Commerce Dashboard

IBEF Blog

INDIA ADDA – PERSPECTIVES ON INDIA

Agriculture

Go Back

India to become Aatmanirbhar in Phosphatic Fertilisers

IBEF, Knowledge Centre

Jul 27, 2021 21:36

Introduction
Agriculture, including its allied sector, is the largest source of income in India. According to an article in Down to Earth, the sector contributes 19.9% to the country’s GDP (as of FY 2020-21), with 54.6% of the population engrossed in agricultural activities. While India may have achieved self-reliance in production of food grains, the production process is labour-intensive and regionally biased. As most rural households mainly depend on farming for their livelihood and the country’s agricultural land suffers from varied degrees of degradation and erosion, many farmers use chemical and organic fertilisers to improve plant nutrients and crop yields; therefore, boost their earnings.

The agricultural sector’s success largely depends on the fertiliser industry, which manufactures some of the most important raw materials required for production of crops. Moreover, the Indian fertiliser industry is extremely crucial as it produces phosphorous-based fertilisers such as diammonium phosphate (DAP), monoammonium phosphate (MAP), nitrogen, phosphorus, and potassium (NPKs) and single superphosphate (SSP) which aids in the development of healthy crops. To manufacture these fertilisers, the country mainly depends on rock phosphate, which is a common, key raw material and largely sourced from Rajasthan and Madhya Pradesh. Despite this, India imports 90% rock phosphate from other countries.

Current production of phosphatic fertilisers in India
The fertiliser industry is highly regulated and monitored by the Indian government. Following this, the government reimburses the price difference between the cost of fertiliser production and price at which it is sold to the beneficiary in the form of subsidy. According to government data, the overall fertilisers production stood at 37 million metric tonnes, a 3% increase in the first 10 months of FY2021 compared with 36 million in the first 10 months of FY2020. Moreover, the country’s import dependence (i.e., imports as a proportion of production plus imports) rose from 36% in first 10 months of FY2020 to 38% in the first 10 months of FY2021.

Chart 1: Production, Import and Sales of Key Fertilisers in India (Unit: million metric tonnes)





Table 1: Commodities Price Data (Unit: US$/metric tonnes)

In FY2021, the production of DAP, which is the second-most popular fertiliser among Indian farmers after urea, grew steadily at 1.9% between FY2020 and FY2021, compared to the sizeable growth of 8% between FY2019 and FY2020. This reduction in growth percent was due to shortage of raw materials and increase in prices of inputs, primarily rock phosphate. Although the demand for rock phosphate drastically declined between October 2019 and October 2020, in FY2021, the country has recorded a gradual uptrend in demand due to unlocking of the economy. Moreover, prices for rock phosphate and other raw materials such as phosphoric acid, ammonia and sulphur are likely to surge due to tight supply but high demand from countries like India and China; this is expected to augment the overall retail price of phosphatic fertilisers and therefore, hamper the country’s agricultural developments.

To improve availability of phosphatic fertilisers, lower the country’s high dependency on rock phosphate imports and combat the volatility in international prices, which affect the domestic prices of fertilisers, in June 2021, the government announced that the Ministry of Chemicals and Fertilisers has outlined an action plan to accelerate exploration and mining of available rock phosphate reserves in the country.

Following this, Mr. Mansukh Mandaviya, the Minister of Chemicals and Fertilisers, said, “I am glad that the Department of Fertilisers is ready with an action plan to make India Aatmanirbhar (self-reliant) in rock phosphate, the key raw material of DAP and NPK fertilisers.”

Steps taken to boost production of rock phosphate
To make India self-reliant in production of fertilisers through indigenous resources, the Ministry of Chemicals and Fertilisers, under the Indian government, rolled out the following action plan:

Rise in subsidy rates of phosphorus-based fertilisers

  • In June 2021, the Cabinet Committee on Economic Affairs approved the proposal to hike subsidy rates for phosphorus-based fertilisers by 140% in a bid to provide relief to farmers owing to the start of kharif sowing season. This additional subsidy, which totalled Rs. 14,775 crore (US$ 1.98 billion), was announced as a one-time measure as of the COVID-19 relief.

Expand production of phosphorite deposits

  • The Ministry of Chemicals and Fertilisers directed domestic manufacturing companies to commercially exploit and increase production in the existing phosphorite deposits (three million metric tonnes), which are available in Rajasthan, Hirapur in Madhya Pradesh, central part of Peninsular India, Lalitpur in Uttar Pradesh, Mussoorie Syncline in Uttarakhand and Cuddapah Basin in Andhra Pradesh.

Explore potential potassic ore resources

  • The Department of Mining and Geological Survey planned to expedite exploration of potential potassic ore resources in Rajasthan’s Satpura, Bharusari and Lakhasar; and other states including Uttar Pradesh, Madhya Pradesh, Rajasthan, Gujarat, Andhra Pradesh and Karnataka.

Encourage joint ventures abroad

  • The Department of Mining and Geological Survey planned to expedite exploration of potential potassic ore resources in Rajasthan’s Satpura, Bharusari and Lakhasar; and other states including Uttar Pradesh, Madhya Pradesh, Rajasthan, Gujarat, Andhra Pradesh and Karnataka.

Focus on acquiring manufacturers of fertiliser raw materials aboard

  • The Department of Fertilisers is working to acquire manufacturers of fertilisers and raw materials overseas to secure the supply of raw materials to India.

Outlook
In conclusion, India aims to be self-reliant in overall fertiliser production by 2023 as the government is constructing new manufacturing units to reduce dependency on imports. In addition, the government is likely to spend Rs. 1.19 trillion (US$ 15.97 billion) in FY2021 in the form of subsidy components to the farmers for the fertilisers. Following this and the government’s action plans under the ‘Aatmanirbhar Bharat’ initiative will aid and accelerate India’s steps in becoming self-reliant to manufacture phosphatic fertilisers in years to come.


 

 

POST COMMENT