The rapid build-up of fertilizer production capacity in the country has been achieved as a result of a favorable policy environment facilitating large investments in the public, co-operative and private sectors.
There are 57 large sized fertilizer plants in the country manufacturing a wide range of nitrogenous, phosphatic and complex fertilizers. Out of these, 29 unit produce urea, 20 units produce DAP and complex fertilizers, 7 units produce low analysis straight nitrogenous fertilizers and the remaining 9-manufacture ammonium sulphate as a by-product.
The most widely used fertilizers include nitrogenous (N), phosphatic (P) and potassic (K). Potassic fertilizer is not manufactured in India and is imported. The installed capacity of fertilizer industry in the country is about 12 m MT of nitrogen and 5.1 MT of phosphatic nutrients.
Urea (85% of N fertilizer consumption) constitutes 58% of the total fertilizer consumption in the country. Di-ammonium phosphate (DAP) accounts for approximately 66% of India's consumption of phosphatic fertilizers.
The nitrogenous fertilizer segment is regulated through price controls. The government fixes two prices: the price at which the manufacturers should sell to the farmers and the retention price, which the manufacturer should have received from the farmer. The government reimburses the difference in the selling price and the retention price in the form of a subsidy.
The demand is very high now. Industry observers say that most fertilizer companies are operating with increased capacity to meet the rabi season demand. Here is also hope in the market that the government may soon come out with a new pricing policy to encourage fertilizer production by exempting manufacturers producing beyond their stated capacities from sharing their extra gain with the Government.
The consumption of chemical fertilizers (in terms of nutrients) rose by 9.5 per cent to 18.4 million tonnes during 2004-05 as compared with previous year, while urea consumption was higher by 4.5 per cent on year-on-year basis.
The estimated consumption of fertilizers for the first half of the current fiscal stood at 10.1 million tonnes.
Domestic production of nitrogenous and phosphatic fertilizer has been estimated at 15.603 million tonnes in 2005-06 as against 15.405 million tonnes in 2004-05.
In terms of consumption of fertilizers per hectare, the all India average increased to 96.6 kg in 2004-05 against 88.2 kg in the year-ago period.
Consumption of fertilizers varied significantly among States. While in the plains, per hectare consumption was high in Punjab, Haryana, Uttar Pradesh and Andhra Pradesh, it was low in Rajasthan, Orissa and Madhya Pradesh and the north-eastern States.
The production of single super phosphate (SSP) has become unviable due to increase in the price of inputs and no change in MRP and subsidy, leading to capacity utilization in the industry falling to 37 per cent, they said.
The prospects of the fertilizer business depend largely on Government policy. Indian fertilizer industry is globally competitive but the policies of the Government need to be changed, according to market pundits. "There should be decontrol and direct subsidization to unleash the potential of the Indian industry, they say.
According to the estimates made by the Department of Fertilizers, the demand for urea, DAP and muriate of potash (MoP) during the rabi season stands at 12.709 million tonnes, 4.819 million tonnes and 1.858 million tonnes, respectively. Domestic production of urea has been estimated to be about 10.271 million tonnes and DAP 2.361 million tonnes. The shortfall would have to be imported and for MoP the entire requirement needs to be imported, officials said.
However, Monsoon holds the key to the future prospects of the fertilizer industry. A good monsoon will spurt foodgrains production and consequently the demand for fertilizers. There has been a fair amount of optimism about the growth prospects of the Indian agricultural sector and thus, by extension, the fertilizer industry.
Abundant rainfall and healthy water storage levels across the country are likely to result in higher offtake for its fertilizer business.
Indo Gulf Fert
Mangalore Chemicals and Fertilizers