Title : REFORMING THE FERTILISER SECTOR

Date : Nov 23, 2021

Description :

Based on a News Article published in the ‘The Hindu’ on 23rd November 2021 on Page Number 7

 

Useful for UPSC CSE Prelims and Mains (GS Paper III)

 

India's Fertilizer Industry:

 

• It is one of the eight primary industries.
• In the Index of Core Industries, fertiliser has the smallest share.
• After China, India is the world's second-largest consumer of urea fertilisers. India is also the world's second-largest producer of nitrogenous fertilisers and the third-largest producer of phosphatic fertilisers. Because we have limited potash supplies, we must rely on imports to meet our needs. Fertilizers are divided into two categories.
• N:P:K: Nitrogenous (urea), Phosphatic (di-ammonium phosphate - DAP), and Potassic (muriate of potash (MOP) fertilisers are categorised according to the nutrients they provide to the soil.
• Calcium, Magnesium, and Sulphur are examples of secondary fertilisers.
• Iron, Zinc, Boron, Chloride, and other micronutrients are examples.
• Subsidies for fertilisers (Food > Fertilizer > Petroleum > Interest payments)
• Until 1977, no fertiliser subsidy was paid. The 1973 oil crisis resulted in a rise in fertiliser prices, which led to a drop in consumption and an increase in food prices. Manufacturers were subsidised by the government in 1977.
• Phosphate and Potash imports were deregulated after the 1991 crisis, however Urea imports were prohibited.

 

Mechanism for Urea Production and Pricing:

 

• Urea is a nitrogenous fertiliser material that is substantially subsidised by the Center. Today, urea is the only fertiliser that is still regulated.
• The Urea Subsidy Scheme will be extended until 2020, according to the CCEA.
• It is included in the Central Sector Scheme. The price of urea will remain unchanged till 2020.
• The DBT Scheme for fertiliser subsidies to urea manufacturers and importers has now been approved. It also contains a subsidy for imported urea, which is used to close the gap between demand and domestic urea output. It also includes urea transportation freight subsidies.

 

 

Benefits:

 

• DBT will ensure that urea makers receive their subsidies on time. Fertilizer Co., resulting in timely urea availability for farmers.
• This will prevent fertiliser subsidy leakage and black marketing.
• To minimise the usage of nitrogen fertilisers, a ceiling could be set.
• Farm Gate price minus MRP paid by farmers Equals Subsidy to Fertilizer Manufacturer/Importer.
• 2015's New Urea Policy (till 2019-20)
• With the goal of increasing indigenous urea production, improving urea energy efficiency, and rationalising subsidy.
• It can be used with any of the 25 current gas-powered devices.
• It ensures that urea makers are paid on time, resulting in timely urea supply for farmers.
• Urea is sold at a regulated price of Rs. 5360 per MT. Other costs associated with the application of the Neem coating.
• The Center intends to loosen the grip on Urea retail pricing and make it more targeted.
• Previously, mandatory Neem coated urea manufacture was done to inhibit nitrogen dissolution in soil, resulting in lower nutritional requirements.
• The government is also considering setting a Nutrient Based Subsidy (NBS) cost for urea to encourage balanced fertiliser use and improve industry efficiency.
• The CCEA has agreed to extend the Nutrient Based Subsidy scheme until 2020.

 

• Under this plan, fertiliser firms (other than Urea) receive a fixed amount of annual subsidy based on the nutrient content of their products. It can be used with 22 different fertilisers (other than Urea).
• The government sets a predetermined subsidy rate for each nutrient in subsidised nitrogen, phosphorus, potassium, and sulphur fertilisers. The MRP is determined by taking into account the international and domestic pricing of P&K fertilisers, the currency rate, and the country's inventory level.

 

Infrastructure:

 

• Fertilizer Corporation of India Limited (FCIL) has four plants in Jharkhand: Sindri (Jharkhand), Gorakhpur (UP), Ramagundam (AP), Talcher (Odisha), and Korbe (Kerala) (Chattisgarh).
• Hindustan Fertilizer Corporation Limited has plants in Barauni (Bihar), Durgapur (West Bengal), and Namrup (Uttar Pradesh) (Assam).
• Trombay's Rashtriya Chemicals and Fertilizers Limited
• Bhatinda (Punjab) and Panipat (Haryana) are home to National Fertilizers Limited (Haryana).

 

Government’s Initiatives in this regard:

 

• The Minister of Chemicals and Fertilizers recently reviewed the Department of Fertilisers' initiatives to make India Atmanirbhar in Fertilizers.

 

• To encourage the use of alternative fertilisers, the government plans to liberalise its Market Development Assistance (MDA) programme.
• MDA Policy:

 

• Previously, MDA policy was limited to solely city compost.
• There were calls to broaden this policy to include organic waste such as biogas, green manure, rural organic compost, solid/liquid slurry, and so on.

 

• The Swachh Bharat Abhiyan will be fully supported by this expansion.

 

• Urea with Neem Coating:

 

• The Department of Fertilizers (DoF) has mandated that all domestic producers produce 100 percent urea with Neem Coating (NCU).
• The following are some of the advantages of using NCU: Improved soil health.
• Use of plant protection agents is being reduced.
• Pest and disease attacks are reduced.
• Increased paddy, sugarcane, maize, soybean, and Tur/Red Gram yields.
• There is very little diversion for non-agricultural reasons.
• Nitrogen Use Efficiency (NUE) of Neem Coated Urea increases as a result of the gradual release of nitrogen, resulting in lower NCU use as compared to regular urea.

 

• The New Urea Policy (NUP) for 2015 is as follows:

 

• The policy's goals are to maximise indigenous urea production.
• To improve the urea units' energy efficiency.
• To reduce the burden of subsidies on the Indian government.

 

 

• 2012's New Investment Policy:

 

• In January 2013, the government launched the New Investment Policy (NIP)-2012, which was amended in 2014 to encourage new investment in the urea business and to make India self-sufficient in the sector.

 

• Policy on City Compost Promotion:

 

• The Government of India authorised a policy on city compost promotion, which was notified by the Department of Finance in 2016 and included a Market Development Assistance of Rs. 1500/- to help scale up production and consumption of city compost.

 

• Compost firms eager to market municipal compost were authorised to sell city compost in bulk directly to farmers in order to improve sales volumes.
• The Direct Benefit Transfer (DBT) for Fertilizers applies to fertiliser businesses who sell city compost.

 

• Space Technology in the Fertilizer Industry:

 

• In collaboration with the Geological Survey of India (GSI) and the Atomic Mineral Directorate, the Department of Finance commissioned a three-year Pilot Study on "Resource Mapping of Rock Phosphate using Reflectance Spectroscopy and Earth Observations Data" by the National Remote Sensing Centre of ISRO (AMD).

 

• The NBS (Nutrient Based Subsidy) Program:

 

• The Department of Finance has been implementing it since April 2010.
• Under the NBS, each grade of subsidised Phosphatic & Potassic (P&K) fertilisers receives a defined amount of subsidy based on its nutrient content, which is determined on an annual basis.
• Its goals include ensuring balanced fertiliser use, increasing agricultural output, fostering the expansion of the domestic fertiliser sector, and lowering the subsidy burden.

 

• India's Fertilizer Consumption:

 

• India's fertiliser usage in FY20 was over 61 million tonnes, with urea accounting for 55 percent of it, and is expected to rise by 5 million tonnes in FY21.
• Because non-urea varieties (MoP, DAP, complex) are more expensive, many farmers choose to use more urea than is actually required.
• To limit urea consumption, the government has adopted a variety of steps. To combat unlawful urea diversion for non-agricultural uses, it introduced neem-coated urea. It also increased its support for organic and low-cost farming.
• Currently, the country produces 42-45 million tonnes of fertiliser, with imports totaling roughly 18 million tonnes.
• Urea Subsidy: The Centre provides urea subsidy to fertiliser manufacturers based on the cost of production at each plant, with the units having to sell the fertiliser at the government-set Maximum Retail Price (MRP).
• Non-Urea Fertilizer Subsidy: Non-urea fertiliser MRPs are deregulated or set by the firms. The Centre, on the other hand, pays a flat per-tonne subsidy to ensure that these nutrients are priced at "appropriate levels."
• Non-urea fertilisers include Di-Ammonium Phosphate (DAP) and Muriate of Potash (MOP).
• The Nutrient Based Subsidy Scheme regulates all non-urea based fertilisers.

Tags : Fertilizer, Indian Agriculture sector, fertilizer sucsidy