed years of dominance. Moreover, indigenous Indian firms are still underrepresented. Progress here won't come easily or cheaply. Now if stage 3 is cleared, one can finally expect to build industrial clusters. So imagine a region where many different factories, their suppliers and logistics providers just sit a few kilometers away from each other. Now imagine many such regions or townships. This kind of density creates an economic efficiency that's unbeatable.

19:52And here, a product can go from mere design to mass production in mere weeks and product redesigns and repairs are even faster. The feedback loop in such clusters is infectious as it obviously cuts costs by a huge margin. But it also makes the whole ecosystem extremely resilient over time. China's dominance in not just electronics, but many other industries, for instance, comes from having many such clusters. Now in India, there are some initial signs of such clusters. Shree Parambudur and Tamil Nadu, for instance, is the furthest along with Foxconn's infrastructure at its core and suppliers beginning to cluster around it. Shree City and Andhra Pradesh is developing. But nothing in India yet approaches the density and breadth of Chinese hubs. Building genuine clusters requires a lot of patient capital backed by infrastructure and consistent policy. India is early in this process and will take years, even decades to get there. While there's plenty of road left, India seems to have made real progress.

20:54Anker manufacturers are deepening their commitments, both foreign and domestic suppliers are entering the value chain and India is slowly but surely capturing more share of an iPhone's value. And to a degree, India is making moves in the right direction. The electronics component manufacturing scheme on ECMS, for instance, targets the supplier layer more directly than the first PLI scheme did. And it got an increase in funding in this year's budget. But beyond large EMS players and a select few suppliers, the domestic side of the PLI story is a little more concerning. Suppliers to a huge anchor factory like Foxconn tend to be MSMEs that often struggle even in day-to-day operations. Yet India makes things even harder for them. See, under the first mobile PLI scheme, every firm had to meet a sales and investment threshold. But 80% of all firms selected under the scheme failed to do so, because there were small firms that couldn't be expected to meet those targets so quickly. So many of the early applicants to the ECMS scheme were MSMEs.

21:55Without adequate support, they'll not be able to meet Apple's strict standards for being a supplier. India may even risk being left with an impressive foreign assembly sector sitting on a weak domestic underbelly. A second problem is geopolitics. For one, China controls and weaponizes inputs India can't easily replace, like rare earths and precision manufacturing equipment. On the other hand, Donald Trump has also taken direct aim at Apple's India strategy, telling Tim Cook, we are not interested in you building in India, and pressing for a US reshoring. Apple moves ahead regardless, but navigating both Washington and Beijing simultaneously will not be easy. So are iPhones merely assembled in India? The evidence increasingly says no. Domestic value addition is rising, a supplier ecosystem is taking shape, even if unevenly. Indian firms are entering Apple's value chain at multiple levels, and Apple itself is entrusting India with its more difficult work. What India hasn't achieved yet is a meaningful presence

22:57in the electronics layer, let alone clustering. Making PCBs at scale, for instance, is not easy, and Indian firms are indeed trying to do so. Those are the harder tests, and in comparison to China, we're honestly still decades behind. But every electronics powerhouse today, China, Vietnam, Malaysia, once passed through the phase India now finds itself in, and Apple's India experiment by most indications may only just be beginning. Now coming to the tidbits. Trump announced that the US will build its first oil refinery in 50 years in Texas, with financial backing from reliance industries. Reportedly, this is a historic $300 billion deal, which will also help preset reliance this historically tense relationship with Trump. Coming to the next tidbit, Meta has acquired multiple a social media platform launched in late January, where AI agents, not humans, autonomously posed, comment and interact with each other.

23:57The platform went viral almost instantly, racking up millions of registered bots within days, though it also drew skepticism over fake agents and security concerns. Coming to the final tidbit. The escalating US-Israel Iran conflict has disrupted straight-of-formals oil flows, triggering an acute LPG shortage in India, and sending consumers scrambling for electric alternatives. As a result, induction cooktop sales surge nearly 20 times on Amazon India in a single 24-hour window, while quick commerce platforms like Blinkit and Zepto saw most models sell out across major cities. That's all the news I have for you. Thank you so much for watching, and see you in the next one.