Monsoon spells good news for fertiliser industry

As the government went all out to cut corners on the subsidy front, the fertiliser industry, riding on the Left support to the UPA government, managed to stave off such moves in the sector during the year.

With monsoon spelling good news for agriculture and the demand for fertiliser likely to increase substantially, the chemicals and fertiliser ministry has decided to seek additional fertiliser subsidy ranging from Rs 6,000-8,000 crore this fiscal from the finance ministry.

Officials in the chemical and fertiliser ministry estimate the subsidy bill to cross well over the budgeted level of about Rs 17,022 crore this fiscal. Till November 2005, the subsidy bill had gone up from Rs 15,879 crore to Rs 16,253 crore.

Experts contend that despite the rise in fertiliser consumption level in India, it would still be well below the trend in the developed world. As compared to a consumption level of 98 kg/hectare in India, it is estimated at 300 kg/hectare in the US.

The Fertiliser Association of India (Fai), representative body of the industry, however, attributes the rise in fertiliser subsidy to increase in input costs.

Fai chairman H C Grover said the government has been tightening the norms for fertiliser pricing so as to reduce the subsidy without increasing the maximum retail price.

The consequent impact on the health and growth of the industry has been given the go by, he said adding the burden of subsidy has been increasing because the principal cause of rise in fertiliser subsidy still remained unaddressed.

Grover said the availability and prices of basic raw material and intermediates, especially hydrocarbons have witnessed steep increases in price in recent years.

Chemical and fertiliser minister Ram Vilas Paswan has assured the representatives that the government will not make any cut in subsidy to fertiliser companies as they are selling fertilisers to farmers at very low prices compared with the cost of production.

The agriculture-related subsidies are much higher in developed countries such as the UK and US, he observed during a meeting. The government provides concession on phosphatic fertilisers under the concession scheme for decontrolled P and K fertilisers.

The concession rates for phosphatic & potassic fertilisers are being worked out as per the recommendations of tariff commission. The government had already approved continuation of the scheme up to 31st march 2006 as per approved parameters.

Total production of phosphatic fertilisers covered under the concession scheme was 120.05 lakh mt during the year 2004-05. The likely production for the year 2005-06 would be about 149 lakh mt as per the production plan indicated by the phosphatic fertiliser manufacturers. The revised estimates of subsidy on decontrolled indigenous P and K fertilisers during 2005-06 are estimated at Rs 7,332 crore against earlier budgetary assessment of Rs 4,000 crore.

On the criticism of the use of chemical fertilisers perse(organic vs chemical fertilisers) and degradation of soils due to use of chemical fertilisers, Grover said: "what critics seem to have completely forgotten or are unaware of is that for best results a judicious combination of all these are required."

He said degradation of soils had occurred due to unscientific and unbalanced use of primary nutrients that is nitrogen, phosphatic and potash and as a result of ignoring the need for using secondary and micronutrients for the crops.

Due to faulty pricing policies there is excessive use of nitrogen in the form of urea, he added.

What is needed, Grover said, was restoring the physical and chemical health of the soil through scientific, balanced and integrated use of primary, secondary and micronutrients along with organic manures and biofertilisers where appropriate.

Due to mechanisation and other factors such as highly intensive farming and multiple cropping, the quantitites in which Farmyard Manure (FYM) are required are simply not available.

According to experts, however, there is no scientific evidence of conversion of paddy land into barren land owing to use of chemical fertilisers, which is still at a low level (around 98 kg per/hectare).

However, non-judicious and imbalanced use of inorganic fertilisers over years may result into deterioration of soil fertility/health and the Indian Council of Agricultural Research is recommending integrated nutrient management through conjunctive use of both inorganic and organic sources of plant nutrients to prevent such degradation.

With regard to making available adequate fertiliser to farmers, the industry is complaining about the government's lack of interest in opening new plants or even attending to the problem of revival of sick units with rigour.

At present, there are 57 large fertiliser units in the country manufacturing a wide range of nitrogenous, phosphatic and complex fertilisers.

Of these, 29 units produce urea, 20 units produce dap and complex fertilisers, seven units produce low analysis straight nitrogenous fertilisers, and the remaining nine manufacture ammonium sulphate as a by-product.

Besides, there are about 62 small and medium scale units in operation producing single super phosphate (SSP).

It is in the fitness of things that Paswan recently called upon the fertiliser industry to join the government efforts in reviving the closed fertiliser units of Fertiliser Corporation of India (FCI) and Hindustan Fertilisers Corporation (HFC).

He said any viable proposal in this regard would be welcomed by the government and with such collective efforts, India can emerge as a net exporters of fertilisers in the coming years.

The government is contemplating revival of three sick fertiliser units in West Bengal, Bihar and Jharkhand.

Recently the fertilisers' ministry received a detailed report on revival from the Project and Development India ltd (PDIL). The units to be revived are Durgapur and Barauni plants of HFC Bengal and Bihar respectively, and the Sindri units of FCI in Jharkhand.

In its report on the Sindri plant, the PDIL has proposed two options. The first is to make the plant functional on a quick-start basis, which will involve a capital expenditure of Rs 169.26 crore with a running cost of production at Rs 13,024 per mt of urea.

The second option, which the PDIL has given, is for improving the performance and energy efficiency at a cost of Rs 386.95 crore with running cost of production at Rs 11,938 crore.

While addressing the golden jubilee annual seminar on "Economic Growth through Agriculture and Fertiliser" organised by Fai earlier this month, Paswan said the government has tried to develop a policy environment conducive to new capacities.

He said the working group under the chairmanship of Y K Alagh to review the policy for urea beyond NPS (new pricing scheme) stage-ii would submit its report very soon. He assured the fertiliser industry that they would be consulted before taking a final decision in this matter.