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Updated: January 26, 2012 23:11 IST

Time has come to unbundle fertilizer industry

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U. S. Awasthi
U. S. Awasthi

The Indian fertilizer industry is today faced with a crisis of sorts. The increasing burden of subsidy and its non-competitive nature is making the industry redundant. It is also slowly killing industrial units which are reporting sick one after the other. The Indian Farmers Fertilizer Cooperative Ltd (IFFCO), world's largest cooperative, has been in the forefront to reach out to the farmers. In an interview with Sujay Mehdudia, IFFCO Managing Director Udhay Shankar Awasthi shares his concerns about the future of the fertilizer industry and the strides made by IFFCO since 1967.

How important is the need for reforms in the agriculture sector to meet the challenges of food crisis in the country today?

The basic model of agriculture only looks at culture of production. India has had a problem of food security in the past but has gone away during the three decades. Today, things have changed. What has happened is that our soil has become less responsive to fertilizers due to imbalance in fertilizer use and intense agriculture. Agriculture productivity and response to fertilizer use has come down.

It is time to look at rejuvenating the soil. Time has come to remove all controls on agriculture. Farmers are not getting an appropriate price for their crops. Farmers cannot sell their produce beyond their State. They should have the right to sell their produce anywhere in India and where the price is highest. Give agriculture the status of industry.

What are major challenges faced by agriculture? What role is IFFCO playing to help farmers in the field of fertilizers and bringing technology closer to them?

Agriculture today is facing an onslaught of climatic extremes, higher input cost and fluctuation in output prices. This has led to plateauing and/or decline in crop productivity and food availability for majority of population. The climatic extremes include simultaneous occurrence of drought and or flood in one or the other parts of country, thus limiting agricultural production. As a result, food prices are increasing, limiting its availability affecting human and animal health. Farm productivity should include overall farm production that includes oilseeds, sugarcane, fibre crops, fruits and vegetables and flower crops. IFFCO has been doing pioneering work in helping farmers and has lately launched “Save the soil campaign”.

It is also working to correcting imbalanced use of nutrients and promotion of integrated nutrient management; timely availability of inputs in adequate quantity at consuming points and incorporation of crop residue in soil and use of farm waste for preparation of organic manure on the farmers' fields. IFFCO provides weather insurance, Sankat Haran Bima Yojna, for the farmers under which the farmer's fertilizer purchases are insured by IFFCO.

We have the IFFCO Kisan Sanchaar. We are giving him five messages free everyday through mobile phones. We have formed goat rearing, fisheries and horticulture communities where we give messages over the mobile phones including weather prediction. The effort is to empower them with knowledge.

What has been the impact of recent rupee depreciation on IFFCO and has it made imports costlier. Are you planning to raise prices of fertilizers?

The rupee has devalued by about 20 per cent in the last five months and has gone up to over Rs.50 now. This has led to a hike of Rs.3,500 per tonne in imported DAP fertilizer price. We have taken a Rs.300-crore hit on our balance sheet but we are not raising the prices. The prices that we charge today are quite large enough and any further increase is not feasible. We worked on management of foreign exchange but did not pass on the burden to farmers. Prices have gone up since September; we have not raised a single rupee since October. We don't intend to pass on the increased cost to farmers till March 2012. We are working on a price strategy with importers that would make it not necessary to hike prices this year also.

Is IFFCO looking to tap new supply sources for less reliance on existing suppliers in Canada, Russia where potash is found in abundance?

The fertilizer industry is not a rich industry. We are just surviving on hand-to-mouth. I don't have access to market. We produce 85 lakh tonnes of fertilizers and, as of today, I have no long-term debt. We cannot access the market as we are a cooperative. Potash needs big investment. We have been requesting the Government to provide some kind of sovereign fund at a lower interest rate through some mechanism. Or the government should invest in potash projects through one of its PSUs to ensure potash security as we don't have potash resources.

There are no big potash projects coming up in other countries than the traditional markets. We cannot set up potash projects as we do not have surplus money. The Government should find a solution to this.

Can you throw some light on your overseas ventures and what kind of JVs and investments you are

looking at?

We are running a joint venture in Senegal and another one in Oman. One of our plants for phosphoric acid is coming up in Jordan. We have a joint venture with a Canadian company for oil and gas in Argentina. We have a small potash project coming up in Peru.

We have a phosphate exploration mine in Australia. Some of these projects are running, some are getting clearances and some are on the drawing board stage. We have just got clearance for the Jordanian mines project. We plan to achieve a production/marketing target of 15 million tonnes per annum, with an annual turnover of Rs.30,000 crore. Our current production capacity is 8.58 million tonnes and our turnover during 2010-11 was Rs. 21,195 crore.

What ails the fertilizer industry in India?

In our country, we have over-stretched our companies and institutions. We get too much busy in the nitty gritties. Business is not run on nitty gritties but on entrepreneurship and the capacity to take risk. The Government wants to reward itself and that is what ails the industry. I have never seen such a frustrating experience in my life than what I see in Indian fertilizer industry. Every effort is being made to kill this industry and nobody is prepared to look at the pain of anyone of us.

The plants are running old and need huge investments. Time has come to give direct subsidy to the farmers and unbundle the fertilizer industry.

Otherwise, the industry will collapse and become extinct in the next five years.

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Its is a real fact that Indian soils are getting less fertile season
by season and its time for the Govt. to think for the corrective
measures to be taken in the agriculture. Its not only the matter of
fertilizer subsidy but also about crop production. Agriculture GDP
has dropped from 60% once upon a time to 20% and also getting lower
year by year. In India according to recent survey 45% of children are
malnourished all its because of food what we produce and what we eat.
Govt. has to give more concentration to the agriculture sector work
very seriously and more new plan has to made in the agriculture sector
for its development. Because of subsidy burden fertilizers industries
are facing more problems and if its continue then agriculture sector
has to face more problems in future.

from:  Laxmi Narayan
Posted on: Jan 28, 2012 at 23:06 IST

One is fed up with this Media blitz against th so-called subsidy on the diktats of the World Bank.The following are the ones to be stopped:-
1.Subsidy to the rich[Industrialists] t the tune of Rs 15 Lakh Crores from 2008 onwards.Such blunders are very dangerous as India's Budgeted Annual expenditure is ONLY about Rs 12 Lakh Crores.Creating HUGE Fiscal Deficits by such crooked methods and then trying to implement the World Bank's diktats like stopping subsidies,Divestment of PSUs,the proposed Water-privatization fo MNC profits,providing concessions to them for "producing effluents" destroying India's Agriculture,.etc are TREASONOUS. 2.The mega-corruption of the UPA should stop.When corruption is rampant Economics does not work.As a shocking example the reported Lobbying of the PML by Wal-Mart to the tune of Rs 52 crores and Starbucks for Rs 1 crore shows that the Nation is in the hands of "anti-national elements" and TRAITORS.

from:  Sadasivan
Posted on: Jan 27, 2012 at 10:40 IST

He is 100 percent right. Indian agriculture even though has been contributing 22 percent of the GDP is languishing in a rotten state due to sheer policy failure and political interference in the name of helping farmers and thereby wasting money through nonsensical subsidies. If the government had used that money in building of infrastructure such as cement silos, logistical transport systems including large scale rail networks chiller storage facilities etc agriculture would surpassed IT by 10 more times in its contribution. This hand out mentality has ruined soils as they have excess nitrogen and this leaching is destroying lakes river systems and aquifers in India and causing agricultural soil acidity and destroying and degrading good land. Indian politicians kindly stop helping farmers as you are destroying their lively hoods by your misguided policies.

from:  Nyaya
Posted on: Jan 27, 2012 at 07:30 IST
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