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DAILY NEWS ANALYSIS

  • 22 December, 2021

  • 19 Min Read

Fertilizer Industry - UPSC

Fertilizer Industry in India

  • The Fertilizer Industry in India is 1 of the 8 core industries. Fertilizer has the minimum share in the Index of Core Industries.
  • India is the 2nd largest consumer of Urea fertilizers after China. India also ranks 2nd in the production of nitrogenous fertilizers and 3rd in phosphatic fertilizers. Potash requirement is met through imports since we have limited reserves of potash. There are 2 types of Fertilizers
    1. Primary Fertilizers: classified on the basis of nutrients they supply to the soil like N:P:K:
      1. Nitrogenous (Urea),
      2. Phosphatic (di-ammonium phosphate - DAP) and
      3. Potassic (muriate of potash (MOP) fertilizers.
    2. Secondary Fertilizers includes Calcium, Magnesium and Sulphur.
    3. Micronutrients include Iron, Zinc, Boron, Chloride etc.

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  • Fertilizer subsidy (Food > Fertilizer > Petroleum > Interest payments)
    1. Earlier no Fertilizer subsidy was paid till 1977. The oil crisis of 1973 led to increasing in Fertilizer prices leading to a decline in consumption and an increase in food prices. In 1977, Govt subsidized manufacturers.
    2. After the 1991 crisis, Govt decontrolled the import of Phosphate and Potash but Urea imports is restricted.

Urea Production and Pricing mechanism

  • Urea is the source of Nitrogenous fertilizer and it is heavily subsidized by the Center. Today Urea is the only fertilizer that remains controlled.
  • CCEA approved the continuation of the Urea Subsidy Scheme up to 2020
    1. It is a part of the Central Sector Scheme. Urea price will be the same till 2020.
    2. Now DBT Scheme is approved for fertilizer subsidy to urea manufacturers and importers. It also includes Imported Urea subsidy which is directed towards import to bridge the gap between demand and indigenous production of urea. It also includes freight subsidies for the movement of urea.
    3. Benefits
      1. DBT will ensure timely payment of subsidies to urea manufacturers. Fertilizer Co. leads to timely availability of urea to farmers.
      2. This will reduce the leakage of fertilizer subsidy and black marketing.
      3. The ceiling might be put to reduce the overuse of Nitrogenous fertilizers.
    4. Subsidy to Fertilizer manufacturer/ importer = Farm Gate price - MRP paid by Farmers.
  • New Urea Policy of 2015 (till 2019-20)

    1. With the objective of maximizing indigenous urea production, promoting energy efficiency in urea production and rationalize subsidy.
    2. It is applicable to the existing 25 gas-based units.
    3. It ensures timely payment to urea manufacturers resulting in timely availability of urea to farmers.
  • Urea is given at a statutorily controlled price = Rs. 5360/ MT. Other charges for Neem coating.
  • Center plans to ease control on the retail prices of Urea and wants to make it more targeted.
  • Earlier Mandatory Neem coated urea production was done to slow down the dissolution of nitrogen into the soil, resulting in less nutrient requirement.
  • Govt is also planning over fixing a Nutrient Based Subsidy (NBS) rate for Urea to promote balanced use of fertilizers and bring efficiency in the industry.

CCEA approved the continuation of Nutrient Based Subsidy scheme till 2020

  • Under this scheme a fixed amount of subsidy decided on an annual basis, is provided to fertilizer companies (other than Urea) depending on its nutrient content. It is applicable to 22 fertilizers (other than Urea).
  • Govt announces a fixed rate of subsidy on each nutrient of subsidized Nitrogen, Phosphate, Potash and Sulphur fertilizers. MRP is decided by considering international and domestic prices of P&K fertilizers, exchange rate and inventory level in the country.

Infrastructure

  • Fertilizer Corporation of India Limited: has 4 units at Sindri (Jharkhand); Gorakhpur (UP); Ramagundam (AP) and Talcher (Odisha) and Korbe (Chattisgarh).
  • Hindustan Fertilizer Corporation Limited: at Barauni (Bihar); Durgapur (WB) and Namrup (Assam).
  • Rashtriya Chemicals and Fertilizers Limited, Trombay.
  • National Fertilizers Limited at Bhatinda (Punjab) and Panipat (Haryana).

Source: PIB


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