OUTLOOK OF DEMAND AND SUPPLY OF

CHEMICAL FERTILISER IN INDIA

The three main nutrients for plant growth N (Nitrogen) P (Phosphate)

and K (Potash) are primarily consumed through Urea, DAP and MOP fertiliser
respectively. The global fertiliser demand has grown by about 10% over the past two year
.This trend is likely to continue in the future the main drive being. Thus global fertiliser
demand is expected to grow at about 2.8% p.a during the FY 2008 to FY 2013 which is
higher than five year average growth of the past decade of the there main nutrients,
nitrogen demand is expected to rise faster (2.9% p.a) than phosphate (2.6% p.a) or potash
(2.4% p.a)
India is one of the major region contributing to rising fertiliser demand
in India is expected to increase at about 4.3% p.a FY 08 to FY 13 higher than the global
rate of 2.8% p.a during the same period.
In FY 08 India imported 6.8 mt of urea making it one of the largest urea
imported in the world. Urea demand is forecast to increase by about 3% p.a to reach 29
mt by 2011 which we believe is very conservative estimate.
India currently import about 2 mt of DAP p.a. Indian DAP demand expected to increase
by about 5% till 2012.But the planed capacity addition are not expected to match the
projected demand increasing India’s dependence on imports.
India is the third largest producer and consumer of fertiliser in the world
after China and USA and contributes to 12% of world production of nutrients and
12.6%of world consumption of NPK nutrients .Per hectare fertiliser consumption (Kg/ha)
in neighboring countries 2001-02.China 225.1, India 91.5, Sri Lanka 122.7. Pakistan
131.9, Bangaladesh 159.1 World 89.9.

REGULATION:
Because of its direct linkage to national food security traditionally the
fertiliser sector has been highly regulated. The production, distribution and pricing of
fertiliser have been controlled by the Government of India. The burgeoning subsidy bill
and huge demand necessities deregulation in this sector. Due to sensitivities involved
complete deregulation of fertiliser sector is still not viable option.

FUTURE OUTLOOK:
By 2015 India is expected to face a demand supply deficit of
8.9mt of urea. The recent initiative may result in relieving its heavy dependence on
import in the near future.
 INDIA UREA -DEMAND-SUPPLY

(Mn.tons)
YEAR DEMAND SUPPLY DEFICITE
2004 19.7 19 0.7
2005 20.7 20.2 0.5
2006 22.3 20 2.3
2007 24.5 20.3 4.2
2008 26.7 20 6.7
2011(e) 29.1 23.1 6

(Source: Crisil, IFA)

INDIA ESTIMATED DAP -DEMAND-SUPPLY

(Mn.tons)
YEAR DEMAND SUPPLY DEFICITE
2008 7.9 5.9 2
2009 8.3 6.2 2.1
2010 9.1 6.4 2.7
2011 9.5 6.5 3

(Source: Crisil, IFA)

FERTILISER CONSUMPTION (NPK)
(In Million Tonnes)

FOODGRAIN FERTILISER PER HECTAR

YEAR PRODUCTION CONSUMPTION CONSUMPTION
1999-00 209.8 18.07 95.23
2001-02 212.02 17.36 91.49
2006-07 234.29 23.55 115.23
2011-12 320 37.92 168.99

(Integrated Nutrient Management)

Chemical fertilisers have played a vital role in the success if India green revolution and
consequent self reliance in food grain production. The increase in fertiliser consumption
has contributed significantly to sustainable production of production of food grain in the
country.
The Indian fertiliser had a very humble beginning in 1906 when the fertiliser
manufacturing unit of SSP was set up Ranipet near Chennai with an annual capacity 6000
MT.
Fertiliser is a key ingredient in ensuring the food security of the country by
increasing the production and productivity of the soil. The domestic food grain
production target has been set at 320 million tonnes by 2011-12 from the present
production of 210million tonnes. This target could be achieved by higher productivity
through improved farming practices expansion of irrigation, better seed and extensive and
balance use of fertiliser. The department of planning to raise the production of urea from
the present installed capacity of 197 to 300 LMT by the end of 11th five year plan i.e.
2011-12 by taking concentrate steps to boost production and productivity removing
regional imbalance in production and distribution securing long term

Sector –wise and Nutrient-wise Installed Capacity of Fertiliser manufacturing units

(as on 1st Jan 09)

Capacity LMT Percentage

Sector Nitrogen Phophatic Nitrogen Phophatic
Public Sector 34.98 4.33 29 7.65
Private Sector 31.69 17.13 26.27 30.27
Co-operative sector 53.94 35.13 44.73 62.08
Total 120.61 56.59 100 100
(Integrated Nutrient Management)

10th Five Year Plan 100% capacity utilization of existing plants (LMT)

DEMAND SUPPLY GAP

YEAR UREA DAP MOP UREA DAP UREA DAP
2002-03 213.86 71.8 21.75 197.9 69.81 15.96 1.99
2003-04 221.18 77.05 22.73 197.9 73.77 23.28 3.28
2004-05 228.1 81.87 23.64 200.3 73.77 27.8 8.1
2005-06 235.03 86.69 24.55 208.56 73.77 26.47 12.92
2006-07 242.14 91.66 25.45 216.45 73.77 25.32 17.89

(Source: Department Of Fertilisers)

The department of fertiliser has estimated the demand for urea on the basis of urea
consumption in the last five years (1998-99 to 2002-03) and past growth trend. Such an
estimate appear more realistic as any future policy on fertiliser usage world emphasis on
balance use of phosphatic and potassic fertilisers to improved NPK ratio. Thus on an
assumed annual compounded growth rate of 2% urea demand is likely to be 220 lakh
tonnes in 2006-07 and 243 lakh tonnes by the end of 11th five year plan (2011-12).This
would also indicate a urea demand supply gap of about 5 to7 lakh tonnes by the year
2005-06 assuming Oman Indian Fertilisers Company (OMIFCO) supplies are available as
targeted.
The gap would further grow to about 30 lakh tonnes by 2011-12.Thus would
be need for additional urea production capacity given by the most conservative demand
estimate.
SRATEGY FOR GROWTH:-
Setting up joint venture project in countries having abundant and cheaper raw material,
expansion and capacity addition/efficiency

Joint Venture Abroad:-

Oman Indian fertiliser Company Oman (OMIFCO)

KRIBHCO, IFFCO and Oman Oil Company with share holding of 25%, 25% and 50%
respectively have collaborated and set up world class urea ammonia fertiliser plant in
Oman. It consists of 5060 MTPD.

Jordan:-

SPIC Southern Petrochemical Industries Corporation Ltd. Jordan Phosphate Mine

Company Ltd. (JPMC) and Arab Investment Company (AIC) joint venture project in
Jordan to produced 2.24 lakh tonnes of phosphoric acid p.a. 52.17% of the equity of the
joint venture named Jordan Chemical Company Ltd. is held by SPIC, 34.86% by JPMC
and 12.97% by AIC

Morocco:-

A joint venture (Indo Morocco Phosphore SA) between Office Cherifien Des Phosphates
(OCP), Morocco and Chambal Fertilizers & Chemicals Ltd. (CFCL) to produce 3.30 lakh
tonnes of phosphoric acid at a total cost of US $ 205 million had been commissioned in
Morocco in October 1999. This venture did not involve any participation or buyback
arrangement by the Government. The equity in the venture of US $ 65 million is held by
OCP and CFCL equally.
Annexure

World Nitrogen Demand/ Supply Balance

(Million metric tonnes)
2009 2010 2011 2012 2013
Supply
Capacity 154.9 158.3 164.7 172.7 179
Total Supply 133.5 137.4 143.1 149.5 154.7
Demand
fertiliser demand 101 103.9 106.1 108.2 110.3
Non-fertiliser demand 22.8 24.2 25.7 26.8 27.9
Distribution Losses 3.1 3.2 3.3 3.4 3.5
Total Demand 126.9 131.3 135.1 138.4 141.7
Potential Balance 6.6 6.1 8 11.1 13
% Balance Supply 5 5 6 8 9
source:M.Prud'homme,IFA,june 2009

World Phosphoric Demand/ Supply Balance

(Million metric tonnes)
2009 2010 2011 2012 2013
Supply
Capacity 46.1 47.6 49.1 53.1 55.3
Total Supply 39.8 41.8 43.6 45.2 46.9
Demand
fertiliser demand 30.1 32.6 34.2 35.7 37.1
Non-fertiliser demand 5.1 5.4 5.5 5.6 5.9
Distribution Losses 0.7 0.8 0.8 0.8 0.9
Total Demand 35.9 38.7 40.5 42.1 43.8
Potential Balance 3.9 3.1 3.1 3.1 3.1
% Balance Supply 11 8 8 7 7
source:M.Prud'homme,IFA,june 2009

World Potash Demand/ Supply Balance

(Million metric tonnes)
2009 2010 2011 2012 2013
Supply
Capacity 41.8 44.1 45.9 51.9 54.7
Total Supply 38 39.5 41.6 44.4 47
Demand
fertiliser demand 24.9 26.9 28.5 29.8 31
Non-fertiliser demand 2.8 2.9 2.9 3 3
Distribution Losses 0.8 0.9 0.9 1 1
Total Demand 28.5 30.7 32.3 33.8 35
Potential Balance 9.5 8.8 9.3 10.6 12
% Balance Supply 33 29 29 31 34
source:M.Prud'homme,IFA,june 2009