robust domestic fertilizer sector is crucial to boost farm output and upgrade the soil health in the country. But with years of neglect and non-cohesive policies of the Central Government, the fertilizer sector with the exception of urea manufacturers has found itself at a crossroads.
Due to hostile business environment, several top fertilizer manufacturers are toying with the idea of exiting the business or pare down investment in the sector. The Tatas are understood to be contemplating to sell their fertilised business, which comes under Tata Chemicals, and the Aditya Birla Group, which owns Indo Gulf Fertilisers, is believed to be cutting down investment into the sector as the business has become unattractive.
Some of the factors that have led to low interest and lack of investment in the sector include the excess focus and usage of urea, delayed subsidy payments to manufacturers, inconsistent Government policy, and non-availability of feedstock.
While urea has been highly subsidized and is currently priced at Rs.5,360 per tonne leading to its excess use by farmers resulting in imbalance and decline in soil health, the prices of decontrolled Nitrogen Phosphorus and Potassium (NPK) fertilizers are three-to-four times higher at Rs.18,000 to Rs.25,000 per tonne and this has led to their reduced consumption.
Besides, fertilizer companies are facing severe problem in getting domestic gas, the main feedstock for production of fertilizer. Though the government recently allowed gas pooling to ensure constant supply, the benefits are totally focused on 30-odd urea manufacturers with no benefit granted to manufacturers of NPK fertilizer .
Out of three companies manufacturing NPK fertilizer in Western India, domestic natural gas is made available to Rashtriya Chemicals & Fertilizers (RCF) and Gujarat State Fertilizers & Chemicals Ltd (GSFC), both government entities, as they also manufacture urea. Supplies have been totally cut off to private sector firm Deepak Fertilisers and Petrochemicals Corporation Ltd., which is into NPK fertilizer, since May 2014, leading to a halt in production.
Recently, the High Court of Delhi, in response to a petition filed by Deepak Fertiliser, had issued a directive to the Central Government to have a uniform policy in gas supply to non-urea makers. In case the Government stops gas supply to the NPK fertilizer units of RCF and GSFC to maintain uniformity, then it may lead to complete halt of production of NPK fertiliser in the state or rise in cost of production since these companies would switch over to costly imported natural gas turning the units unviable. This is likely to result in rising imports.
Subsidy paymentsAnother important issue that is hindering growth of the sector is the delay in subsidy payments. As per estimates by the Fertilizer Association of India (FAI), subsidy to the tune of Rs.30,000 crore is outstanding to manufacturers, and some of which date back to 2008.
“The delay in subsidy payments by the Government has disrupted the cash flow fertilizer companies. Many companies are becoming sick, and no investment has come into the sector for 20 years. Every year, there is an outstanding of Rs.30,000 crore. There is humiliation at every stage to collect the dues,” said Satish Chander, Director General, FAI.
Industry officials say that the policies are not conducive for domestic production, and over the past one year, imports of NPK fertilizers have already increased by 13 per cent.
Once India depends on imports, the country will be exposed to excessive price rise, and this will hurt the interest of farmers.
“The excess usage of urea and low usage of complex fertilizer is leading to soil imbalance, thereby impacting the farm productivity of the farmers. This is a matter of great concern, and it needs to be addressed on a priority basis,” Mr. Chander said.
“There should be an equal treatment for urea manufacturers and NPK fertilizer producers in gas supply. There needs to balanced fertilization to improve soil health,” he added.
The Central Government has recently initiated steps for issuance of soil health cards to farmers across the country to enhance farm output and help farmers to grow the right crop. Besides, Prime Minister Narendra Modi has identified Eastern India, comprising Odisha, West Bengal, Bihar and Jharkhand, to usher in the second Green Revolution in the country. It cannot happen without a vibrant fertilizer sector, and a well thought out policy.
