Category: Production vs imports

OVERCOMING THE REFORM CHALLENGE

If the Government is serious about making a dent on subsidy, it should dismantle controls and give subsidy directly to target beneficiaries (the poor) under direct benefit transfer. This will pave the way for many players, increase supply, offer more choices and foster competition In the Medium Term Expenditure Framework (MTEF) statement (a statutory requirement under the Fiscal Responsibility and Budget Management Act, 2003) presented by the Modi Government, expenditure on fertiliser subsidy during 2018-19 and 2019-20 was kept unchanged at Rs 70,000 crore. The provision was the same in this year’s budget. Allocation for food subsidy has been increased from Rs 145,000 crore  during 2017-18 to Rs 175,000 crore during 2018-19 and further to Rs 200,000 crore in 2019-20....
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APATHETIC ATTITUDE RUINING BUSINESS

The fertiliser industry, in India is slumping due to the burden on investors to sell at low price and delayed payment of subsidy dues by the Government Last year, Tata Chemicals Limited (TCL) sold its urea business viz plant in Babrala, Uttar Pradesh to Yara Fertilisers India Private Limited [YFIL] — Indian arm of Norway’s Yara lnternational ASA — for a sum of Rs 2,670 crore. This was a distress sale. Then, it had also alluded to selling its complex fertiliser business (including Haldia unit). Now, the TCL are in advanced negotiations with India-born Indonesian billionaire Prakash Lohia of Indorama Corporation to sell Haldia unit — on a slump sale basis for Rs 600-800 crore. The sale will include the plant and other fixed assets and...
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Self-sufficiency in fertilisers or building castles in air?

Union Minister for Chemicals and Fertilisers Ananth Kumar has announced the government’s decision to revive five closed plants of Fertiliser Corporation of India (FCIL) and Hindustan Fertiliser Corporation Limited (HFCL). They are: Talcher (Odisha), Ramagundum (Telangana), Sindri (Jharkhand), Barauni (Bihar) and Gorakhpur (Uttar Pradesh). To be commissioned by 2020-21, their revival is expected to add 7.5 million tonnes (mt) of urea capacity. The minister has also exuded confidence that the decision for mandatory neem coating of urea (2015) will result in 10% improvement in the efficiency of fertiliser use. Taking urea consumption of about 33 mt annually, this will save about 3.3 mt. He also referred to steps for increasing utilisation of the existing capacity. This has led to increase...
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Fertilizer reforms – time for big bang

An official from the department of fertilizers is reported to have said that by putting 45 kg of urea in a bag, it is possible to achieve 10% saving in consumption. His logic is that farmer calculates requirements on per acre basis. He needs 90 kg which can be met with 2 bags of 45 kg each against current practice of using two bags of 50 kg each. Are we to infer that until hitherto, 10% urea was going waste as he was forced to buy 100 kg – against need of 90 kg – and that loss will now be prevented with use of 45 kg bag? How come such an innovative idea did not strike policy makers earlier?...
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Self-sufficiency in fertilizers – building castles in the air

Union Minister for chemicals and fertilizers, Ananth Kumar has announced government’s decision to revive five closed plants of Fertilizer Corporation of India [FCIL] and Hindustan Fertilizer Corporation Limited [HFCL] viz. Talcher [Odisha], Ramagundum [Telengana], Sindri [Jharkhand], Barauni [Bihar] and Gorakhpur [Uttar Pradesh]. To be commissioned by 2020-21, their revival is expected to add 7.5 million tons [mt] of urea capacity. Kumar has also exuded confidence that the decision of the government to make neem coating of urea mandatory [2015] will result in 10% improvement in the efficiency of fertilizer use. Taking urea consumption of about 33 mt annually, this will result in saving of about 3.3 mt. The minister also referred to steps aimed at enticing manufacturers to increase utilization...
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Neem-coated urea: Why is Narendra Modi govt waiting for 5 years to make India self-sufficient in fertilisers?

Addressing the 9th Global Agriculture Leadership Summit on September 8, 2016, chemicals and fertiliser minister, Ananth Kumar proclaimed that neem-coating of all urea supplies meant for use by farmers has resulted in elimination of diversion to chemical industries and smuggling to neighbouring countries. If, the claim is true, it will have a profound impact on the larger picture of demand-supply balance, self-sufficiency in fertilisers, dependence on import, subsidy pay-out, demand for hydrocarbons especially gas and impact on the environment. The total consumption of urea is about 30 million tonnes annually, including 22 million tonnes indigenous and 8 million tonnes of imported product. Since, all of this is sold by manufacturers/importers at a low ‘controlled’ price, excess of cost of production/import...
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Gains from neem coating urea – real or imaginary!

The exhortations by prime minister, Modi and his cabinet colleague, chemicals and fertilizer minister, Ananth Kumar regarding the success of neam coating of urea [ordered by Modi last year to cover all of domestic production and import] could have much deeper ramifications than mere stoppage of diversion to industrial use and smuggling to neighboring countries. The total consumption of urea in India is about 30 million tons annually including 22 million ton indigenous and 8 million tons imported. Since, all of this is sold by manufacturers/importers at a low ‘controlled’ price under the Fertilizer Control Order [FCO], the excess of cost of production/import and distribution over this price is reimbursed to them as subsidy by Government of India [GOI]. For...
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Tata exit from fertilizers – symptomatic of deeper malaise

Tata Chemicals Limited [TCL] made headlines on August 10, 2016 by announcing sale of its urea business [it has a plant in Babrala, Uttar Pradesh with 700,000 tons ammonia and 1.2 million ton urea capacity] to Yara Fertilizers India Private Limited [YFIL] – Indian arm of Norway’s Yara lnternational ASA – for a sum of Rs 2670 crores [after obtaining all regulatory approvals and court sanction, the transaction will be consummated within 9-12 months]. TCL had decided to exit fertilizers long back. However, a number of earlier attempts had failed as it did not find any taker; even this one is a distress sale and will fetch the company only 2/3rd of the money so far invested. Tata has also...
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REVIVING INDIA’S FERTILISER PLANTS

Efforts by successive Government’s to achieve self-sufficiency in the production of fertilisers have failed. The Modi Government should broaden its options and look for expansion of existing units or set up joint ventures abroad The Coal India Limited (CIL) and the National Thermal Power Corporation limited (NTPC) signed a joint venture agreement to revive the Sindri (Jharkhand) and Gorakhpur (Uttar Pradesh) plants of the Fertiliser Corporation of India (FCIL), at an estimated cost of about Rs 18,000 crore, over the next four years. CIL and NTPC operate in coal and power sectors respectively and both have their plates full to meet their commitments in those areas to help India achieve the growth target. But, given fertiliser is a different cup...
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Fertilizer woes – quick fix won’t work

On July 4, 2016, the minister for chemicals and fertilizers, Ananth Kumar announced government’s decision to reduce maximum retail price [MRP] of non-urea fertilizers viz., DAP [di-ammonium phosphate: 18% nitrogen [N] & 46% phosphate [P]]; MOP [muriate of potash] [60% potash [K]] and complex fertilizers [contain N, P and K in different proportions] with immediate effect. The retail price of DAP has been reduced by Rs 2,500 per ton to Rs 22,000/tonne, MOP by Rs 5,000 per ton to Rs 11,000/tonne and those of complex fertilizers by Rs 1,000/tonne on an average. The minister went on to say that the rate cut would entail a benefit of Rs 4,500 crore to farmers and help promote balanced use of fertilizers. On...
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