Context:
As the conflict persists in Ukraine and Gaza, there is growing concern over potential price increases for key components used in petroleum-based chemical fertilizers. In light of these challenges, Nicholas Sitko, a Senior Economist at the Food and Agriculture Organization, emphasized the necessity for India to enhance its fertilizer production capabilities. This urgency is underscored by a statement from the Agriculture Minister of Uttar Pradesh, India’s largest foodgrain-producing state, noting that the state has only ten days’ worth of fertilizer stocks left. This comes at a critical time as the sowing of winter rabi crops, which rely heavily on fertilizers like Diammonium phosphate (DAP) and NPK (Nitrogen, Phosphorus, and Potassium), is underway across India’s wheat-growing states.
Relevance:
GS III: Agriculture
Dimensions of the Article:
- What is the current import fertilizer import scenario?
- How has India’s fertilizer production changed?
- Current Geopolitical Impact
- Strategic Responses for India
What is the current import fertilizer import scenario?
- Though the latest data on import is yet to be made available by the Ministry, the Standing Committee of Parliament on Chemicals and Fertilizers, in August 2023, tabled a report on ‘Planning for Fertilizers Production and Import Policy on Fertilizers Including GST and Import Duty Thereon’ in both the Houses.
- It expressed concern that the “production capacity of fertilizers does not commensurate with its demand/requirement and, therefore, the gap between demand and supply is met through imports.”
- According to the report, about 20% of the domestic requirement of urea, 50-60% of the domestic requirement of DAP, and 100% of the domestic requirement of Muriate of Potassium (MOP, or Potash) is met through imports.
How has India’s fertilizer production changed?
- In 2021-22, India’s yearly consumption of all major chemical fertilizers was approximately 579.67 lakh metric tonnes (LMT), comprising 341.73 LMT of urea, 92.64 LMT of DAP, 23.93 LMT of MOP, and 121.37 LMT of NPK.
- In 2020-21, the total consumption of fertilizers was about 629.83 LMT. The country produced 435.95 LMT of chemical fertilizers in 2021-22, resulting in a shortfall of 143.72 LMT relative to demand.
- While MOP is not produced here, in 2021-22, India produced 250.72 LMT of urea, 42.22 LMT of DAP, 89.67 LMT of NPK, and 53.34 LMT of Single Super Phosphate (SSP). Total production in 2014-15 was 385.39 LMT, indicating an increase of only about 50 LMT over seven years.
- In the case of Urea, the most consumed fertilizer, in 2019-20, the production was 244.58 LMT and the use was 336.96 LMT. In 2020-21, the country produced 246.05 LMT of urea and consumed 350.51 LMT. In 2021-22, the figure was 250.72 LMT and 341.72 LMT, respectively.
- The Centre allocated ₹ 1.79 lakh crore as fertilizer subsidy under the Budget estimates for 2023-24.
- Out of this, for indigenous P&K Fertilizers, the subsidy amount was ₹25,500 crore and ₹18,500 crore for imported P&K Fertilizers.
- For indigenous Urea, the subsidy was ₹1,04,063.20 crore while the subsidy for imported urea was ₹ 31,000 crore.
Current Geopolitical Impact
- Ukraine and Gaza Crises: The conflict in Ukraine and instability in Gaza have disrupted global markets, particularly affecting the price of oil, a key input for fertilizer production.
- Impact on India: As noted in the Lok Sabha, India heavily relies on fertilizer imports from countries like China, Russia, Saudi Arabia, UAE, Oman, Iran, and Egypt. The ongoing conflicts in Ukraine and tensions in West Asia pose risks to these imports, potentially leading to shortages and higher prices.
Strategic Responses for India
- Enhancing Domestic Production: Increasing the production capacity of domestic fertilizer plants can reduce India’s dependence on imports. Recent initiatives have added significant urea production capacity.
- Alternative Farming Practices: Experts suggest shifting towards natural farming methods and using innovative products like nano urea to decrease dependency on traditional, import-heavy fertilizers.
- Investment in Fertilizer Sector: The Standing Committee of Parliament advocates for policies that stimulate investments across public, cooperative, and private sectors in fertilizer production.
Investment and Policy Shifts
- New Investment Policy: Introduced in 2012, this policy has facilitated the establishment of new urea plants and the revival of old units, thereby bolstering domestic production capabilities.
- Future Outlook: The government’s continued focus on enhancing local manufacturing infrastructure and adopting sustainable agricultural practices is crucial for securing India’s fertilizer needs amid global uncertainties.
-Source: The Hindu
