FERTILISERS: ALL EYES ON GOVERNMENT...
- Mittravinda Ranjan

The growth of Indian fertilizer sector has been marred during the last decade which can be attributed to volatile energy costs, policy paralysis and very high dependence on raw material imports. The subsidies offered to the fertiliser industry too could not bring the much needed respite to bolster the growth of this sector.

Manufacturers have been forced to carry subsidy burdens over stretched periods of up to 180 days and in some cases even 12 months, which severely impacts the operations and profitability.

As a result of inadequate availability of raw material, India has almost 50 per cent of underutilised capacity. Though urea can be produced to certain extent from indigenous sources, our industry relies completely on potash and phosphate imports to produce phosphate based fertilisers. Any fluctuations in global supply chains have adverse impact on the Indian manufacturers.

Sadly, despite being considered one amongst the largest agrarian economies globally, the fertiliser consumption is very low in India as compared to many countries like Bangladesh & Pakistan which have far lesser geographical spread in comparison.

Nutrient Based Subsidy (NBS) scheme, launched in 2010 was a good move but was not extended to urea manufacturers and in the due course of 18 months the benefits of NBS have been partially neutralised, shares Suresh Krishnan, MD, Zuari Agrochemicals Ltd. With the new government in place, R Mukundan, MD, Tata Chemicals Ltd is optimistic about the improvement in policy regime during 2014 with implementation of NBS for urea and timely payment of subsidy bills.

Setting up of Sovereign Wealth Fund (SWF) has been appreciated by the fertiliser industry but would require careful allocation of funds. Guy Goves, President, Agri Business & Farm Solutions, DFPCL is of the view that setting up joint investment fund to increase inorganic footprint through acquisition of raw material assets can go a long way towards securing long term supplies.

Mukundan identifies technology stagnation as one of the major deterrents for the growth of the indigenous fertiliser sector. Internationally, fertiliser producers have deployed advanced technologies in their facilities, which enable them to be globally competent, whereas, over regulation and price control have refrained the investors from enter the Indian market.

Announcement of comprehensive National Energy Policy would benefit the industry at large; the government has also proposed policy changes in the oil & gas sector which would include introducing uniform licensing policy to facilitate E&P operators to work under the single policy regime. However, government will still require striking the balance in gas pricing, allocation and subsidies mechanism for the fertiliser sector to realise its true potential.

The new government has given positive feelers to drive the growth of the fertiliser sector. However, this would require concerted effort on the part of policy makers and the industry to put the fertiliser sector back on a growth trajectory.