MANTHAN

REPORT 2020
Fertilizer Sector

National Institute of Agricultural Extension Management (MANAGE)

Rajendranagar, Hyderabad, 500030

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INDEX

SL
Topics Pg. No
No

1 Introduction 3

2 Global demand and supply of fertilizers 4

3 Indian Scenario 7

4 Market summary 10

5 Direct Benefit Transfer for Fertilizer subsidy 10

6 Freight Subsidy 13

7 Fertilizer Import 14

8 Integrated Nutrient management 15

9 Fertilizer Control Order 16

10 Impact of COVID-19 on fertilizer industry 17

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 Introduction

India is agricultural economy where 80% of the people depend on agriculture.

The productivity of agricultural land has to be necessarily improved with
increased use of agricultural inputs like quality seeds, fertilizers, water, agro-
chemicals etc., for better crop yields. Among the different agricultural inputs and
practices required for good production, the use of the fertilizers together with
quality seeds and water are the most important. Fertilizers provide plants with
the food they need for their growth and development. Successive five year
plans have laid emphasis on self-sufficiency and self-reliance in food grain
production and concerted efforts in this direction have resulted in substantial
increase in agriculture production and productivity. This is clear from the fact that
from a very modest level of 52 million MT in 1951- 52, food grain production
increased to about 252.22 million MT in 2015-16. In meeting the domestic
requirement of food grains and also generating exportable surpluses, the
significant role played by chemical fertilizers is well recognized.

The Indian fertilizer market was worth INR 5,437 Billion in 2018. Looking
forward, the market is projected to reach INR 11,116 Billion by 2024,
growing at a CAGR of 12.3% during 2019-2024. India is the second largest
consumer of fertilizers after China. India also ranks second in the production of
nitrogenous fertilizers and third in phosphatic fertilizers whereas the requirement
of potash is met through imports since there are limited reserves of potash in the
country.

Table 1. The production of fertilizers in recent years

Complex
Year Urea (LMT) DAP Total
Fertilizer
2014-15 225.85 34.44 78.32 338.61
2015-16 244.75 37.87 83.01 365.63
2016-17 242.01 43.65 79.55 365.62
2017-18 240.23 50.36 90.38 380.74

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 300
244.75 242.01 240.23
250 225.85

200

150

83.01 90.38
100 78.32 79.55
43.65 50.36
50 34.44 37.87

0
2014-15 2015-16 2016-17 2017-18

urea DAP Complex fertilizer

Global Demand and Supply of Fertilizers:

Global fertilizer demand is increasing, and this rising demand requires growth
capacity in the industry. The need internationally for more fertilizer presents
some major challenges as farmers attempt to feed a growing world population.
World fertilizer nutrient (N+P2 O5 +K2 O) consumption is estimated to reach
186.6 million tonnes in 2015, up by 1.1 percent over 2014. World demand for
total fertilizer nutrients is estimated to grow at 1.6 percent per annum from 2015
to 2019. The demand for nitrogen, phosphate, and potash is forecast to grow
annually by 1.2, 2.0 and 2.5 percent, respectively, during the period. Over the
next five years, the global capacity of fertilizer products, intermediates and raw
materials will increase further. The global total nutrient capacity (N+P2 O5 +K2
O) was 284 million tonnes in 2014, out of which the total supply was 240 million
tonnes.
China has urea capacity dropping by 2.7 mmt from 2018 capacity, to 65 mmt in
2021, due to facilities closing in the country because of increasing environmental
regulations. This correction will result in 16 mmt less in production in 2021 than
what it was in 2014.
India, meanwhile, is set to see urea capacity surging over the next five years. Five
new urea plants in the nation will increase India urea production by 6.4 mmt, to
31.2 mmt in 2021.

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World supply of ammonia, phosphoric acid and potash, 2016-2022 (thousand tonnes)

Year 2016 2017 2018 2019 2020 2021 2022

Ammonia,
153,646 155,253 157,819 161,504 160,492 161,572 163,219
as N
Phosphoric
46,308 47 564 48 620 49 510 50 520 51 520 52 066
acid
Potash 44,177 46 284 49 422 51 373 52 752 53 664 54 197
Total 244,131 249 101 255 861 262 387 263 764 266 756 269 482

World demand for nitrogen, phosphorus and potassium for fertilizer use, 2016-2022
(thousand tonnes)

Year 2016 2017 2018 2019 2020 2021 2022

Ammonia,
105,148 105,050 105,893 107,424 108,744 110,193 111,591
as N
Phosphoric
44,481 45,152 45,902 46,587 47,402 48,264 49,096
acid
Potash 35 434 36,349 37,171 37,971 38,711 39,473 40,232
Total 185 063 186,551 188,966 191,981 194,857 197,930 200,919

Nitrogen Outlook:
Global ammonia production in 2017 dropped by 1.2% to 174 Mt NH3, mostly
driven by a 7% drop in China. Global seaborne ammonia sales remained static at
15.6 Mt. Close to 30 new large ammonia units are expected to come on stream in
2017 and 2018, bringing global ammonia capacity to 188 Mt N in 2018 compared
with 179 Mt N in 2016. The global nitrogen balance will show a large increase in
the potential surplus in 2017, followed by a moderate expansion of the potential
surplus in 2018.
Urea Outlook:
World urea production in 2017 dropped for the second consecutive year, reaching
170 Mt (-2%) close to 90% of the decrease was in China. Global domestic

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deliveries in 2017 decreased 2% to 121 Mt, mostly reflecting lower sales within
China. Global urea exports dropped by 3% to 48 Mt. Large capacity additions are
seen in the USA, Latin America and EECA. Global urea supply was estimated at
191 Mt in 2017 and 194 Mt in 2018. The combination of rather static demand and
large increases in urea supply will result in an acceleration of potential surpluses,
from 11 Mt urea in 2016 to 18 Mt in 2017 and 20 Mt in 2018. This imbalance is
essentially caused by the on-going commissioning of new capacity, combined
with near-stagnant demand in maturing markets.
Phosphate Outlook:
Global production of phosphate rock in 2017 reached a record level of 212 Mt,
rising 6% over 2016, while global production of processed phosphates (MAP,
DAP and TSP) rose by 3% to 33.7 Mt P2O5 (70 Mt products), supported by higher
MAP and DAP output. Global phosphoric acid capacity is projected to expand in
2017-2018 by an overall 6% compared with 2016 (+3.5 Mt) to reach 61 Mt P2O5
in 2018.
Potash Outlook:
World potash demand and production firmly recovered in 2017 after a depressed
sales during 2016. Global production of MOP (Murate of Potash) rose by 5% to
66.5 Mt MOP, driven by firm exports, which grew by 10% to 52 Mt thanks to
higher imports into India and South-East Asia. Global potash capacity in 2017 is
seen expanding by 10% to 60 Mt K2O followed by a further 4% expansion in
2018.
Global Demand of fertilizers from
2016-2022
120,000
100,000
80,000
60,000
40,000
20,000
0
2016 2017 2018 2019 2020 2021 2022

Ammonia, as N Phosphoric acid Potash

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Indian Scenario:
Despite a strong growth in recent years, the average intensity of fertilizer
use in India remains much lower than most of the developed and emerging
countries around the world. The usage of fertilizers is also highly skewed,
with wide inter-regional, inter-state and inter-district variations.

Indian Fertilizer Market: Drivers

 Catalyzed by a strong growth in the country’s population over the next

five years, food demand is also expected to exhibit a strong growth.
Conversely, as a result of increasing urbanization levels, available
arable land is expected to decrease. Fertilizers to play a key role in
increasing the average crop yields per hectare
 Despite strong historical growth, fertilizer consumption in India
remains highly skewed. There are currently a number of states in India
which still have a very low penetration of fertilizers. This leaves a lot
of room for future growth
 A number of government and non-government awareness campaigns to
educate farmers on the benefits of fertilizers. Promotion of fertilizers
through television, radio and customized rural workshops are also
anticipated to increase the consumption of fertilizers in the coming
years
 Increasing rural incomes, coupled by easy availability of credit, are
also likely to create a positive impact on fertilizer usage in the country.
 Contract farming, where inputs in terms of technology and training are
expected to be provided to the farmer from the food processor
(contractor), is also expected to create a positive impact on fertilizer
usage

The Indian fertilizer market was worth INR 6,258 Billion in 2019. The
first manufacturing unit for Fertilizer was for Single Super Phosphate
(SSP) in Ranipet, Chennai with a manufacturing capacity of 6000MT per
year. The Green Revolution in India boosted the growth of fertilize r
industry in India. Fertilizer sector in India comprises of public sector,

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 private sector and the cooperatives. Sector wise capacity of Fertilizer
manufacturing units during 2016-17

Urea DAP &Complex

Fertilizers
1 Public Sector 63.09 21.64
2 Co-operative 54.19 43.35
3 Private Sector 90.36 81.01
Total 207.54 146.00

(Source: Department of Fertilizer)

Types of fertilizers produced in India:

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The following are 9 PSUs that are working in the field of fertilizer
production in India: -

• The Fertilizers and Chemicals Travancore Ltd. (FACT)

• Fertilizes Corporation of India Ltd (FCIL)
• National Fertilizers Ltd (NFL)
• Rashtriya Chemicals and Fertilizers Ltd. (RCF)
• Madras Fertilizers Ltd (MFL)
• Projects and Development India Ltd (PDIL)
• Hindustan Fertilizes Corporation Ltd (HFCL)
• Brahmaputra Valley Fertilizer Corporation Ltd (BVFCL)
• FCI Aravali Gypsum and Minerals India Ltd (FAGMIL)

All India Projections of Fertilizer Nutrients (‘000 tonnes)

Year N P K Total

2017-18 20165 9868 4290 34323

2018-19 20632 10096 4390 35118

2019-20 21092 10322 4488 35902

2020-21 21545 10543 4584 36672

2021-22 21989 10761 4679 37428

2022-23 22225 11113 4832 38170

2023-24 22648 11324 4923 38895

2014-25 23060 11530 5013 39603

(Source: Department of Fertilizer)

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Market Summary:

 Based on the product type, the market has been segmented as chemical
fertilizers and bio-fertilizers. Currently, chemical fertilizers dominate
the market, holding the largest share
 Based on the segment, the market has been segmented as complex
fertilizers, DAP, MOP, urea and SSP. Currently urea represents the
largest type accounting for the majority of the market share.
 On the basis of formulation, the market has been segmented as liquid
and dry. Dry fertilizers represent the leading segment holding the
majority of the market share
 Based on the application, the market has been segmented as farming
and gardening. The farming applications currently dominate the market
 On the basis of region, the market has been segmented as North India,
South India, East India and West India. North India holds the leading
position in the Indian fertilizer market

The Demand and production (in LMT) of fertilizers in India:

Year Requirement Production

(Demand)
2016-17 614.33 414.41
2017-18 598.95 413.61
2018-19 603.00 414.85
2019-20 640.48 (up to October) 245.01

Direct Benefit Transfer for Fertilizer subsidy:

The Government has introduced Direct Benefit Transfer (DBT) system for
fertilizer subsidy payments from October 2016. Under the fertilizer DBT system,
100% subsidy on various fertilizer grades shall be released to the fertilizer
companies, on the basis of actual sales made by the retailers to the beneficiaries.
Sale of all subsidized fertilizers to farmers/buyers will be made through Point of
Sale (PoS) devices installed at each retailer shop and the beneficiaries will be
identified through Aadhaar card, KCC, voter Identity card etc.

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 DBT implementation and current status:
 The Department of fertilizers has implemented Direct Benefit Transfer System
on a pilot basis w.e.f. 1.10.2016 in 17 districts
 A Project Monitoring Cell is in place in the Department to oversee
implementation of DBT exclusively. 24 State Coordinators have been appointed
across all States to monitor the on-going DBT activities
 Implementation of the DBT Scheme requires deployment of PoS devices at
every retailer shop, training of retailers & wholesalers for operating PoS device.
Across the country, 6761 training sessions were conducted till date, as a part of
ongoing PoS deployment and as a precursor to nation-wide rollout of
DBT. Approximately 2.39 lakh retailers were sensitized during the introductory
training sessions conducted by LFS
 A dedicated 15-member Multi-lingual Help Desk has been set up to provide
quick response to the queries of wide range of stakeholders across the country
as a preparatory to DBT implementation. The helpdesk will operate from 9.30
am to 6.00 pm on all working days including Saturdays
The Schedule for Phase- wise roll out of DBT:
S. No. Names of States/UT’s Live Date
st
1 NCT of Delhi 1 September, 2017
Mizoram, Daman & Diu, Dadra Nagar Haveli, 1st October, 2017
2
Manipur, Nagaland, Goa, Puducherry,
Rajasthan, Uttarakhand, Maharashtra, 1st November, 2017
3
Andaman & Nicobar Islands, Assam, Tripura.
Andhra Pradesh, Haryana, Punjab, Chhattisgarh 1st December,2017
4
and MP
Kerala, Bihar, Karnataka, Jharkhand, 1st January, 2018
5
Telangana, and TN
Uttar Pradesh, Gujarat, West Bengal, Odisha 1st February, 2018
6
and Himachal Pradesh
7 Jammu & Kashmir 1st March, 2018

(Source: Department of fertilizers, Government of India)

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 Salient features of DBT in Fertilizer:
 The DBT model in fertilizers is different from the conventional system of DBT
being implemented in LPG
 Under DBT system in fertilizer subsidies, the farmers/beneficiaries will continue
to receive Urea at statutory subsidized prices and P&K fertilizers at subsidized
prices in the market
 The fertilizer companies which used to receive subsidy on receipt of fertilizers
at the district, will now get subsidy after the fertilizers are sold to
farmers/beneficiaries by the retailers through Point of Sale (PoS) machines
through biometric authentication

Existing System of Subsidy Payment:

 The existing system of subsidy payment is based on the movement of fertilizers

up to district and retailer level in conformity with the supply plan.
 The initial 85% -90% payment (95% in Urea) is released as “On Account”
Payment on receipt of fertilizers in the district.
 The balance 10%-15% (5% in Urea) is released on the confirmation of receipt
by retailers in mobile Fertilizer Monitoring System mFMS. Independently, the
State Governments certify the receipt of fertilizers and upload in the Fertilizer
Monitoring System (FMS) within 30 days and 180 days respectively.

System of Subsidy Payment under DBT Framework:

The proposed DBT system entails 100% payment of subsidy to the fertilizer
manufacturing companies on the basis of actual sales by the retailer to the
beneficiary. The farmer or buyer’s identity is authenticated either through
biometric, Aadhar based, Unique Identification Number or Voter ID Card or
Kisan Credit Card. This would enable recommendation of appropriate mix of
fertilizers compatible to the soil health profile of the agricultural land held by the
beneficiary.

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 However, the recommendation is not binding on the beneficiary and the sale of
fertilizers would initially be on a “no denial mode”. The sales to the beneficiary
are captured through the Point of Sale (PoS) machines installed at the retailer’s
end. All the Fertilizer sale transactions are captured online in the Integrated
Fertilizer Management System (IFMS) system on real time basis. The claims will
be processed on a weekly basis and the amount of subsidy will be remitted to the
company’s bank account through electronic mode.
Benefits of DBT:
 The proposed DBT framework is a beneficiary driven subsidy payment
mechanism being initiated at national level
 It creates Aadhaar seeded data base of beneficiaries and provides transaction
visibility at the level of buyers
 By linking the actual sales to subsidy payments, it facilitates a more transparent
and faster tracking of funds along the value chain i.e. from manufacturers to
beneficiaries
 Diversion of fertilizers is expected to be minimized

Freight Subsidy:

The Uniform Freight Policy was released in April 2008. Under the Policy, freight
subsidy is provided to fertilizer manufacturers to ensure timely and easy
availability of fertilizers to all parts of the country. Reimbursement is based on
rates notified by the Department of Fertilizers. Payment of claims should be
completed within 60 days of the receipt of claims. In Union budget 2017-18, Rs
3,000 crores were allocated for freight subsidy. Of this, Rs 2,980 crores was used
to make payments for the period between 2015 and January, 2017. For the
purpose of subsidy claims from February, 2017 onwards, an additional
requirement of Rs 3,700 crores was proposed in the revised estimates of 2017-
18.

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Under the Uniform Freight Subsidy Policy, freight rates are notified in four slabs

Distance Slab (km) Per ton per kilometer rate(Rs)

0-100 4.25
101-250 2.71
251-350 2.08
351-500 1.82

Fertilizer Import:
In fiscal year 2019, India imported fertilizers worth almost 521 billion Indian
rupees. This largely constituted manufactured fertilizers rather than crude ones.
Fertilizers made up about 1.3 percent of all imports into the country that year .
Value of India's fertilizer imports from FY 2015 to FY 2019 (in billion rupees) is
shown in the graph below:

600
525 520.95
500 452.95

400 346.5
337.3
300

200

100

0
FY 2015 FY 2016 FY 2017 FY 2018 FY 2019

(Source: Department of fertilizers, Government of India)

Urea is the only fertilizer under statutory price control and its import for direct
agriculture use is permitted through state trading enterprises (STEs) namely
MMTC, STC under the foreign trade policy of the government.

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The country imported 42.03 lakh ton of urea for USD 1,048.59 million till
November 2018. Urea imports were 54.81 lakh ton worth USD 1,047.28 million
in 2016-17 and 84.73 lakh ton worth USD 2,087.61 million in 2015-16. In the
case of phosphatic and potassic (P&K) fertilizers, the country imported 52.2 lakh
tonne of diammonium phosphate (DAP), 4.04 lakh tonnes of nitrogen-
phosphorus-potassium (NPK) and 27.53 lakh tonne of Murate of potash (MOP)
till November 2018. In entire 2017-18 financial year, India imported 42.17 lakh
tonne of DAP, 4.99 lakh tonnes of NPK and 47.36 lakh tonne of MOP.
Integrated Nutrient Management:
Integrated Nutrient Management refers to the maintenance of soil fertility and of
plant nutrient supply at an optimum level for sustaining the desired productivity
through optimization of the benefits from all possible sources of organic,
inorganic and biological components in an integrated manner.

INM

Cropping System Nutrient Requirement

Soil Fertility

Organic manures N, P, K& S Soil pH

Bio-fertilizers Micronutrients Low-Lime//High-

Gypsum
Crop residues

Agricultural constraints Environmental

Integration Constraints

Available fertilizers Legislation

Nutrient management plan

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The aim of Integrated Nutrient Management (INM) is to integrate the use of
natural and man-made soil nutrients to increase crop productivity and preserve
soil productivity for future generations. Rather than focusing nutrition
management practices on one crop, INM aims at optimal use of nutrient sources
on a cropping-system or crop-rotation basis. This encourages farmers to focus on
long-term planning and make greater consideration for environmental impacts.
INM relies on a number of factors, including appropriate nutrient application and
conservation and the transfer of knowledge about INM practices to farmers and
researchers. Boosting plant nutrients can be achieved by a range of practices
covered in this guide such as terracing, alley cropping, conservation tillage,
intercropping, and crop rotation. Given that these technologies are covered
elsewhere in this guidebook, this section will focus on INM as it relates to
appropriate fertilizer use. In addition to the standard selection and application of
fertilizers, INM practices include new techniques such as deep placement of
fertilizers and the use of inhibitors or urea coatings that have been developed to
improve nutrient uptake.

Fertilizer Control Order (FCO)-1985:

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 agencies, setting up
of quality control laboratories and prohibition on manufacture/import and sale of
non-standard/spurious/adulterated fertilizers. Accordingly there are 74 Fertilizer
Quality Control Laboratories in the Country which includes 4 set up by Central
Government as CFQC&TI, Faridabad and its three Regional Laboratories. The
order also provides for cancellation of authorization letter/registration certificates
of dealers and mixture manufacturers and also imprisonment from 3 months to 7
years with fine to offenders under ECA.

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The enforcement of this Order has primarily been entrusted to State
Governments. The Central Government provides training facilities and technical
guidance to States and supplements their efforts through random inspection of
manufacturing units and their distribution network through the Inspectors .

Impact of Covid-19 on Fertilizer sector:

Countries have entirely shut down various business and trade operations to
control the spread of COVID-19. These shutdowns have a direct impact on the
fertilizer industry. Currently, fertilizer manufacturers are relying on emergency
stocks of raw materials, which will soon be over if the current scenario continues
to persist. The shipping industry has already been reporting slowdowns due to the
lockdown and port closures, along with further logistical hurdles, which are
projected to disrupt the supply chains in the coming months.
The impact across various countries are uneven and therefore not all are negative.
The main effects remains the logistics related issues. The impact on fertilizer
supply is limited. While experts believe that the Indian fertilizer industry, with
the markets currently remaining well supplied and the fourth quarter of the
financial year being an off-season period for the industry, the impact of the
lockdown is expected to be muted. Also, the global urea markets have remained
well supplied in recent years with new capacities coming online in Africa, the
Middle-East and Africa. With the downward trend in Chinese exports continuing
for the last couple of years, the impact of the Chinese urea industry on the global
market has reduced. The raw materials for phosphatic fertilizers are imported
from China and is not expected to witness any major impact on the global front
as production in China remains low during January every year following Chinese
New Year holidays.

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 Academic Committee
2019-2021
National Institute of Agricultural Extension
Management (MANAGE)
Rajendranagar, Hyderabad,
500030

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