SWOT

ANALYSIS

FERTILISER

ACT

Pramith Virinchi

2016071

Sem III
AIM/Objective: The main objectives of the Fertiliser Act are or The Fertilizer Control Order
(FCO), 1985, enacted under The Essential Commodities Act, 1955, is being implemented to
regulate the trade, price, quality and distribution of fertilizers in the country.

Research Methodology

The research is purely based on doctrinal study. The project is completely doctrinal in nature,
as it uses mostly secondary sources data of articles, books from the library, archives and other
data sources for its research

Observations

There are two things which can be mainly observed in this. First, its the use of sub standard
fertilisers. The sub-standard fertilizers do not provide the requisite nutrients resulting in under
nourishment of the soil which forces the farmers to lose faith in the system as well as in new
technologies. Secondly, in some cases the additives may harm the quality of the soil and the
output. Practices such as these make adulteration and the use of substandard fertilizers a
serious problem for the livelihood of a farmer and for the food security of the nation. The
stagnating food grain production in recent years is just one manifestation of the crisis at hand.
These concerns are well appreciated, are in public domain and have resulted in the
development of an elaborate quality control institutional mechanism over the years.

Impact on economy:

From the available data in fertiliser statistics, it is quite clear that India is an important player
in the world market for fertilisers. For the last decade (2001-2012), India has been the second
highest producer of nitrogenous fertilisers after China (producing 10-11 per cent of world
production) and third highest producer of phosphatic fertilisers after China and USA
(producing around 7 per cent of total world production in 2012). India is important as a
consumer as well. It is the second biggest consumer of nitrogenous and phosphatic fertilisers
after China (14.1 per cent and 14.5 per cent respectively of world consumption in 2012 for
nitrogenous and phosphatic fertilisers) and the fourth biggest consumer of potassic fertilisers
after China, Brazil and USA (7 per cent of world consumption in 2012). India is also an
important importer of all the macronutrients. India is the second highest importer of Nutrients
after USA.
INTRODUCTION

Fertilizer is the most critical and costly input for sustaining agricultural production and
ensuring food security in a country. The Fertilizer Control Order (FCO), 1985, enacted under
The Essential Commodities Act, 1955, is being implemented to regulate the trade, price,
quality and distribution of fertilizers in the country. The State Governments are the
enforcement agencies for implementation of the provisions of the FCO and are adequately
empowered to take action against those who indulge in production and sale of non
standard/spurious fertilizers. The FCO provides for compulsory registration of fertilizer
manufacturers, importers and dealers, specifications of all fertilizers manufactured/imported
and sold in the country, regulation on manufacture of fertilizer mixtures, packing and
marking of fertilizer bags, appointment of enforcement agencies, setting up of quality control
laboratories and prohibition on manufacture/import and sale of non-
standard/spurious/adulterated fertilizers. A major role is played by fertilizer inspectors
appointed by the Central and state governments who draw random samples of the fertilizers
and send them to laboratories for testing. Accordingly, 71 Fertilizer Quality Control
Laboratories were set-up in the country which included the four set up by the Central
Government namely Central Fertilizer Quality Control & Training Institute, Faridabad and its
three associated Regional Laboratories.
Strengths

There is no denying the fact that over the years increased usage of fertilizer has played a
significant role in increase of agriculture productivity. Current trends in agricultural output,
however, depict that the marginal productivity of soil in relation to the application of
fertilizers is declining. The comparatively high usage of straight fertilizers (Urea, DAP &
MOP) as against the complex fertilizers (NPKs) which are considered to be agronomically
better including low or non usage of secondary and micro nutrients has also probably
contributed towards slowdown in growth of productivity. The declining fertilizer use
efficiency is also one of the factors for low productivity. The pricing of subsidized fertilizers
is also probable responsible for higher usage of straight fertilizers and skewed usage of
nutrients. The manufacturers/importers were earlier not willing to fortify the subsidized
fertilizers with secondary and micro nutrients, which are only required in nominal quantities
as the additional cost for the same was required to be borne by them from their own return on
fertilizer production. However, now the manufacturers / importers are allowed to charge 5%
above MRP in case of fortified subsidized fertilizer (10% for zincated urea and Boronated
SSP) and thus better availability of fortified fertilizers is being ensured by the suppliers. It is
therefore more relevant in times to come for the Government to ensure balanced usage of
fertilizers comprising of primary, secondary and micro nutrients in optimum quantities by the
farmers and to simultaneously monitor the farm productivity levels so that the country is able
to generate export surplus after meeting the demand of agriculture produce by the populace.

India is, thus, becoming more and more import dependent in phosphatic and potassic sector
and even the gap of production and consumption in nitrogenous sector is also widening. The
increasing international prices of inputs as well as finished fertilizers are making the growing
fertilizer subsidies unsustainable. Urea is the only sector where the country can achieve self
sufficiency provided the new gas finds are committed for the new urea units and alternative
resources like coal, CBM etc. are used for urea production.

To ensure adequate availability of right quality of fertilizers at right time and at right price to
farmers, the Fertilizer was declared as an Essential Commodity and Fertilizer Control Order
(FCO) was promulgated under Section 3 of Essential Commodities Act,1955 to regulate,
trade, price, quality and distribution of fertilizers in the country. the FCO provides for
compulsory registration of fertilizer manufacturers, importers and dealers, specification of all
fertilizers manufactured/imported and sold in the country, regulation on manufacture of
fertilizer mixtures, packing and marking on the fertilizer bags, appointment of enforcement.

Weakness

The fertilizer industry has not witnessed any major changes in the technical department.
There are many new techniques coming into existence and many people still use the same old
techniques. The fertiliser control order cannot do anything about it.

The cost of the fertilisers are very high for a normal farmer to buy. There is no sort of cost
benefit analysis that is being used. Although the government is providing subsidies for many
fertiliser makers, they are still being misused and the act cannot actually help them.

According to the government of India, the price of the fertiliser can be set by the makers of
the product. This provision is being misused and the product irrespective of the
manufacturing cost is sold at a higher rate.

Oppurtunities

The fertiliser act has been amended whenever it was necessary, so that people are not affected
by it and would recover the losses they made due to fertilisers. Recently,
the Government has notified the Modified NPS-III for existing urea units on 2nd April,
2014 in order to address the issue of under recoveries of the existing urea units due to
freezing Fixed Cost at the level of costed year 2002-
03. The policy will be implemented for a period of one year from the date of issue of
notification. The policy envisages the
continuation of calculation of concession rates of urea units as per NPS-
III with certain amendments. As per the said policy,
the existing urea units will be paid the maximum additional fixed cost (towards increase
in the four components, viz., salaries & wages, contract labour, selling expensed and repair &
maintenance) of Rs. 350/MT to existing urea units or actual increase in above four
components of fixed cost during the year 2012-13 as compared to the year 2002-03,
whichever is lower. However, in respect of KFCL and BVFCL-II units, for which cost data
of four components is not available either for the year 2002-03 or 2012-13, the actual
increase in these four components as per the certified cost data for the latest year over and
above Rs. 521/MT (weighted industry average during 2002-03) subject to maximum
of Rs. 350/MT will be allowed.

The computation of subsidy on P&K fertilizers was based on Cost Price Study on DAP and
MOP conducted by Bureau of Industrial Costs and Prices (BICP) now called Tariff
Commission (TC). The subsidy rates were decided on the cost plus approach on quarterly
basis w.e.f. 1.4.1999. The total delivered cost of the fertilizers being invariably higher than
MRP indicated by the Government, the difference between delivered price of fertilizers at
farm gate level and the MRP was compensated by Government in the form of subsidy.

Threat

In the fertiliser industry there is a lot of mal practice done. The manufacturers and dealers are
routinely subjected to hand-twisting and rent seeking by inspectors and analysts- many a
times acting in connivance with each other, who threaten to produce reports which could put
the dealers business in jeopardy. Prevalence of such practices create large disincentives for
genuine quality producers for they are also subjected to the same rigmarole as the
unscrupulous producers.

Based on the data provided by the apex institution of Government of India for fertilizers
quality- CFQCTI, its reports, data collected through a series of RTI application by FISME
from Central and State laboratories and the feedback received from the members of
Micronutrient Manufacturers Association it was found that there are critical deficiencies in
specifications of fertilizers particularly with in micronutrient fertilizers and their mixtures. In
some cases these specifications are so rigid that they in fact act against the interests of
farmers as some eminently desirable elements are also grouped as impurities. According to
the Governments own experts, most of these specifications are arrived at on ad-hoc basis
without any detailed field study. The method of testing prescribed under standards has been
questioned by experts and is not in consonance with the testing infrastructure available in
testing laboratories.
Even though the samples fail the test the first time, as the re testing barrier is corrupted
fertilisers which are highly toxic can come into the market.

Recommendations

1. Government: The government has been introducing and amending the NPS, but
there has been no noticeable change which has occurred.

2. Experts: Fertilizer subsidies that encourage production and productivity have been
widely criticized because of the huge cost of subsidies and also their benefits are
perceived to be far from uniformly distributed. There is a general view in academic,
policy and political circles that fertilizer subsidies are concentrated geographically, on
relatively few crops and few producers and in many cases do not reach the targeted
group(s). One of the most contentious issues surrounding input subsidies in general
and fertilizer in particular in India is how much of what is paid out actually finds its
way into the pocket of the farmer, and how much is siphoned away by the fertilizer
companies. There has also been a debate about the issue of real beneficiaries of
fertilizer subsidy like small vs. large farmers, well-developed vs. less developed
regions, etc.

Detailed information should be easily accessible on the second round testing, for
instance, reasons for passing in the second round etc. Ideally, retesting should be
conducted in the presence of either the parties or their authorized representatives.
Competent persons may be approved to be authorized representatives of the parties.
Such competent persons could be lecturers, professors of chemistry department of
science or agriculture colleges and universities. In addition, for empowering the
consumers, right to test or retest by the parties other than in question should be given.

3. Personal: This act helps a few farmers but not all of them. This is because it has not
been implemented strictly and there is a lot of transparency in the system. By making
the laws strict and if it is seen that the act is implemented properly in the country it
would help in development and less pollution of water.
 Conclusion

The quality of a fertilizer is of huge significance in India where 70% of people are employed
in agriculture and on its output depends not only economic prosperity but also the livelihood
of millions of Indians. The elaborate quality control mechanism that exists in India ensures
identification of producer and seller of fertilizers, specifies types of fertilizer that could be
manufactured and sold and arranges for periodic and surprise testing of fertilizers in markets
in the special approved laboratories. Nonetheless, concerns have been raised from
government and stake holders about the quality of fertilizers being sold in the market,
emphasizing the need for revamping the quality mechanism from time to time.