Fertiliser Sector in India

IN NEWS:

• The Commission for Agricultural Costs and Prices (CACP) has recommended the Centre to bring urea under the nutrient-based subsidy (NBS) regime to address the problem of imbalanced use of nutrients. 

FERTILISERS:

• Fertilizers are substances that provide one or more of the chemicals required for plant growth. Fertilizers can be both organic and inorganic.
• Scientists have identified 16 essential nutrients and grouped them according to the relative amount of each that plants need:
  • Macronutrients: They are nutrients which are usually required in the largest amounts. They include carbon, hydrogen, nitrogen, oxygen, phosphorus, potassium, calcium, magnesium, and sulfur.
  • Micro- or trace nutrients: They are required in tiny amounts. Micronutrients are boron, chlorine, copper, iron, manganese, molybdenum, and zinc.
• For most modern agricultural practices, fertilization focuses on three main macro nutrients: Nitrogen (N), Phosphorus (P), and Potassium (K).

FERTILIZER SECTOR IN INDIA:

• As an agrarian country, the fertilizer industry is one which the Indian economy cannot do without.
• There are 3 basic types of fertilisers used in India: Urea, Diammonium Phosphate (DAP), and Muriate of Potash (MOP). Urea is the most widely used, followed by DAP.

• India is among the top three in the production and consumption of chemical fertilisers in the world.

Production:

• The first fertiliser factory in India was established at Ranipet in Tamilnadu in 1906. Following independence, major impetus was given to fertiliser industry.
• Today, some of the major manufacturers are Fertilizer Corporation of India, National Fertilizers Limited, Rashtriya Chemicals & Fertilizers Limited and Brahmaputra Valley Fertilizer Corporation Limited.

Consumption:

• The per hectare Consumption of Fertiliser (N+P+K) in India was 133.1 Kg in 2018-19. However, there is large regional variation.
• Fertilisers are provided with Nutrient-Based Subsidy or NBS. Under the scheme, a fixed amount of subsidy, decided annually, is provided on each grade of subsidized Phosphatic and Potassic (P&K) fertilizers, except for Urea, based on the nutrient content present in them.

ISSUES IN INDIAN FERTILISER SECTOR:

• Rising fiscal burden:
  • Fertiliser accounts for large fiscal subsidies, the second-highest after food. For 2021-22, the Union Budget has estimated fertilizer subsidy at Rs. 79,530 crores.
  • But with no significant increase in agriculture productivity, rising subsidy indicates the inefficiencies in the subsidy mechanism.  
• Misuse of subsidy system:
  • Subsidies are given based on the classification given by fertilizer companies, which is non-transparent. Many companies are artificially inflating their costs to get the maximum subsidy.
• Issues created by low price of Urea:
  • Urea is not yet under the NBS Scheme and it remains extremely under-priced. The low prices of urea have led to imbalanced use of N, P and K.
  • Diversion of subsidized urea: Only agricultural urea is subsidized. This creates incentives to divert subsidised urea to other industries and across the border.
• Skewed NPK ratio:
  • Under-pricing urea has encouraged its overuse. As a result, the N:P:K ratio in India has deviated considerably from the recommended 4:2:1 mix.
  • For eg: It was 33.7:8.0:1 in Punjab and 1.3:0.7:1 in Kerala.
• Environmental concerns:
  • Skewed NPK ratio and the overuse of other fertilisers have resulted in significant environmental externalities, including depleted soil and groudnwater quality.
• Disparity in interstate consumption:
  • In 2019-20, fertilizer use per hectare of cultivated area varied from 70 kg of NPK in Rajasthan to 250 kg in Telangana. This leads to variable productivity from farms fields in India.
• Import dependency:
  • India is not self-sufficient in domestic fertiliser production and relies on imports. This leaves India exposed to volatilities in the international market.
  • The domestic demand for urea is about 34-35 MT whereas the domestic production is about 25 MT. The shortfall is met exclusively through imports.
• Volatilities in international market:
  • The international prices of fertilizers are volatile and almost directly proportional to energy prices. This, coupled with the supply chain disruptions due to covid, is likely to increase the price of fertilisers in the coming months.
• Cartels in international market:
  • Cartels of major global producers have a strong influence on prices and often lead to artificial rise in prices.
  • Eg: The international price of urea rose to a record level of over USD 900 per metric tonne in November 2021 from nearly USD 270 per mt in September 2020.

GOVERNMENT EFFORTS:

• Nutrient based subsidy scheme
  • The government introduced the Nutrient Based Subsidy (NBS) in 2010. The basic purpose of the scheme has been to provide fertilizers to the farmers at subsidized prices while addressing the imbalanced use.
• Soil health card scheme:
  •  It was launched by the ministry of agriculture in 2015.
  • The card informs farmers about nutrients status of the soil and recommendations on appropriate dosage of nutrients to improve soil health and fertility.
  • SHC is provided to all farmers in the country at an interval of 3 years.
• Neem-coated urea:
  • In NCU, the urea is coated with oil extracted from neem seeds. Currently, the Government has mandated all indigenous producers of Urea to produce 100% of urea as Neem coated urea only.  
  • Neem coating not only prevents diversion of neem for industrial purposes, but also improves soil health through slow release of nutrients and reduction in pest and disease attack.
• Gas-pooling:
  • Under gas pooling, government charges urea manufacturers a uniform average price for domestic and imported variants of natural gas. This reduces the cost of production and encourages them to manufacture more.
• New Urea Policy-2015 (NUP-2015):
  • NUP was created to increase indigenous urea production, promote energy efficiency in production, and reduce the subsidy burden on the central government.
  • Initially introduced for 4 years, the scheme was extended in 2019 till further orders.
• Push for organic farming:
  • Central and state governments have been actively pushing for organic farming in recent years.
  • Eg: Andhra Pradesh is pushing to become the first Zero Budget Natural Farming state in India.
  • https://www.ilearncana.com/details/Zero-budget-natural-farming/1168

WAY FORWARD:

• Strive for self-reliance:
  • India needs to be self-reliant and not depend on import of fertilizers. In this direction, five urea plants at Gorakhpur, Sindri, Barauni, Talcher and Ramagundam are being revived in the public sector.
• Extend NBS model to urea:
  • The present system of keeping the price of urea fixed and absorbing all the price increases in subsidy needs to be replaced by distribution of price change over both price as well as subsidy based on some rational formula.
• Develop alternative sources of nutrition for plants:
  • India should encourage the shift towards the use of non-chemical fertilizers. For this, India needs to enhance the value of large biomass of crop and livestock byproducts.
• Technology infusion:
  • Technological support must be given to scale up and improve innovations to enhance effectiveness of fertilizers and develop alternative fertilizers. For this, strong academia-industry linkage must be established.
• Develop international cooperation:
  • India should encourage investments in nitrogenous fertilisers in Gulf countries (e.g., Iran, Kuwait, Oman, etc.) where gas prices are typically less than India’s, through some medium to long-term agreements for imports.
• Transfer subsidy to farmers:
  • The subsidy should be paid directly to the farmer rather than to the fertilizer industry. This which would lessen the administrative burdens and also give farmers the ability to buy the fertilizers that best meet their needs.

PRACTICE QUESTION:

Q. Reforming India’s fertiliser sector is crucial in attaining the twin goals of doubling farmers income and ensuring sustainable agriculture. Discuss.