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Government policy measures to provide fillip to Fertilizer sector   
 
Fertilizer industry plays a vital role in making the country self-reliant in food grain production. The Indian fertilizer sector is one of the most regulated sectors in India and also the allied sector of agriculture sphere. Today, India stands as the second largest consumer of fertilizers behind China. The fertilizers contain the three basic nutrients for agriculture: nitrogen (N), phosphorous (P) and potassium (K). India lacks potassium resources and has to entirely depend upon import for meeting the requirement of potassium fertilizers for agriculture usage. The country is also deficient in phosphatic (P) resources with around 90% requirement of it is being met through direct import of finished phosphatic fertilizers or phosphatic raw materials for indigenous production of phosphatic fertilizers, while N is the only fertilizer, the requirement of which is largely (around 80%) met through the domestic production.
Currently, the Indian fertilizer industry consists of two key segments - urea fertilizer and non urea fertilizers. Within these two segments, the urea fertilizer accounts for over 50% of the total fertilizer consumption, regulated by the government as the price and the subsidy are fixed by the government. While, the non urea segment, which consists the Di Ammonium Phosphate (DAP), nitrogen (N), phosphorous (P) and potassium (K), Single Super Phosphate (SSP) and Muriate of Potash (MOP) fertilizers, functions under a fixed subsidy and variable pricing freedom being granted by the government since April 2011.
 
Current scenario
As of now, the country has achieved 80% self-sufficiency in production capacity of Urea. As a result, India could manage its substantial requirement of nitrogenous fertilizers through the indigenous industry. Similarly, 50% indigenous capacity has developed in respect of phosphatic fertilizers to meet domestic requirements. However, the raw-materials and intermediates for the same are largely imported. For potash (K), since there are no viable sources/reserves in the country, its entire requirement is met through imports.
The installed capacity has reached to a level of 132.58 Lakh Metric Ton (LMT) in respect of nitrogen and 70.60 LMT in respect of phosphatic nutrient in the year 2014-15, making India the 3rd largest fertilizer producer in the world. The rapid buildup of fertilizer production capacity in the country has been achieved as a result of a favourable policy environment facilitating large investments in the public, co-operative and private sectors.
At present, there are 30 large size plants in the country manufacturing Urea, 21 units manufacturing DAP and complex fertilizers and 2 units manufacture Ammonium Sulphate as a byproduct. Besides, there are 97 medium and small-scale units in operation producing Single Super Phosphate (SSP).
 
Marginal rise in production
Production of total nutrients (N+P) increased marginally by 0.9% during 2014-15 over the previous year. N and P2O5 production at 12.43 and 4.09 million tonnes during 2014-15 registered increase of 0.2% and 3.1%, respectively, during the period. Sharp increase in production of NP/NPK complex fertilisers by about 12.7% contributed to higher production of fertiliser nutrients. All other major fertilisers experienced negative growth during the year. Production of urea, DAP and SSP fell by 0.6%, 5.1% and 3.2%, respectively, during 2014-15 over 2013-14. Fertiliser industry continued to suffer on account of inadequate availability of natural gas from domestic sources. Gap in availability was filled through imported LNG. Limitation in availability of phosphoric acid was also experienced by some of the DAP/NP/NPK plants. Apart from this, a couple of plants reported technical/ equipment problems for part of the year. Disruption in operation of three naphtha based urea plants due to policy related issues and difficulties in supply of gas to another urea plant affected the production of urea adversely.
Imports of Urea surges 23%
During the full year 2014-15, import of Urea was 8.75 million tonnes as against 7.09 million tonnes in the previous year, up by 23.41%. Import of DAP was marginally up at 3.82 million tonnes in 2014-15 compared to 3.26 million tonnes in the previous year. Import of MOP increased considerably significantly from 3.18 million tonnes in 2013-14 to 4.18 million tonnes in 2014-15. In addition, small quantities of MAP at 136 thousand tonnes and NP/ NPKs at 291 thousand tonnes were also imported during the year.
Availability
The year 2014-15 marked some recovery from the setback in consumption of fertilisers experienced in preceding three years. Consumption of all the three nutrients, viz., nitrogen, phosphate and potash recorded positive growth over the previous year. Availability of fertilisers from domestic production and imports was sufficient to take care of demand, particularly for phosphatic and potassic fertilisers. In case of urea, there was tight availability in few pockets during June-October 2014 due to drastic fall in imports during the period. Thereafter, large imports of urea took place surpassing the level in previous year for the same period. Domestic production of urea suffered on account of various factors. Additional production of urea beyond reassessed capacity was no more remunerative due to non-revision in policy. Production in three naphtha based plants suffered. These plants were ready to use gas but did not have access to gas as there is no pipeline connectivity to these plants as yet. Urea policy did not provide for operation of naphtha based plants beyond September 2014. Production in one gas based plant at Andhra Pradesh suffered due to technical snags in pipeline. Production suffered in one gas based complex fertilizer plant located in western region due to suspension of gas supply to the plant.
Consumption increases marginally
The growth in consumption of all the nutrients witnessed marginal rise in Rabi 2014-15 on the back of good rainfall received in September, 2014 and adequate moisture availability in soil. Consumption of N, P2O5 and K2O surged 8.4%, 5.4% and 19.4%, respectively during Rabi 2014-15 over the corresponding season in the previous year. Total nutrient consumption (N+P+K) increased by 8.6% during the period. Accordingly, overall total nutrient consumption increased to 25.6 million tonnes during full year of 2014- 15 from the level of 24.5 million tonnes in the previous year, registering an increase of 4.5%. N, P2O5 and K2O consumption at 17.0 million tonnes, 6.1 million tonnes and 2.5 million tonnes increased by 1.6%, 8% and 18.9%, respectively, during the period. NPK use ratio improved from 8.0:2.7:1 during 2013-14 to 6.8:2.4:1 during 2014-15.
Fertilizers Subsidy
Government proposed keeping fertiliser subsidy for 2014-15 at about same level as last fiscal, a move which was criticised by the industry that is facing liquidity crunch because of delay in subsidy payments. The proposed subsidy on crop nutrients at Rs 67,970 crore for the financial year ending March 2015 compared to the revised estimate of about Rs 67,971 crore in 2013-14 fiscal. Of the total fertiliser subsidy of Rs 67,970 crore in 2014-15 fiscal, subsidy for imported urea is pegged at Rs 12,300 crore, domestic urea is Rs 31,000 crore and sale of de-controlled fertilisers (like phosphatic & potassic fertilisers) is Rs 24,670 crore.
 
Recent developments
India eying partner for setting up urea plant in Iran
The government is scouting for an Iranian partner to set up a fertiliser plant entailing investment of over Rs 5,000 crore in the Persian Gulf nation. India revived its plans after Iranian authorities approached the government officials and evinced interest to partner with them in the project. India had nominated state-run Rashtriya Chemicals and Fertilisers (RCF), Gujarat Narmada Valley Fertilisers & Chemicals (GNFC) and Gujarat State Fertilisers Corporation (GSFC) for the proposed 1.3 million tonnes urea plant. Now the government is looking for an Iranian partner to be part of this project. And therefore a senior delegation from India will visit Iran next month. The proposal is to set up a urea joint venture plant at Chahbahar in Iran, using natural gas as feedstock, which is abundant in the country. Indian government officials have conveyed to the Iranian authorities that they are looking for a long-term gas contract at feasible rates for producing urea.
Government approves gas pooling for fertiliser sector
Government of India approved a proposal to pool or average out prices of domestic natural gas and imported LNG used by fertiliser plants to make the cost of fuel uniform and affordable. Fertiliser plants consume about 42.25 million standard cubic meters per day of gas for manufacture of subsidised urea. Out of this, 26.50 mmscmd comes from domestic fields and the rest 15.75 mmscmd is imported liquefied natural gas (LNG). The $5.18 per million British thermal unit price of domestic gas is about half the cost of LNG. The gas pooling will help to save Rs 1,550 crore in subsidy and will benefit 30 urea plants. The cost of gas, which is the most important component for production of urea, varies from plant to plant owing to differential rates at which imported LNG is contracted as well as cost of transportation. The Cabinet Committee on Economic Affairs (CCEA) has approved averaging of different rates of domestic and imported gas to ensure supply of fuel to all urea plants at a uniform delivery cost. This would help in focusing on improving plant efficiency and may help in price advantage in sourcing of LNG. The move would help bring down the cost of fuel and help save subsidy.
FDI in fertilizer sector
The Fertiliser Industry has attracted Foreign Direct Investment (FDI) worth $543.35 million or Rs 2,916.94 crore between April 2000 and June 2015. In June 2015, the sector has garnered FDI worth Rs 0.65 crore.
 
 
Corporate developments in fertilizer sector
•             Rashtriya Chemical Fertilizers (RCF) has entered into a Joint Venture Agreement (JVA) with Coal India (CIL), GAIL (India) and Fertilizer Corporation of India (FCL) for incorporation of a company namely ‘Rashtriya Coal Gas Fertilizers’ to establish and operate new coal gasification based Fertilizer Complex (Ammonia Urea Complex) at Talcher, Odisha along with power plant and associated facilities at Talcher unit of FCIL and to market its products.
•             The Fertiliser Ministry is planning to increase the capacity of National Fertilizer’s (NFL) plant at Nangal in Punjab by 13 lakh tonnes (LT). Currently, the company’s Nangal unit has an installed capacity of 4.785 lakh tonnes (LT).
•             RCF is planning to invest around Rs 14,000 crore over the next five years for expansion and charting a growth path for the public sector unit. The company will expand the capacity of urea at Thal by setting up one single stream ammonia plant of 2200 MTPD capacity and another plant of 3850 MTPD capacity at the existing site.
Outlook
Agriculture is the major occupation in the country, thus the industry not only helps India to become self-reliant in food grain production but also contributes significantly to enhance employment in the country. With the improving farm economics and rising thrust on irrigation, the consumption of fertilizers has been growing sharply leading to increasing import dependence towards meeting the requirement of fertilizers in the country, as there has been no significant investment in the fertilizer sector over the last several years.
The domestic fertilizer industry has by and large attained the levels of capacity utilization comparable with others in the world. The capacity utilization of the fertilizer industry, particularly in respect of Urea, is expected to improve further through modernisation of the existing plants. The Government of India has recently come out with a slew of policy measures aimed at containing subsidy outgo, improving energy efficiency, levelling input costs and preventing diversion of urea from agriculture. Moreover, government notified new urea investment policy for expansion of urea plants and also allowed gas pooling for the sector. These policies are expected to provide support to individual fertiliser players and the overall industry in the next few years.
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