Addressing the 9th Global Agriculture Leadership Summit on September 8, 2016, chemicals and fertiliser minister, Ananth Kumar proclaimed that neem-coating of all urea supplies meant for use by farmers has resulted in elimination of diversion to chemical industries and smuggling to neighbouring countries. If, the claim is true, it will have a profound impact on the larger picture of demand-supply balance, self-sufficiency in fertilisers, dependence on import, subsidy pay-out, demand for hydrocarbons especially gas and impact on the environment. The total consumption of urea is about 30 million tonnes annually, including 22 million tonnes indigenous and 8 million tonnes of imported product. Since, all of this is sold by manufacturers/importers at a low ‘controlled’ price, excess of cost of production/import...
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Category: Joint Ventures (JV)
REVIVING INDIA’S FERTILISER PLANTS
Efforts by successive Government’s to achieve self-sufficiency in the production of fertilisers have failed. The Modi Government should broaden its options and look for expansion of existing units or set up joint ventures abroad The Coal India Limited (CIL) and the National Thermal Power Corporation limited (NTPC) signed a joint venture agreement to revive the Sindri (Jharkhand) and Gorakhpur (Uttar Pradesh) plants of the Fertiliser Corporation of India (FCIL), at an estimated cost of about Rs 18,000 crore, over the next four years. CIL and NTPC operate in coal and power sectors respectively and both have their plates full to meet their commitments in those areas to help India achieve the growth target. But, given fertiliser is a different cup...
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Revival of sick fertilizer PSUs – a mirage
The revival of sick plants of two central public sector undertakings [PSUs] viz., Fertilizer Corporation of India Limited [FCIL] and Hindustan Fertilizer Corporation Limited [HFCL] is once again in the news. Last year, the Union Cabinet had approved a plan to revive the Barauni [Bihar] of [HFCL], Gorakhpur [UP] and Sindri [Jharkhand] of FCIL through auctions. Having failed to get a good response through this route, the central government had asked cash-rich PSUs viz., Oil and Natural Gas Corporation Limited [ONGC], National Thermal Power Corporation limited [NTPC] and Coal India Limited [CIL] to adopt one closed urea plant each for revival. Accordingly, CIL and NTPC have signed an agreement to form a joint venture [JV] to revive Sindri and Gorakhpur...
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Fertilizer Industry in India – on the brink
Emboldened by the success of direct benefit transfer [DBT] in LPG and having announced DBT for kerosene subsidy in 26 districts to begin with from April 1, 2016, the government is currently examining various possibilities for taking similar initiatives in fertilizers [besides food]. Subsidy syndrome While, these efforts are welcome, it needs to take stock of the present state of fertilizer industry in India as its health is a pre-requisite for ensuring un-interrupted supply of fertilizers to farmers at affordable price. In a pre-budget meeting with finance minister, Arun Jaitely, the Fertiliser Association of India [FAI] told him that at present, manufacturers have outstanding subsidy dues of Rs 45,000 crores. It urged the government to clear these in three installments....
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Gas price loss is urea’s gain
It’s time to leverage the conditions. Freeing distribution and movement will also make a difference Under new pricing guidelines notified in October, 2014, the price of domestic gas was fixed at $5.61 per mBtu on net calorific value (NCV) basis with effect from November 1, 2014 — an increase of 33 per cent over the $4.2 per mBtu prior to that date. The price was applicable till March 31, 2015. The price was arrived at by taking a weighted average of gas prices in Henry Hub (the US), NBP (National Balancing Point, the UK), AGR (Alberta Gas Reference, Canada) and Russia. It was to be revised once in six months based on movement in these indices for a full year,...
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Domestic gas price cut – can help end urea mess
Under new pricing guidelines notified in October, 2014, the price of all domestic gas was fixed at US$ 5.61 per mBtu [million British thermal units] on net calorific value [NCV] basis w.e.f November 1, 2014 which was an increase of 33% over US$ 4.2 per mBtu prior to that date. The price was applicable till March 31, 2015. The price was arrived at by taking a weighted average of gas prices in Henry Hub [USA], NBP [National Balancing Point] [UK], AGR [Alberta Gas Reference] [Canada] and Russia. It was to be revised once in 6 months based on movement in these indices for a full year three months prior to the date of next revision. Thus, for price effective from...
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Fertilizer reforms – time to walk the talk
Successive governments have blatantly glossed over reforms in the fertilizer sector for generations. Modi who was catapulted to power on the promise of pushing reforms and development had generated hope. Yet, during last 15 months in office, one only hears loud talk but no action on ground. In this regard, four major pronouncements of Modi – dispensation need close scrutiny. First, the prime minister promised that every farmer has a soil health card [SHC] so that he knows how much nutrient he will need to apply for getting good crop yield and keep soil healthy and robust. This by itself is a herculean task requiring cooperation of all state governments and authorities right up to the village level to ensure...
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DE-CONTROLLING UREA PRODUCTION
Removing the archaic ceiling on urea prices, which is a political sop to secure votebanks, will energise domestic production. This, in turn, will ensure consistent supply and also lessen the public’s subsidy burden India was able to import only about 9,00,000 tonnes of urea between April and November, 2014, which was 16 per cent less than what was imported during the same period in 2013. This put tremendous pressure on local markets. The problem was aggravated by a drop in supply from the Oman India Fertiliser Company SAOG. At home, three naphtha-fed urea production plants viz, Madras Fertilisers Limited, Mangalore Chemicals and Fertilisers, and Southern Petrochemicals Industries Corporation, also had to stop production after the Government decided to suspend subsidy payments....
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Urea ‘black-marketing’ – tackle the root cause
During April–November, 2014, urea imports were 900,000 tons (16 percent) less when compared to corresponding period in 2013. The shortfall was aggravated by drop in supplies from OMIFCO (Oman-India Fertilizer Company) – a joint venture between IFFCO, KRIBHCO and Oman Oil Company (OOC) – with whom India has a long-term off-take agreement. This together with shortfall in domestic production (3 naphtha-based plants viz., Madras Fertilizers; Mangalore Chemicals & Fertilizers and Southern Petrochemicals Industries had stopped producing due to government’s decision to suspend subsidy payments) led to aggravation of imbalance in the demand–supply in the run up to Rabi season (October, 14 to March, 15). The result was proliferation of black-marketing especially in northern and eastern parts with urea selling at over...
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Fertiliser self-sufficiency is a pipe dream
For nearly four decades successive governments have vowed to achieve self-sufficiency in the production of fertilisers, yet this goal has eluded them so far, barring for a brief while in the early 1990s. Will things be different under Modi? Immediately after the current government took charge, fertiliser minister Ananth Kumar reiterated the need to reinvigorate the sick plants of the Fertiliser Corporation of India (FCIL) and Brahmaputra Valley Fertiliser Corporation of India (BVFCL)—earlier known as HFCL—both central PSUs. Both have been incurring losses for decades. Indeed, some plants—Ramagundum and Talcher (FCIL) and Haldia (BVFCL)—were babies born sick. These PSUs have been on the ventilator for ages with the Centre pumping in thousands of crores of rupees to keep them alive....
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