12th July 2024 (9 Topics)

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India’s Fertilizer Sector

Context

Recent discussions have focused on reforms in India's fertiliser sector, which plays a critical role in agriculture. The government is considering changes to how fertilisers are priced and regulated to improve efficiency and accessibility for farmers.

Current Situation:

Price Control and Subsidy: Currently, the government regulates the prices of some fertilisers like urea to ensure affordability for farmers. Other fertilisers under the Nutrient-Based Subsidy (NBS) scheme have their prices set by companies but receive subsidies based on their nutrient content.
Recent Changes: Starting April 2023, the government has imposed informal price controls on NBS fertilisers by setting maximum profit margins. Fertiliser companies cannot receive subsidies if they charge prices exceeding these margins.
Impact on Farmers: This move aims to stabilize fertiliser prices and ensure they remain reasonable for farmers.
- For instance, the maximum retail prices (MRPs) for popular fertilisers like DAP and MOP have been set to Rs 27,000 and Rs 30,000-31,000 per tonne, respectively.

Why fertilizer is ‘crucial’ for Indian economy?

Food Security: India's ability to feed its large population depends heavily on the availability and efficient use of fertilisers to boost crop yields.
Global Standing in Agriculture: As the world's second-largest producer of fruits and vegetables after China, India's agricultural success relies on effective fertiliser usage.

Current Challenges:

Pricing Issues: There are disparities in how fertilisers are priced and subsidised. Farmers pay less than 20% of urea's production cost due to heavy subsidies, leading to overuse of nitrogen compared to other essential nutrients like phosphate, potash, sulphur, and micro-nutrients.
Production Gap: Despite increasing domestic production capacity to 31 million tonnes, there remains a shortfall of approximately 4 million tonnes annually to meet national demand.
Import: India currently imports a significant amount fertilizers, including urea. However, the country has decided to end urea import by 2025.
Climate Change: Global climate change poses a significant threat to food and nutritional security worldwide, affecting agricultural productivity.
Environmental Impact: Fertiliser production is energy-intensive and heavily reliant on fossil fuels, contributing to environmental concerns.

Fact Box:

About Fertilisers

Fertilisers are basically food for crops, containing nutrients necessary for plant growth and grain yields.
Balanced fertilisation means supplying these following nutrients in the right proportion, based on soil type and the crop’s own requirement at different growth stages.
- Primary (N, phosphorus-P and potassium-K)
- Secondary (sulphur-S, calcium, magnesium)
- Micro (iron, zinc, copper, manganese, boron, molybdenum)

Fertilizer Consumption

Overall fertilizer consumption in the country rose 2.6% to 60 million tonne in 2023-24,
DAP consumption increased to 105.31 lakh MT from 92.64 lakh MT in 2021-22.
However, NPK consumption in the country exhibited a declining trend, falling to 107.31 lakh MT from 125.82 lakh MT in 2020-21.
Total urea consumption during 2022-23 year was nearly 35.7 million tonne.
In 2023-24, India’s consumption of conventional urea is estimated to decline by 2.5 million tonne due to
- increase in the demand of nano urea (liquid form of the farm chemical)
- government’s efforts to curb use of agricultural chemicals through natural farming
- Integrated Nutrient Management (INM): This approach advocates for soil test-based balanced and integrated utilization of chemical fertilisers along with organic sources like Farm Yard Manure (FYM), city compost, vermi-compost and bio-fertilisers.
- Paramparagat Krishi Vikas Yojana (PKVY): Cluster formation, training, certification and marketing are supported under the scheme to a farmer towards organic inputs.

What is Nutrient-Based Subsidy (NBS) scheme?

The NBS (Nutrient-Based Subsidy) scheme, introduced in 2010, is designed for fertilisers other than urea.
- Urea, being the most widely used fertiliser, is not covered under the NBS scheme. Its pricing and subsidy are handled separately by the government.
Market-determined MRPs: Unlike urea, NBS fertilisers have market-determined MRPs. Companies selling these fertilisers set their prices.
Fixed per-tonne subsidy: Under NBS, the government provides a subsidy based on the nutrient content of the fertiliser. It fixes a subsidy per kilogram for nitrogen (N), phosphorous (P), potassium (K), and sulphur (S) components in the fertilisers.
- However, in the last two years, non-urea fertilisers under the NBS scheme have been informally regulated.
- Starting April 2023, the Department of Fertilisers has set maximum profit margins over costs to decide if the maximum retail prices (MRPs) are fair. Companies charging higher prices won't receive subsidies from the government under the NBS scheme if their prices exceed these set margins.

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India’s Fertilizer Sector

Current Situation:

Why fertilizer is ‘crucial’ for Indian economy?

Current Challenges:

Fact Box:

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