India Must Treat the 3Fs (Fuel, Fertilizer and Food) as One Economic Challenge to Navigate External Shocks: CII

CII Calls for Coordinated 3Fs Strategy to Shield Growth, Farmers and Consumers from West Asia Shock

Confederation of Indian Industry (CII) has called for a coordinated national response to India’s emerging "3Fs" challenge of fuel, fertilizer, and food. The call for action comes as the West Asian crisis has sent ripples through global and domestic market alike, driving up energy and fertilizer prices, logistics costs, food inflation, and currency volatility.

"The 3Fs are not three disparate pressures," emphasized Mr Chandrajit Banerjee, Director General, CII. "Fuel feeds into fertilizer, fertilizer feeds into food, and all three feed into inflation, fiscal stress, and household welfare. That is why we believe it helps to treat this as a single, integrated economic challenge so that it makes navigating external shocks that much easier.”

This interdependence is a function of India’s acute import reliance across fuel and fertilizers. According to government data, India imports approximately 88 per cent of its crude oil, 90 per cent of its phosphates, and 25 per cent of its urea. Given that a critical volume of these maritime crude and LNG flows transits the Strait of Hormuz, geopolitical developments in West Asia have had immediate ramifications. These extend beyond primary energy & fertilizer security and increasingly affect the broader economy through increased living costs and second-round impact on food prices. 

CII noted that the government's early response has been reassuring. "CII would like to acknowledge that the government has moved quickly and responsibly, cushioning consumers from the initial fuel price spike and channelling gas towards critical sectors. From here, our sense is that a few calibrated steps in the short term, taken alongside strong structural reforms, would serve India well. Global uncertainties are likely to stay with us for a while, and our growth and stability could be strengthened further through reforms that are more long-term in nature, with some action in the medium term as well," said Mr Banerjee.

Fuel represents the primary touchpoint for external shocks, but it also offers the most immediate opportunity to reduce India’s import reliance. To capitalize on this, CII recommends leveraging the newly notified BIS standards for higher ethanol blends, ranging from E22 to E30, by establishing a clear roadmap for their market introduction. This should be supported by fast-tracking flex-fuel vehicles in high-supply, ethanol-producing states where the production ecosystem is strongest.

Concurrently, establishing a national framework for long-haul LNG trucking, complete with vehicle incentives, refuelling corridors, and transparent pricing, would unlock a cleaner, domestic fuel alternative for freight logistics. CII also suggests gradually transitioning a portion of LPG demand toward sustainable domestic alternatives, including electric and ethanol-based cooking, as well as green hydrogen where viable.

For long-term structural resilience, CII emphasizes accelerating domestic oil and gas exploration, expediting the Strategic Petroleum Reserve expansion, and diversifying the sources for crude imports. This should be paired with expanding newer energy avenues like coal gasification, methanol blending, bio-CNG, and nuclear power, including Small Modular Reactors (SMRs). "Boosting efficiency and scaling up home-grown alternatives are far more than near-term fixes; they form the very bedrock of India's long-term economic security”, noted Mr Banerjee.

For the fertilizer sector, strategic concerns centre both on fiscal sustainability and supply security. The budgeted expenditure for fertilizer subsidies faces a heightened risk of exceeding its limit this fiscal year, driven by sustained high fertilizer prices.  This vulnerability stems from a structural dependence on imported di-ammonium phosphate (DAP), urea feedstock, phosphoric acid, and the LNG required for domestic manufacturing. Consequently, the same external volatility impacting the fuel sector directly influences fertilizer supply lines.

To address these challenges, CII recommends a series of producer-centric reforms designed to optimize efficiency without compromising agricultural productivity. First, the framework proposes a phased transition of fertilizer subsidies toward a Direct Benefit Transfer (DBT) model for farmers. This system would leverage established digital infrastructure, including rural banking networks, mobile authentication, soil health registries, and specialized agricultural credit systems. Second, subsidized input allocations should be precisely calibrated using digitized land records, crop cycles, and irrigation data, starting with targeted pilot districts. Third, urea should be gradually integrated into the Nutrient Based Subsidy (NBS) framework to address the current pricing imbalances that lead to disproportionate nitrogen application and degraded soil quality.

“The objective is to strengthen support, not reduce it," stated Mr Banerjee. "By working together to route subsidy benefits directly and bring in data-driven insights, we can better safeguard the interests of small & marginal farmers, nurture soil health, and build resilience against volatile global prices."

On food, the picture is more encouraging to begin with as India is coming off a record foodgrain harvest seen last year. However, costlier fuel, higher fertilizer costs, a weaker rupee, and any monsoon unpredictability can still feed into prices down the line, particularly for volatile perishables like vegetables and edible oils. Tomato, onion, and potato (TOP) crops, in particular, have a well-documented tendency to transmit their volatility to the wider food basket.

Here, CII has proferred practical, near-term recommendations. These include the early, calibrated release of onion and tomato buffers under the Price Stabilisation Fund ahead of the traditional August-to-November lean season, alongside firm action against hoarding and speculation within the collaborative framework of the Essential Commodities Act.

To ease seasonal stress, CII suggests enhancing the movement of perishables across states through targeted transport support, cold-chain pre-positioning, and expanding direct farmer-to-consumer markets and FPO-led urban networks that naturally trim the layers between farm and plate. Over the medium term, these steps should lead into a dedicated Mission for Climate Adaptation in Agriculture, supported by a "Climate Stack" of localised weather and agronomy tools, alongside well-calibrated futures and options markets for crops like potato and onion to improve price discovery.

"Food inflation hits the most vulnerable households first and fastest, requiring a decisive yet measured response," noted Mr Banerjee. "Alongside the short-term tools the government already deploys effectively, the lasting solution lies in modernised storage, faster logistics, sharper market intelligence and structurally shortening the journey from farm gate to consumer plate.”

"If we use this moment well, we can come out of it with a more resilient economy. A thoughtful 3Fs approach can protect growth today and prepare us a little better for whatever tomorrow brings," Mr Banerjee added.