18th AFA Int’l Annual Fertilizer Forum & Exhibition Feb., 7-9-2012, Sharm El-Sheikh , Egypt Maritim Jolie Ville Hotel
Current Fertilizer Policy in India & Future Directions
Mr. Satish Chander Director General, FAI India
CURRENT FERTILISER POLICY IN INDIA AND FUTURE DIRECTIONS
Satish Chander Director General The Fertiliser Association of India New Delhi
AGRICULTURE POLICIES
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AGRICULTURE POLICIES
Pre-Green Revolution period (1950/51 to mid 1960s) institutional changes and development of major irrigation projects
The intermediary landlordism was abolished, tenant operations were given security of farming and ownership of land.
Expansion of area was the main source of growth
New Agricultural strategy (Green revolution technology) (from 1965-66) Spread of HYV of wheat and rice which involved use of fertilisers and irrigation.
The biggest achievement - attainment of self sufficiency in food grains.
CHALLENGES IN POST REFORM PERIOD
Green revolution has been widely diffused in irrigated areas, throughout the country, the dry land areas have not seen the benefit of technology
Government initiated process of economic reforms in 1991, which involved deregulation, reduced government participation in economic activities, and liberalization new international trade accord, requiring opening up of domestic market
To provide new direction to agriculture, GOI announced National Agricultural Policy in July 2000.
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RECENT INITIATIVES BY G.O.I
National Food Security Mission launched with an outlay of over one billion dollar for XI Plan to increase the production of rice by 10 million te, wheat by 8 million te and pulses by 2 million te by 201112
National Agriculture Development Programme with an outlay over 5 billion dollar for holistic development of agriculture sector
National Horticulture Mission, Cotton Mission, Oilseeds and Pulses Mission
Increase in agricultural credit through formal sources
Steep increase in the minimum support prices
Additional area of 10 million hectares under assured irrigation
Infrastructure for soil and fertiliser testing
Infrastructure for marketing and agro-processing
FERTILISER SECTORBASIC FACTS
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FERTILISER CONSUMPTION & FOOD GRAIN PRODUCTION India has accorded high priority to use of fertilisers for achieving selfsufficiency in foodgrains production and stipulated growth in other crops. 300000
50000 45000
Fertilizer (in '000 MT)
35000 30000
200000
25000 20000
150000
15000 10000
Foodgrains (in '000 MT)
250000
40000
100000
5000 0
50000 1970- 1975- 1980- 1985- 1990- 1995- 2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 201071 76 81 86 91 96 01 02 03 04 05 06 07 08 09 10 11
Fertiliser consumption (N+P+K)
Foodgrain production
NUMBER OF FERTILISER PLANTS* AND CAPACITY (As on 1st December, 2011) Fertiliser
No. of plants
Urea
29
Capacity (End-product) (Million te) 21.2
DAP and NP/ NPKs Ammonium Sulphate
19 10
14.1 0.6
Calcium Ammonium Nitrate SSP Total
1
0.1
82 141
8.0 44.0
* = Operating plants
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PRODUCTION, IMPORT AND CONSUMPTION OF FERTILISERS - 2010-11 (Million te)
Fertiliser
Production
Import
Consumption
Urea
21.87
6.61
28.11
Ammonium Sulphate
0.64
0.03
0.62
Calcium ammonium nitrate
0.10
-
0.10
DAP
3.55
7.41
10.87
NP/ NPKs
8.76
1.17
9.86
SSP
3.71
-
3.83
MOP
-
6.36
3.93**
38.63
21.70
57.49
Total Material* *= Includes other fertilisers
** = For direct consumption.
ESTIMATED PRODUCTION AND IMPORT OF RAW MATERIALS AND INTERMEDIATES – 2010-11 (Million te)
Item
Production
Import
Raw materials -
Rock phosphate
1.921
6.387
-
Sulphur
1.000
1.808
13.532
1.735
1.545
2.140
Intermediates -
Ammonia
-
Phosphoric acid (As P2O5)
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DISTRIBUTION CHANNEL
About 58 million tonnes of fertilisers are distributed in a year
Fertilisers are distributed through 275,500 sale points. 77% of these are in private trade and the balance 23% are cooperative and other institutional agencies
83 per cent fertilisers moved by rail; remaining 17 per cent by road.
Average distance of fertilisers moved by rail is about 827 km
ISSUES AND CONCERNS IN THE DECADE OF 2000 • Fertiliser sector has remained under stringent regulations for a very long time • Most of the policies oriented towards containing fertiliser subsidy • Subsidies kept on increasing due to stagnant retail prices steep increase in cost of feedstock/ raw materials/ intermediates, sustained increase in consumption of fertilisers • Stagnation in domestic capacity and production • Imports at exorbitantly high prices • Imbalance in fertiliser use • Widespread deficiency of secondary and micro nutrients • Depletion in soil health causing decline in crop response to fertiliser use
6
17.31
14.45
20
2011-12 (Est.)
2010-11
13.5
15
2009-10
21.01
25
2008-09
2007-08
6.21
4.17
2005-06
10
2006-07
3.53
2004-05
2.58
2.28
2002-03 2003-04
2.64
2001-02
0 3.02
5
2000-01
9.93
Subsidy (US$ Billion)
SUBSIDY ON FERTILISERS
FERTILISER POLICIES
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BROAD FERTILISER POLICY Main objectives of the fertiliser policy : (1) Ensure adequate and timely availability of quality fertilisers to the farmers at affordable prices (2) Equitable distribution of fertilisers across the country (3) Encourage domestic capacity to insulate the country from volatile international prices GOI declared fertilisers as an essential commodity and notified the Fertiliser Control Order (FCO) under the Essential Commodities Act in 1957, modified in 1985.
MOVEMENT / DISTRIBUTION POLICY • Movement of fertilisers controlled by the Fertiliser Movement Control Order. • DAP / NPKs / MOP and SSP: Manufacturers/importers are free to move as per their choice. • Urea: 50% of unit production moved as per GOI directions.
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QUALITY CONTROL • The Fertiliser Control Order (FCO) notified in 1957 to regulate the sale, price and quality of fertilisers • FCO lays down specifications of all the fertiliser products in terms of nutrient contents as well as physical parameters • FCO also gives procedures for drawing and analyzing the samples • Amendments are incorporated from time to time
PRICING POLICY • Government can fix maximum retail prices (MRP) of all the fertilisers • MRPs are lower than the delivered cost • Difference between the delivered cost and MRP is called fertiliser subsidy. • Fertiliser subsidy is routed through the industry. The mechanism has been adopted for administrative convenience. The industry is merely a conduit to pass on the subsidy and not the beneficiary.
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UREA POLICY • Government fixes maximum retail prices (MRP) of urea • Import of urea is canalized through State Agencies ( Minerals & Metals Trading Corporation, Indian Potash Ltd., State Trading Corporation) • Difference between cost of production/ import and retail price is paid as subsidy • Subsidy on domestic urea is group based i.e., six groups based on vintage and feedstock of various plants: (i) Pre-1992 gas based (ii) post-1992 gas based (iii) pre-1992 naphtha based , (iv) post-1992 naphtha based (v) fuel oil/low sulphur heavy stock (FO/LSHS) based and (vi) mixed energy based •
Incentives for additional urea production
UREA POLICY •
50% of the movement and distribution of urea is controlled by the government.
•
Monitoring of movement and distribution of urea is done through on-line fertiliser monitoring system
• Subsidy is paid when the quantum of urea reaches a district • Freight incurred on movement of fertilisers from plants/ ports is reimbursed separately • The present policy (NPS) for urea expired on 31st March 2010. It has been extended on ad hoc basis in the absence of fresh urea policy • There is need for bringing urea under NBS in the interest of balanced fertilisation and encouragement to increase production.
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GAS ALLOCATION • Government of India (GOI) has accorded top priority in gas allocation to the fertiliser sector • Industry at present is using 42 million standard cubic meter (MMSCMD) of gas to produce about 18 million tonne of urea. Out of this gas supply, 8 MMSCMD is imported as liquefied natural gas (LNG) • Cost of imported LNG is higher than domestic gas and should be substituted with domestic gas to reduce cost of production of urea • GOI has further allocated about 3 MMSCMD gas this year mainly for plants which are increasing capacity through debottlenecking/ revamp projects. However, there is need for allocation of additional gas for new projects • At least 6 – 8 new projects of 1.2 million tonnes capacity each are needed to fill the present consumption – production gap and to meet further increase in urea demand in next 5 years.
IMPORTANCE OF REFORMS IN THE FERTILISER SECTOR
To enhance agricultural productivity through balanced fertilisation
To encourage fresh investment in the fertiliser sector
To reduce dependence on imports
Enable the manufacturers to produce and promote right kind of fertilisers
Subsidy bill within manageable limits
Simplification of the procedure and payment of subsidy.
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NBS ON P & K FERTILISERS
Nutrient based subsidy (NBS) has been implemented on P & K fertilisers w.e.f. 1st April, 2010
NBS is applicable on about 20 fertiliser products including DAP, MOP, MAP, TSP, SSP, various grades of complex fertilisers and Ammonium sulphate (GSFC & FACT)
Subsidy under NBS is same both for domestic and imported fertiliser products. In addition, freight is borne by the Government
Primary nutrients, namely N, P and K and secondary nutrient, namely Sulphur (S) contained in the fertilisers are eligible for subsidy
Additional subsidy for fertilisers fortified with boron and zinc
Subsidy is released through the industry.
NBS AND TRADE POLICY
Import of all fertiliser products is under Open General License (OGL) except urea
Import of Urea is canalised for the present
Applicable rate of Import duty is 5.15% (Basic customs duty 5%+ Education cess10% on customs duty) on fertiliser products.
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OBJECTIVES OF NBS
Farmers will have access to new efficient products (e.g. customised, water soluble, fortified fertilisers)
Deficiencies of sulphur and micro nutrients being addressed
NBS is expected to encourage investments in India and overseas
Reforms will address fiscal management of subsidy bill
Global trade to India will be more holistic, including macro and micro nutrients
ASSESSMENT OF IMPLEMENTATION OF NBS – 2010-11
NBS scheme well received by the stake holders
Arrangement of imports of bulk of the finished fertilizers and raw materials at the beginning of the year
Adequate availability of fertilizers
Farmers prices have not been impacted
Fiscal management of subsidy in the Budget within limits
A few new products brought under NBS
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RATE OF SUBSIDY PER KG OF NUTRIENT The per kg NBS for nutrient ‘N’ ‘P’ ‘K’ and ‘S’ for 2011-12 w. e. f 1st April 2011 have been fixed as follows:
Sl no.
Nutrients
NBS per Kg of nutrient In Rs.
In US $
1
“N”
27.153
0.52
2
“P”
32.338
0.62
3
“K”
26.756
0.51
4
“S”
1.677
0.03
Note: Exchange rate assumed US$ 1 = Rs.52
RATE OF SUBSIDY PER TONNE OF P & K FERTILISERS – 2011-12 Fertilisers
NBS per tonne (in Rs.)
(in US$)
DAP (18-46-0-0)
19763
380.06
MOP (0-0-60-0)
16054
308.73
11030 - 18866
212.12 – 362.81
NP/NPKs of various grades
Note: Exchange rate assumed US$ 1 = Rs.52
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ASSESSMENT OF IMPLEMENTATION OF NBS – 2011-12
Higher subsidy rates
Steep increase in MRPs
Demand destruction
Lower imports in 2012-13
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