The crisis in Ukraine following the invasion by Russia has exposed the chinks in the Indian fertiliser industry. Despite predictions by successive governments during the last four decades that India would become self-reliant on the fertiliser front and putting in place policies aimed at achieving the goal, the country remains preponderantly dependent on imports for meeting the requirements of its farmers. The three most popular fertilisers used by farmers are urea, di-ammonium phosphate (DAP) and muriate of potash (MOP), which are the major sources of nitrogen, phosphate and potash respectively. Natural gas is the raw material/feedstock/fuel used for the manufacture of urea whereas phosphoric acid and ammonia are the prime raw materials (RMs) needed for making DAP. In the case...
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Category: Demand vs Supply
Ukraine crisis – impact on Indian fertilizer industry
The crisis in Ukraine following invasion by Russia has sent shock waves through out the world economy. In India, even as the steep rise in energy import bill will affect almost all sectors of the economy, the impact on fertilizers will be more pronounced. At the outset, let us capture a few relevant facts. Despite prognostications by successive governments during the last four decades or so that India would become self-reliant in fertilizer availability and putting in place policies (in particular pricing and subsidy policies) aimed at achieving the goal, even today, the country remains preponderantly dependent on imports for meeting the requirements of its farmers. Three most popular fertilizers used by farmers are urea, di-ammonium phosphate (DAP) and muriate...
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Tackling fertilizer subsidy – political will missing
In the Union Budget for 2022-23 presented by the Finance Minister, Nirmala Sitharaman on February 1, 2022, Modi – government has allocated Rs 105,000 crore for fertilizer subsidy which is Rs 35,000 crore less than the actual expenditure of Rs 140,000 crore during the current year as per the revised estimate (RE). Fertilizer subsidy arises because the Union Government wants manufacturers/imports to sell fertilizers to farmers at a low maximum retail price (MRP), unrelated to the cost of production and import and distribution, which is much higher. In case of urea, it exercises mandatory control on MRP and reimburses the manufacturers for the excess of cost over it as subsidy on a ‘unit-specific’ basis under the new pricing scheme. In...
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Fertilizers – all is not well
Inaugurating the revival project – annual production capacity of 1.27 million ton (MT) neem coated urea – of the Hindustan Urvarak & Rasayan, a public sector joint venture of Coal India Ltd (CIL), NTPC, Indian Oil Corporation (IOC) and FCIL – at Gorakhpur (Uttar Pradesh) on December 7, 2021, Prime Minister, Narendra Modi made the following four observations:- (i) despite steep increase in international price of fertilizers during the current year, the Government has ensured that the farmers don’t have to pay more. (ii) 100 percent neem coating has helped in reining in diversion of urea to non-agricultural/industrial uses; (iii) Gorakhpur along with four other revival projects currently under implementation will add 6 million tons (MT) to existing annual urea...
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Making urea that is not needed: New Talcher urea project will further worsen the unsustainable fertiliser subsidy burden
The new urea project at Talcher will worsen the already unsustainable fertiliser subsidy burden as retention price at this project may surpass the current high of $350/tonne The RP in turn, is calculated taking into account efficiency norms such as capacity utilisation, energy consumption, capital related charges (CRC), other fixed cost, delivered cost of gas and other inputs, etc. The Cabinet Committee on Economic Affairs (CCEA) has recently approved subsidy for urea to be produced by Talcher Fertilizers (TFL) —a joint venture of four PSUs: Coal India Limited (CIl), GAIL, Rashtriya Chemicals and Fertilizers (RCF), and Fertilizer Corporation of India (FCI). TFL is setting up the capacity of 1.27 million tonne per annum at Talcher, Odisha, at an estimated investment of Rs 13,277...
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Making urea, that is not needed
The Cabinet Committee on Economic Affairs (CCEA) has recently approved subsidy for urea to be produced by Talcher Fertilizers (TFL) – a joint venture of 4 public sector undertakings (PSUs) viz. Coal India Limited (CIL), GAIL (India), Rashtriya Chemicals and Fertilizers (RCF) and Fertilizer Corporation of India (FCI). The TFL is setting up the urea plant with installed capacity of 1.27 million ton per annum at Talcher (Odisha) at an estimated investment of Rs 13,277 crore and is expected to be commissioned by September 2023. The project is based on use of coal gasification technology. According to the union commerce minister, Piyush Goal, the CCEA has given its approval for “a specific subsidy to promote this innovative technology for the...
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Urea black marketing – how not to curb
In a bid to tackle diversion, hoarding and black marketing of urea (a widely used fertilizer that constitutes nearly half of India’s total fertilizer consumption), the Union government has decided to restrict its purchase to 100 bags from 999 bags per transaction by one purchaser. In a letter dated August 27, 2020, addressed to state chief secretaries, the ministry of chemicals and fertilizers, Chhabilendra Roul has sought their opinions on ‘how many such transactions should be allowed per month to each purchaser’. He has also asked states ‘to identify top 20 urea purchasers in each of their respective districts’. States have also been asked to collect details from buyers which include quantity of urea purchased, dates of purchase, point of sale such as retailers, agricultural land owned...
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Fertilizers – disjointed policies, contrary signals
Modi – government is running in its sixth year [five years of the first term and first of Modi 2.0]; we are yet to see a coherent announcement on reforms in the fertilizer sector forget giving a ‘stable’ and ‘predictable’ policy badly needed to give a clear-cut signal to various stakeholders for taking decisions with regard to investment, innovation, imports, logistics and use etc. All that we see is exhortation from the Prime Minister himself made in bits and pieces from the public platform. Let us pick up some of most crucial ones. First, in the 38th edition of “Mann ki Baat” delivered on November 26, 2017, Modi exhorted farmers to take a pledge for reducing consumption of urea [the...
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Correcting imbalance in fertilizer use – SHC alone won’t help
In 2015, prime minister, Modi had launched National Soil-Health-Card [NSHC] scheme with the objective of galvanizing farmers to replenish seriously degraded soils caused by excessive fertilizer use over several years. It seeks to promote a more judicious mix of fertilizers by testing soil samples of each farm household across the country on 12 parameters and prescribing recommendations on use. To test soil, the country’s cropped area is divided into grids of 10 hectares (ha) for rain-dependent farms and 2.5 ha for irrigated land. One soil sample from each grid is taken and test results are distributed to farmers whose lands fall under the relevant grid. These show which ingredients are depleted or are present in excess. Their soils need to...
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Urea – Modi’s clarion call may lead to its under-use
Addressing the 38th edition of ‘Mann Ki Baat’, the prime minister said, “Can our farmers take a pledge to bring down urea use by half by 2022? If they promise to use less urea in agriculture, the fertility of the land will increase. The lives of farmers will start improving.” Modi made the statement in the backdrop of ‘World Soil Day’ on December 5 and deteriorating health of the soil world over, an overarching factor contributing to this is excessive use of urea. The positive correlation between excessive use of urea and erosion in soil health is an incontrovertible fact proven by several studies and also acknowledged in the Economic Survey and other official documents. This is a phenomenon that...
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