FERTILIZER

INDUSTRY
Sectoral Report, 2009

National Institute of Agricultural Extension Management (MANAGE)

0
Hyderabad

Table of content

Content

Page No.

1. Introduction

2. Global Scenario

3. Production Capacity and Capacity Utilization

4. Major Players and their shares

5. Micronutrients

6. Bio-Fertilizers

11

7. Water Soluble Fertilizers

13

8. Reasons for low and declining crop response to fertilizers

14

9. Subsidy Trend

16

10. Recent Government Policies

18

11. Strategy For Growth

24

INTRODUCTION
Fertilizer is generally defined as "any material, organic or inorganic, natural or synthetic,
which supplies one or more of the chemical elements required for the plant growth" Chemical
fertilizers have played a vital role in the success of India's green revolution and consequent
self-reliance in food-grain production. The increase in fertilizer consumption has contributed
significantly to sustainable production of food grains in the country. The Government of India
has been consistently pursuing policies conducive to increased availability and consumption of
fertilizers in the country.
The Indian Fertilizer industry had a very humble beginning in 1906, when the first
manufacturing unit of Single Super Phosphate (SSP) was set up in Ranipet near Chennai with
an annual capacity of 6000 MT. The Fertilizer & Chemicals Travancore of India Ltd. (FACT)
at Cochin in Kerala and the Fertilizers Corporation of India (FCI) in Sindri in Bihar were the
first large sized fertilizer plants set up in the forties and fifties with a view to establish an
industrial base to achieve self-sufficiency in food grains. Subsequently, green revolution in the
late sixties gave an impetus to the growth of fertilizer industry in India. The seventies and
eighties then witnessed a significant addition to the fertilizer production capacity.

Fertilizer 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 230 million tonnes (200708). This target could be achieved by higher productivity through improved farming practices,
expansion of irrigation, better seeds and extensive and balanced use of fertilizers. Towards this
end, the Department of chemicals and fertilizer is planning to raise the production of urea from
the present installed capacity of 197 LMT to 300 LMT by the end of 11th Five Year Plan i.e.,
2011-12 by taking concrete steps to boost production and productivity, removing regional
imbalances in production and distribution, securing long term tie-ups for supply of feedstock
and raw material etc.

Global Scenario
At global level it is anticipated that there will be an ample supply of all three major fertilizer
nutrients. Surpluses of nitrogen and phosphate are forecast to grow while those of potash are
likely to remain more or less stable. Africa will remain a major phosphate exporter and
increase nitrogen exports while importing all of its potash. It is expected that America will
continue to be a net importer of nitrogen and that the region will move into increasing
phosphate deficit during the outlook period while remaining a primary supplier of potash.
Starting with a small deficit, the Asia region is expected produce a rapidly increasing surplus
of nitrogen, but will continue to import phosphate and potash. According to forecasts, Europe
will be the major nitrogen and potash exporting region in the world and will continue to
produce surpluses of phosphate though decreasingly so. It is expected that deficits of all three
nutrients will persist in Oceania.
Forecasted N, P, K consumption pattern of world from 2007 - 2011
REGION

World Nutrient balance(2007-08)to 2011-12

unit= 000 tonnes

Africa

America

Asia

Europe

Ocenia

N.P,K

2007-08

2008-09

2009-10

2010-11

2011-12

677

1397

1566

1776

3184

P2O5

5278

5765

6105

6684

7064

K20

468

485

497

509

516

7014

7736

7833

7416

8094

P2O5

124

197

241

418

K20

4689

3370

4312

4527

5917

2132

206

1972

5078

7374

P2O5

5327

5146

5076

4983

3820

K20

9057

9614

9568

10014

10543

12468

12748

12816

13069

13587

P2O5

742

695

677

430

372

K20

10963

11106

11241

12370

12317

714

772

848

912

992

P2O5

307

283

294

306

326

WORLD

K20

373

384

394

404

415

3286

5843

7673

11550

15059

P2O5

387

907

1216

1584

2873

K20

5754

3993

5094

5970

6760

SOURCE: WWW. FAO.ORG

Graph showing the consumption pattern of fertilizers in major countries in

world.

Nitrogen
The forecast is for world nitrogen fertilizer demand to increase at an annual rate of about 1.4%
until 2011/2012, which is an overall increase of 7.3 million tonnes. About 69%t of this growth
will take place in Asia.

Phosphate
With an increment of 4.2 million tonnes during the outlook period, the expected annual
growth rate in world demand for phosphate fertilizers is about 2.0%. About 71% of this

growth will take place in Asia and 21% in America. The main contributors to increase in
world consumption will be South Asia (35.8%), East Asia (33.8%) and Latin America (18.3%)

Potash
World demand forecast for potash fertilizers is to increase at an annual average rate of about
2.4%, equivalent to an increment of 3.6 million tonnes over the outlook period. About 68% of
this growth will occur Asia and 26% in America

Production capacity and capacity utilization

As on 31 Jan 08, the country has an installed capacity of 120.61 lakh MT of nitrogen and
56.59lakh MT of Phosphate. Presently, there are 56 large size fertilizer plants in the country
manufacturing a wide range of nitrogenous, phosphatic and complex fertilizers. Out of these,
30 (as on date 28 are functioning) units produce urea, 21 units produce DAP and complex
fertilizers, 5 units produce low analysis straight nitrogenous fertilizers and the remaining 9
manufacture ammonium sulphate as-product. Besides, there are about 72 medium and small
scale units in operation producing SSP. The sector-wise installed capacity is given in the table
below:Sector -wise and Nutrient - wise Installed Capacity of Fertilizer Manufacturing Units (as on
1st
January, 2008)

S.No

Sector Capacity

( mMT)

Percentage Share

Nitrogen

Phosphatic

Nitrogen

Phosphatic

Public Sector

4.48

1.22

34

22

Cooperative Sector

3.16

1.27

24

23

Private Sector

4.22

3.05

32

55

Total

11.88

5.56

At present, there are 56 large size fertilizer units in the country manufacturing a wide range of
nitrogenous, phosphatic and complex fertilizers. Of these, 30 units (as on date 28 units are
functioning) produce urea, 21 units produce DAP and complex fertilizers, 5 units produce low
analysis straight nitrogenous fertilizers and 9 manufacture ammonium sulphate as by-product.
Besides, there are about 72 small and medium scale units in operation producing single super
phosphate (SSP). The total installed capacity of fertilizer production which was 119.60lakh
MT of nitrogen and 53.60lakh MT of phosphate as on 31.03.2004 has marginally increased to
120.61lakh MT of nitrogen and 56.59lakh MT of phosphate as on 31.01.2008.
The production of fertilizers during 2008-09 was 132lakh MT of nitrogen and 55.6lakh MT of
phosphate. The production target for 2009- 2010 has been fixed at 134.5lakh MT of nitrogen
and 55.5lakh MT of phosphate, representing a market growth rate of 3.2% in nitrogen and
1.4% in phosphate, as compared to the actual production in 2008-2009.

Major players and their shares:

Nitrogenous fertilizers:
Product Variation
Type

Share (%)

Urea

81

AS, CAN, ACI

Di-Amm. Phosphate

17

Major players in urea (market share %):

MAJOR PLAYERS

Share (%)

4%

25%

5%

Chambal Fertilisers

NFL

24

5.56

IFFCO

Chambal Fertilizers

14

3.24

KHRIBCO

IFFCO

13

3.01

KHRIBCO

1.85

RCFL

1.39

Nagarjuna

1.16

Tata Chemicals

1.16

Oswal Chem. &

1.16

Indo Gulf

0.92

Others

14

3.24

RCFL

5%

Nagarjuna

15%

5%
6%

Tata Chemicals
Oswal Chem. & Fert.

8%

13%

in

(unit =mMT)

NFL

14%

Volume

Indo Gulf

Fertilizers.
Others

Urea Details:
2004-05

2005-06

2006-07

2007-2008

2008-09(E)

Production(in lakh tons)

202.63

200.98

203.08

198.58

199.21

Imports (in lakh tons)

6.41

20.56

47.19

69.28

56.66

Consumption (in lakh tons)

205.47

220

244.85

261.67

266.47

Ave. Import price in $/tonne

202

243

257

344

500

Subsidy: Indigenous in Rs/tonne

5055

5301

6229

8284

10526

Subsidy: Imported in Rs/tonne

11576

10413

10746

14340

22824

Total subsidy outgo in Rs Crores

10985

12794

17721

26358

33901

WWW.businessline.com

Major Players in Diammonium Phosphate:

Lead Players(unit=mMT)
3% 3%
5%

21%

7%

Oswal Chem

Company

Share (%)

5.55

IFFCO

Oswal Chemicals

22

1.22

GSFC

IFFCO

16

0.88

GSFC

14

0.77

Godavari

12

0.66

Godavari Fert

8%

16%

11%

HLCL

Fertilizers

SPIC

HLCL

11

0.61

SPIC

0.44

Paradeep

0.38

Indo Gulf Corpn

0.27

MCFL

MCFL, Mangalore

0.16

Zuari

Zuari

0.16

Paradeep
12%

14%

Indo Gulf Corpn

DAP Details:
2004-05

2005-06

2006-07

2007-2008

2008-09(E)

Production(in lakh tons)

51.84

46.28

48.51

42.12

29.88

Imports (in lakh tons)

6.44

28.28

28.76

29.73

64.92

Consumption (in lakh tons)

60.79

65

69.24

75.55

99.04

Ave. Import price in $/tonne

260

290

330

489

914

Subsidy: Indigenous in Rs/tonne

4826

5941

6966

10381

36662

Subsidy: Imported in Rs/tonne

4396

5724

6391

12016

27408

Total subsidy outgo in Rs Crores

2785

4369

5217

7944

28748

WWW.businessline.com

Phosphatic Fertilizers:
Product Variation
Type

Share (%)

SSP

18

DAP

48

NP/NPK

34

MOP Details:
2004-

2005-

2006-

2007-

2008-

05

06

07

2008

09(E)

Imports (in lakh tons)

34.09

45.29

34.48

44.21

43.19

Ave. Import price in $/tonne

180

215

213

256

815

Subsidy: Imported in Rs/tonne

5614

6594

7024

7645

22056

Total subsidy outgo in Rs Crores

1914

2986

2422

3380

9526

WWW.businessline.com

Micronutrients:
Micronutrients are essential for the normal growth of plants. Deficiencies of micronutrient
drastically affect the growth, metabolism and reproductive phase in plants, animal and human
beings. The deficiencies of multi-micronutrients are increasing in Indian soils due to depletion
of fertility after green revolution.

Micronutrient deficiencies in Indian soils and potential areas for Micronutrients:

Sulphur (S): S deficiency is fast emerging in areas under oilseeds and pulses due to higher
removal of S by crops. Survey of Indian soil under AICRP micronutrients revealed that on an
average 41 per cent of Indian soils are deficient in S and it is widespread in coarse textured
alluvial, red and lateritic, leached acidic and hill soils and black clayey soils. The deficiency of
sulphur is emerging fast in areas where continuously sulphur free fertilizers like DAP, urea etc
are being used. Sulphur deficiency is also found more in alkaline, coarse textured, low organic
matter soils. States like Orissa, Jharkhand, Andhra Pradesh, Madhya Pradesh and some parts
of Gujarat are highly deficient in Sulphur.

Zinc: Coarse textured, calcareous, alkaline or sodic soils having sandy texture, high pH and
low in organic matter are generally low in available zinc. Calcareous soils of Bihar, Vertisols
and Inceptisols of Andhra Pradesh, Tamil Nadu and Madhya Pradesh and Aridisols of
Haryana showed extensive deficiency of zinc resulting low crop yields. Zinc is a crucial
component of the package of the practices recommended for sodic soils reclamation.
Deficiencies of Fe, Mn and Cu are much less extensive than that to zinc. Maximum zinc
deficiency is observed in areas of Maharastra, Andhra Pradesh, Uttar Pradesh, Bihar and
Madhya Pradesh.

Fe: The deficiency of Fe was found to be largest26% in Sierozem of Haryana followed by

18% in Tamil Nadu, 12% in Punjab and 8 to 9% in calcareous soil of Gujarat and Uttar
Pradesh acid soils are more deficient in B and Mo than zinc, iron and manganese.

B: Boron deficiency varies from 2% in AER 2; 24-48% in highly calcareous soils of AEZ 2, 9
and 14 but most widespread (39-68%) in red and lateritic soils of AEZ 6, 13, 16, 17, 19.
Deficiency of boron occurs widely in highly calcareous soils of Bihar, parts of Gujarat and
Tamil Nadu. Calciorthent soils of Samastipur and Muzzaffarpur showed 52% B deficiency,
44% in Gandak command area and 32% inVertisols of Sone command area. About 22-24%
calcareous and sandy soils of Uttar Pradesh and 2-4% samples of swell-shrink soils of Madhya
Pradesh, inceptisols of Haryana and Punjab tested to be deficient in available boron. Soil
fertility maps have been prepared for wider use. Soils of Bihar,Karnataka and Uttar Pradesh
are highly deficient in Boron.

In all the agro-economic zones of India on an average 45.4% Zn, 3.3%Cu, 4.5%Mn and8.3%
Fe deficiency is observed. Zinc, Iron and Manganese deficiencies are observed more in nonacidic soils and Boron and Molybdenum deficiencies are more common in acidic soils.

10

Bio- Fertilizers:
Ever increasing health consciousness of the people world over has resulted in a major
consumer shift towards organic foods. As a result, organic agriculture (OA) is expanding
globally.
In India 2.5 Million hectare is under organic forming and area under organic farming is
growing year after year. There is wide range of demand for bio fertilizers. Area under organic
farming during year 2003 was 37 thousand ha, area under organic farming during year 2004
was 76 thousand ha area under organic farming during year 2005 was 1.73lakh. The trend
shows growth rate of more than 100%. For the current production of 230 tonnes of food
grains(2007-08) per annum in the countrys modern farming, Organic manures and biofertilizers contribute around four million tonnes of nutrients out of supplied 18million tones.
Manu fertilizer companies in India stared commercial production of bio fertilizers and organic
manure. The table given below shows increase in the sustainable production of bio fertilizers
year after year from 2003-04 to 2007-08.

Production Bio-Fertilizers during 2003-04 to 2007-08

S.No.

Name of the State

(in tonnes)

Production during the year

2003-2004

2004-2005

2005-2006

2006-2007

2007-08

South Zone
1

A&N Islands

0.00

Andhra Pradesh

205.00

2019.50

2246.43

4500.619

4515.81

Daman & Diu

0.00

Karnataka

1083.40

1135.86

612

341.64

2841.269

Kerala

54.85

213.25

8.34

261.75

814.447

Lakshadweep

0.00

Pondicherry

22.62

7.78

1827.78

471.286

Tamil Nadu

1845.50

1564.94

2207.58

1770.29

3466.966

Total

3211.37

4933.55

5082.13

8702.079

12109.778

9.

Chhattisgarh

86.95

10

Gujarat

1034.85

943.00

1371.60

1250.63

1263.301

11

Goa

0.00

3.5

12

Madhya Pradesh

1300.45

1333.94

823.07

1204.76

1884.867

13

Maharashtra

3035.00

3049.98

2098.96

2425.959

2486.41

14

Rajasthan

590.01

30.64`

430.59

339.75

302.303

West Zone

11

15

D & N Haveli

0.00

Total

6047.26

5357.56

4724.22

5224.599

5936.881

North Zone
16

Delhi

0.00

1.36

1.23

168.844

17

Chandigarh

0.00

18

Haryana

22.54

20.16

23.48

30.22

8.89

19

Himachal Pradesh

9.48

10.30

9.59

56.21

20

Jammu & Kashmir

0.00

21

Punjab

2.95

0.37

2.27

1.7

22

Uttar Pradesh

115.98

130.27

486.30

212.78

250.057

23

Uttaranchal

0.00

Total

150.95

162.46

522.87

245

485.701

24

Bihar

0.00

15.00

41.00

36.9

20

25

Jharkhand

0.00

9.00

205.62

201.68

26

Orissa

59.31

32.62

65.97

280.54

331.94

27

West Bengal

226.53

74.296

194.60

1406.48

922.34

Total

285.84

121.916

310.57

1929.54

1475.96

East Zone

North east Zone

28

Arunachal Pradesh

0.00

29

Assam

88.50

25.20

107.60

8.465

70.901

30

Manipur

0.00

31

Meghalaya

0.00

32

Mizoram

1.14

1.68

3.58

33

Nagaland

8.03

17.03

10.65

13.98

34

Sikkim

0.00

35

Tripura

5.80

23.25

14.27

Total

103.47

25.20

124.63

44.045

102.731

Grand Total

9798.89

10600.686

10764.42

16145.263

20111.051

Details of State-wise Capacity and Production of Bio-fertilizer during 2007-08:

State

Capacity

Total

Bio-fertilizer

Production

2007-08

(MT)
Andhra Pradesh

7025

4515.81

12

Assam

290

70.901

Bihar

150

20

Delhi

1000

168.844

Gujarat

1850

1263.301

Goa

150

Haryana

50

8.89

Himachal Pradesh

75

56.21

Jharkhand

220

201.68

Karnataka

26425

2841.269

Kerala

5855

814.45

Madhya Pradesh

1725

1884.87

Maharashtra

5775

2486.41

Mizoram

25

3.58

Nagaland

150

13.98

Orissa

430

331.94

Punjab

1.7

Pondicherry

890

471.29

Rajasthan

800

302.30

Tamil Nadu

12825

3466.97

Tripura

30

14.27

Uttar Pradesh

315

250.06

West Bengal

1105

922.34

Total

67162.00

Water soluble fertilizers:

Technology helps in increasing productivity by 30 to 100 per cent with 50 to 70 percent
saving of water. There is enhanced water use efficiency (WUE). Fertilizer use efficiency is
also enhanced when it is applied through drip irrigation. Increased productivity with saving of
30 to 40 per cent of fertilizer is achieved through fertigation.
For intensive and economical crop production, the best solution for higher
productivity is fertigation, where both water and fertilizers are delivered to growing crops
through micro irrigation system. Fertigation provides Nitrogen, Phosphorus, Potash as well as
the essential trace elements (Mg. Fe, Zn, Cu, MO, Mn) directly to the active root zone, thus
minimizing losses of expensive nutrients, which ultimately helps in improving productivity
and quality of farm produce. Fertigation ensures higher and quality yield along with savings in

13

the time and labor, which makes Fertigation economically profitable.14.29lakh hectare is
potential market for Water soluble fertilizers in India.

Water Technology Center,

Fertilizer Use Efficiency (%)

TNAU, have conducted

Nutrient

Soil Application

Drip

Drip Fertigation

Fertilizer Use Efficiency

30-50

65

95

Experiment on wide range

20

30

45

of crops, more than 90% of

50

65

80

Fertilizer Use Efficiency is

observed in drip fertigation.

Reasons for low and declining crop response to fertilizers:

The fact that the fertilizer was the key input in augmenting food grain production after the
availability of the seeds of high yielding crop varieties is evident from the increase in fertilizer
consumption from 1.98 Mt in 1969-70 to 18.07 Mt by 1999-00. Nevertheless, the average
annual increase in fertilizer consumption witnessed a declining trend in these three decades, as
reflected by 16.5% during 1970's, 12.04% during 1980's and only 5.6% during 1990's. A
simple regression analysis between the food grain production and fertilizer consumption
during 1960-61 to 1999-00 showed that the partial factor productivity of fertilizers has been
continuously declining. The data available from some centers under the Project Directorate of
Cropping Systems Research (PDCSR), Modipuram also indicate a reduction in crop response
to fertilizer application, especially when balanced fertilization is not practiced. The major
factor responsible for the low and declining crop response to the fertilizers was the continuous
nutrient mining of the Indian soils without adequate replenishment to the desired extent. It is
estimated that about 28 Mt of primary plant nutrients are removed annually by crops in India,
while only 18 Mt or even less are applied as fertilizer, leaving a net negative balance of about
10 Mt of primary plant nutrients (NPK).
Similarly, a study at ND University of Agriculture and Technology, Faizabad showed that the
yield decline in both rice and wheat was the highest when N alone was applied at 120 kg/ha.
As the depletion of native soil P increased with time, the response of both rice and wheat to
applied P showed an increase after 10 years of cropping.

14

Furthermore, the soils are also getting continuously depleted of secondary plant nutrient S and
micronutrients. The marked deficiencies of S and Zn are widespread in the country and
significant responses to application of these nutrients are well documented. The deficiencies of
B, Fe and Mn are also being reported from some parts of the country. Thus, inadequate and
imbalanced fertilization is a major causative factor for low and declining crop response to
fertilizers.
The major factor, responsible for the low response of crops to fertilizer nitrogen, is its low use
efficiency, especially in case of rice crop where it is only 30-40% of applied N due to various
N loss mechanisms. There is, therefore, an urgent need to develop more efficient nitrogen
fertilizers. So there is need for slow release N fertilizers, Coated urea with neem.
Studies in India showed that coating urea with neem cake/oil/neem bitterns could retard the
nitrification for 2-3 weeks. A technology for coating urea with neem oil emulsion at the
factory scale is now available in India and the Govt. of India has permitted National Fertilizers
Limited (NFL), Shriram Fertilizers and Chemicals and Indo-Gulf Fertilizers to manufacture
and market the neem-coated urea on an experimental basis. The results obtained with neemcoated urea on the farmers fields have shown a 2 to 10 % higher grain yield of rice as
compared to uncoated urea. There is a heavy demand of neem-coated urea in several states of
India, and therefore, production of neem-coated urea needs to be enhanced.

Causes for Low and Declining Crop Response to Fertilizers:

Continuous use of fertilizer N alone or with inadequate P and K application leading to

mining of native soil P and K

Continued practice of intensive cropping systems like 'rice-wheat' with high yielding
varieties even under recommended NPK use, impoverishing soils of secondary and
micro nutrients specially S, Zn, Mn, B and Fe

Use of high analysis fertilizers and inadequate addition of organic manures resulting in
widespread deficiencies of S and micronutrients

Fertilizer application mostly not based on soil-test values

Inappropriate time and method of fertilizer application

Excessive use of irrigation in rice-wheat cropping system, sugarcane and other heavily
fertilized crops leading to leaching of nitrogen and other plant nutrients

15

Inadequate availability of appropriate kind of fertilizers at the right time

Antagonistic reaction between some plant nutrients

Low status of soil organic carbon

Subsoil impedance to plant root system restricting nutrient uptake

Soil degradation due to high salinity/sodicity/acidity/waterlogging, affecting nutrient

availability

Lack of adequate and quality soil testing facilities and meager availability of fertilizer
recommendations under aberrant weather conditions

Environmental degradation, having negative impact on belowground biodiversity,

especially agriculturally important microorganisms

Subsidy trend
Total subsidy
81500
71500
61500
51500
41500
31500
21500
11500
2005-06

2006-07

2007-08

2008-09

2009-10

The trend over subsidy shows the upward trend from the year 2005to 2008 while it shows
suddenly a downturn in the year 2009 with a total subsidy of Rs.49980crore. The substantial
reduction in the subsidy can be observed for the current fiscal year (2009-10). It is basically
due to the reason that Prices of major fertilizers such as urea and di-ammonium phosphate
(DAP) and key raw materials such as sulphur, phosphoric acid etc have come down steeply
during the past three months as compared to previous year. DAP Prices has been substantially
reduced from $ 1300/ton to less than $ 400/ton compared to last year
Table showing input price movement from July 2008 to Nov 2008:
Fertilizer

July 2008

Nov 2008

16

Urea

860

255

DAP

1300

850

Sulphur

860

60

Phosphoric acid

2600

1300

Ammonia

950

350

Thus country has saved more than Rs 20,000 crore in its fertilizer subsidy bill during the
current financial year as a fall-out of the global economic crisis leading to slide in
international markets.
Nutrient Based Fertilizer Subsidies (New development towards fertilizer subsidy):
This Nutrient Based Fertilizer Subsidy is the most important step (passed in Budget 20092010) to make the Indian farmer able to use more complex fertilizer instead of straight
fertilizer. Farmers will see prices of complex fertilizers coming down by an average of 17.5
per cent. Previously, subsidies on fertilizers are entirely product-based. They are available
only for specific products such as urea, di-ammonium phosphate (DAP), muriate of potash
(MoP) and Single Super Phosphate (SSP). Others fertilizers receive no subsidy or have prices
that are fixed with no regard to their nutrient content.
This will, however, now change. For example, the farm-gate price of urea (which contains 46
per cent nitrogen) is currently Rs 4,830 a tonne, which works out to Rs 10.5 a kg of nitrogen.
Likewise, the phosphorous content of 46 per cent in DAP, 60 per cent potassium in MoP and
11 per cent sulphur in SSP will be used as the benchmarks for arriving at the equivalent
nutrient-linked prices for all other fertilizers.

W T O Implications:

The restriction on quantity of fertilizers to be imported has been eliminated from April
1, 2001.The proposed plan to establish a tariff rate quota (TRQ) for the import of urea
has been deferred.

The Government has planned to impose a higher tariff of 150-200 per cent on
imported urea in future. This would lead to increase in prices of imported urea and be
detrimental to the demand supply gap which is likely augment in future.

Future Trends

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India's demand for fertilizers in 2007-08 was 26 MM tons, which went up to 29 MM

tons in 2008-09 against a supply of 20 MM tons in 2008-2009.

The demand for fertilizers in 2011-12 is forecasted to be around 35.5 MM tons.

More fertilizer projects are in the pipeline.

Gujarat is expected to play a leading role in fertilizer production.

Indian companies have penetrated the overseas market, signaling a new phase for the
industry.

Recent government policies

Mounting pressure of subsidy on fiscal deficit of the country has compelled Government of
India to take a decision to gradually withdraw the subsidy, heading towards total decontrol in
a phased manner. A long term policy for fertilizer sector is under consideration, covering the
problems of feedstock, fertilizer pricing, total decontrol, WTO related issues etc. The present
policy environment is not investment friendly and viability of several existing units will also
be adversely affected. A switch over in feedstock from naphtha to LNG for urea is
contemplated, however, its availability and price is still uncertain. High energy cost do not
permit further expansions in urea capacity within the country, joint ventures abroad are likely
to be developed.
Economic liberalization and reforms are the two key notes of the Government's political
philosophy today which has embraced almost all sectors of the economy. Even in the case of
the fertilizer sector, an attempt to introduce liberalization has been made since August 1992. It
is obvious that the fertilizer sector has to fall in line with the rest of the economy and a total
decontrol would therefore have to be ultimate goal for this sector. In 1992, with a view to
reducing the subsidy, all the phosphatic and potassic fertilizers were decontrolled.
Consequently the prices of these fertilizers increased sharply leading to fall in their
consumption and distorting the ratio of fertilizer consumption.
The retention pricing scheme (RPS) which was introduced in 1977 thus got confined to urea
only. The nineties remained a decade of uncertain policies. To review the existing system of
subsidization of urea and suggest an alternative broad-based scientific and transparent
methodology a High Powered Fertilizer Pricing Policy Review Committee (HPC) under the

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Chairmanship of Professor C.H. Hanumantha Rao, was set up. The Committee has explored a
number of options for determining producer price such as the existing RPS with some
modification, group retention price, uniform administered price and market oriented system.
Government of India is drawing a long term policy for fertilizer industry which is to ensure
that the transition to total decontrol is achieved in a phased manner.
Long Term Fertilizer Policy:
The primary consideration and goal of the new pricing policy is to encourage efficiency
parameters of international standards based on the usage of the most efficient feedstock, stateof-the-art technology and also ensure viable rate of return to the units.
The proposed Long Term Fertilizer Policy had been chalked out a three phased programme
starting 2000-01 to 2006-07 with definite actions to be performed in each phase as listed
below:
Phase 1

It had been of one-year duration, from 1.4.2003 to 31.3.2004.

Existing urea units had been given a concession which may be at the group concession
rate or actual of the unit if it is lower than the group concession rate.

The urea units having low efficiency levels face the challenge of revamping their
manufacturing efficiency

Phase 2

It had been of two years duration from 1.4.2004 to 31.3.2006

During this stage further decontrolling of Urea will be done to extent of full
decontrolling in a phased manner.

The emphasis had been on tightening the energy consumption norms and
increasing the efficiency levels.

Phase 3

change over from Naphtha / Fuel oil to LNG / Natural Gas (Currently 60% of
capacity base on gas). Overall implementation depends upon availability & pricing
of LNG Natural Gas.

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Drawbacks of the New Policy

Closure of some capacity imminent: In contrary to inability to enthuse fresh

investments, the closure of some old units would further create problems.

Complete withdrawal of Fertilizers form Essential Commodity Act: After the

implementation of new fertilizer policy the canalization of fertilizer and making it
available through ECA mechanism would completely be withdrawn. This could impact
the farmers adversely.

Problem of Food Security not tackled: GoM(Group of Ministers) have failed to tackle
the crucial question of the relevance of fertilizer subsidy for ensuring food security in
the country.

Problem of inefficiency not tackled: The Groups recommendations also fall far short
of addressing the problem of inefficiency in the production of fertilizers. Instead of
replacing the unit wise retention - pricing scheme with a scheme for clusters of units
based on fuel usage, the GoM could have gone in for a single farm gate price for Urea
by adopting a uniform normative price to determine the subsidy.

Mopping up of gains disincentive for investments: Under the stringent norm of new
fertilizer policy, it would further make this sector more capital intensive. Another
aspect is that the government hand can be foreseen even after price deregulation.

Recent Special Bonds Issued by Govt. Of India for fertilizer Companies:

Government of India notifies the issue of 6.65 per cent Fertilizer Companies Government of
India Special Bonds, 2023, (hereinafter briefly described as Special Bonds) for an
aggregate amount of Rs. 6,000 crore (nominal) on January 29, 2009.
Government of India notifies the issue of 6.20per cent Fertilizer Companies Government of
India Special Bonds, 2022,for an aggregate amount of Rs. 4,000 crore (nominal) on
December 28, 2008.
Present status of fertilizer industry and measures taken by the GOI for the industry

The MRP of fertilizers fixed in 2002 remain unchanged till date. Since 1992 control
fertilizers by the government is urea and decontrolled or decanalised fertilizers are
DAP,MOP,SSP . Indias average fertilizers consumption 115 kg/ha where as Chinas
fertilizers consumption 300 kg/ha.

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Total yearly removal of NPK from soil by different food grains crops is 32 mt and
addition by different chemical fertilizers is just 16 mt and by manure is 6 mt therefore
the gap is 32-(16+6) =10 mt which can be met by (1) Bio-fertilizers (2) Specialty
nutrients fertilizers so in near future there is huge scope for the micro-nutrients based
fertilizers.

The Indias average fertilizers consumption 115 kg/ha which cost the farmers almost
Rs.1400-1500/ha but the actual cost of production 4-5 times higher i.e 5(Rs.14001500/ha)=Rs.7000-7500/ha. So government giving subsidy on an average Rs.40005000/ha. We know that Indias gross cultivated area 165 million ha. So if we calculate
the total subsidy given by Govt. will be (Rs.4000/ha)*165= Rs.66,000 crore
to(Rs.5000/ha)*165= Rs.82,500 crore.

The prices of complex fertilizers will decline substantially. It will come down by an
average by 1,416 rupees per metric tone and the over-dependency of farmers on a
particular variety of fertilizers will come down. Indian firms sell fertilizers at state-set
prices, and are subsidized by the government for the short-fall arising due to the cap on
prices.

The new policy approved by the federal cabinet also provides for a uniform freight
subsidy for all fertilizers. Prices of other fertilizers like urea would not change. The
subsidy burden was likely to fall as the prices of key raw materials have fallen 50-60
percent since last year.

The finance ministry has earmarked Rs 9,780 crore as subsidy for indigenously
produced urea while another Rs 5,947.94 crore for imported urea fertilizers. India
mainly imports three varieties of fertilizers like urea, Di-ammonium phosphate (DAP)
and muriate of potash. As only nitrogenous fertilizers are under price control, the
subsidy estimates are based on the likely imports of urea during the year. While the
demand for urea is 26 million tonne, only 20 million is produced domestically and 6
million tonne had to be imported during 2008-09. Though globally the demand has
come down, we expect the domestic demand to remain almost the same level .

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Meanwhile the government is also considering changing the fertilizer

subsidy regime. The Budget 2009-10 stated that to ensure balanced
application of fertilizers, the government intends to move towards a
nutrient based subsidy regime instead of the current product pricing
regime. It will lead to availability of innovative fertilizer products in the
market . Govt links subsidy on key fertilizer to import prices.

The pricing of subsidy on di-ammonium phosphate (DAP) had been tied to import
costs, aimed at spurring local production.This will ensure competitiveness and also
provide rational basis. Now the entire indigenous DAP will be paid for on par with
imported DAP. In FY08, India imported half its DAP requirement of 8 million
tonnes.

Total subsidy on fertilizers for 2008-09 has been estimated at Rs 950 billion, more than
double from the previous year as a global food grain shortage has driven up prices of
raw materials and global demand for fertilizers. To ease the burden on farmers, the
federal government caps retail prices for farmers, but compensates producers for the
deficit through a mixture of cash subsidy and bonds.

The most worrisome aspect of the subsidy regime is the skew in favour of nitrogenous
fertilizers that has promoted its gross overuse. The current subsidy structure is
excessively tilted in favour of nitrogenous fertilizers, in particular urea that accounts
for over 80 per cent of the total consumption of such fertilizers in the country.
Interviews with 700 farmers located in seven states, that were conducted by the
scientists in the Greenpeace study, indicated that over 80 per cent of the "surveyed
farmers reported that they used higher doses of nitrogen to replace other nutrients"
since synthetic nitrogenous fertilizers were cheaper.

The Role of the Government in decontrolled scenario:

The Govt. would rely more on monetary and fiscal measures for regulating the industry. There
had been greater exposure of the industry to global competition and the Government would
perform the following role:

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a. Monitor the trends in the consumption of fertilizers to ensure that no imbalance

develops in nutrient consumption.
b. Monitor the prices of fertilizers both with a view to ensuring their balanced
consumption and assessing the impact of prices on the economics of the farmers.
c. Monitor the availability of fertilizers specially in hilly and inaccessible areas and the
north eastern region and the state of J&K.
d. An appropriate level of custom duty be determined based on the protection that could
be extended to an LNG based fertilizer unit producing urea to ensure competitiveness.
In the case of DAP the industry could be protected only to the extent of the handicaps
it suffers in terms of imports of raw materials and intermediates.
The fertilizer industry may have to be given the status of infrastructure as it would continue to
cater to a very basic aspect of the national economy. The industry had been investing large
sums of money in laying down the pipelines, erecting terminals for receiving LNG or any
other appropriate fuel. In other countries of the world where similar investments have been
made the Governments concerned have played an active role and lent their support to such
efforts. A group of Secretaries has been appointed by the Cabinet Secretary to examine all
aspect of policy relating to the LNG in its entirety. The Group of Secretaries will provide
useful inputs with regard to LNG chain and thus facilitate proper policy formulation.

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Strategy for Growth

The following strategy has been adopted to increase fertilizer production:
Expansion and capacity addition/efficiency enhancement through retrofitting / revamping of
existing fertilizer plants.
Setting up joint venture projects in countries having abundant and cheaper raw material
resources.
Working out the possibility of using alternative sources like liquified natural gas, coal
gasification, etc., to overcome the constraints in the domestic availability of cheap and clean
feedstock, particularly for the production of urea.
Revival of the closed units by setting up Brownfield units subject to availability of gas.
Setting up of Greenfield projects in urea sector.

Joint Ventures Abroad

The details of the existing joint ventures in the fertilizer sector are:Joint Venture Oman India Fertilizer Company, Oman (OMIFCO):
KRIBHCO, IFFCO and Oman Oil Company with a share holding of 25%, 25% and 50%
respectively have collaborated and set up a world-class urea-ammonia fertilizer plant in Oman.
It consists of 5060 MTPD granular Urea and 3500 MTPD Ammonia plants along with all
other offsite and utilities in the coastal town of Sur in Oman. The annual capacity of the
fertilizer complex is 16.52 lakh MT of granular Urea.

ICS Senegal
The Government of India (GOI), Indian Farmers Fertilizer Cooperative Ltd. (IFFCO) and
Southern Petrochemicals Industries Corporation Ltd. (SPIC) are equity partners in a joint
venture company set up in Senegal. The initial equity contribution of the Indian consortium in
the venture in 1980 amounted to Rs. 13.67 crore, i.e. about 18.20% of its total equity. At
present, the Indian sponsors together hold 27.28% equity (GOI-6.97%, IFFCO-19.09% and
SPIC-1.13%), in the Joint Venture Company in Senegal named Industries Chimiques du
Senegal (ICS).

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JV with Jordan
SPIC, Jordan Phosphates Mines Company Ltd. (JPMC) and Arab Investment Company (AIC)
have set up a joint venture project in Jordan to produce 2.24 lakh tonnes of phosphoric acid
per annum. 52.17% of the equity of the joint venture named Indo Jordan Chemicals Company
Limited is held by SPIC, 34.86% by JPMC and 12.97% by AIC. The plant had been
commissioned in May 1997. The Phosphoric Acid from this venture is supplied to SPIC and
few other fertilizer units in India.

JV with Morocco
A Joint venture IMACID (Indo Moroc Phosphore SA) between Office Cherifien Des
Phosphates (OCP), Morocco and Chambal Fertilizers & Chemicals Ltd. (CFCL) to produce
3.30 lakh tones of phosphoric acid per annum was commissioned in Morocco in October
1999. After completion of first phase of revamp / debottlenecking project during 2004, the
capacity has been increased to 3.65 lakhs tonnes per annum. The equity of US$ 65 million in
the venture was held by OCP & CFCL equally. Subsequently in May 2005, both OCP &
CFCL have sold one-third of their equity stake in IMACID to TATA Chemicals Limited.

Overseas Joint ventures under implementation/consideration

JV in UAE
SPIC is in the process of setting up a gasbased nitrogenous fertilizer plant at Dubai in United
Arab Emirates to produce 4.00 LMT of urea per annum at an estimated cost of US$ 170
million. The joint venture company by name SPIC Fertilizers and Chemicals Limited,
incorporated in Mauritius is promoted by SPIC with equity participation of US $ 22.64 million
and Emirates Trading Agency of UAE with equity holding of US $ 6.4 million. The project is
currently under discussion.

JV in Egypt
Indian Farmers Fertilizer Cooperative Ltd (IFFCO and El Nasr Mining Co. (ENMC) have
formed a Joint Venture Company, the Indo Egyptian Fertilizer Company on 15th November
2005 for setting up a Phosphoric Acid plant in Egypt with an installed capacity of 5,00,000
tonnes of P205 per annum. The estimated cost of the Project is US$ 325 million, which is
expected to be financed with a debt: equity ratio of 67:33. IFFCO and its Affiliates would hold
the majority equity shareholding of 76% while ENMC and Affiliates would hold the balance

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equity of 24% in the Joint Venture Company. ENMC, the largest Rock Phosphate Mining
Company of Egypt will supply Rock Phosphate, the basic raw material of the Project and
IFFCO will buy back the entire Phosphoric Acid production. The Project construction period
is estimated at 36 months. While the financial closure of the project has been achieved, the
construction of the project has not commenced due to delay in issuance of licence by the
Egyptian Industrial Development Authority.

JV in Tunisia
Gujarat State Fertilizers & Chemicals Ltd (GSFC) and Coromandel Fertilizers Ltd (CFL)
alongwith Group Chimique Tunisien (GCT) & M/s Compagnie Des Phosphates De Gafsa
(CPG) are setting up a joint venture project in Tunisia for production of 3,60,000 MTs of
Phosphoric Acid per annum. The name of the JV Company is M/s Tunisian Indian Fertilizers
S.A. (TIFERT).
The JV will sell its full production to both the Indian parties viz GSFC and CFL. An MOU to
this effect was signed in October, 2005 between GSFC & GCT/CPG. The cost of the project is
approx. US $ 165 million + 5% with equity of US$66 million and borrowings of US $99
million. The project is expected to be commissioned by mid 2009 or latest by December,
2009.

JV in Jordan
The Indian farmers Fertilizers Cooperative Ltd (IFFCO) and Jordan Phosphate Mining
Company (JPMC) have agreed on a joint venture for setting up of a Phosphoric Acid plant in
Jordan with an installed capacity of 5,00,000 tonnes of P205 per annum. The equity holding is
52:48 between IFFCO and JPMC, respectively. The project construction period is estimated at
36 months thereafter.

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