How the fertilisers industry has become synonymous with controls, and at what cost

There is perhaps no industry in India as controlled as fertilisers. The maximum retail price (MRP) of urea is fixed at Rs 266.5 per 45-kg bag, a rate practically unchanged since November 2012. Di-ammonium phosphate (DAP) is technically decontrolled. Companies, on paper, can sell this fertiliser to farmers at market-determined prices, with the Centre merely paying a flat subsidy of Rs 1,490 per 50-kg bag. But the subsidy given to the companies is conditional upon their charging an MRP of only Rs 1,350 per bag, also frozen since the Covid-19 pandemic. Even on the other “decontrolled” fertilisers — muriate of potash (MOP) and complexes containing nitrogen (N), phosphorus (P), potassium (K) and sulphur (S) in different proportions — the companies have to ensure that the MRPs are “maintained in accordance with the subsidy rates as notified”. The MRPs are to further be reported regularly to the Centre, i.e. department of fertilisers (DOF), with any “unreasonable” profit recoverable from the subsidy amounts paid. And it’s not just price controls The movement, distribution and allocation of all subsidised fertilisers — urea, DAP, MOP and NPKS complexes — from the various plants and ports in the country is also controlled by the Centre. The DOF prepares an “agreed supply plan” for each fertiliser, based on the requirement as assessed by the Union agriculture ministry in consultation with the respective state governments. The state-wise, season-wise and month-wise plan is, then, shared with the fertilise manufacturers and importers for them to make timely dispatches. After the fertiliser is sent to a state as per the agreed plan for the particular month, the district-wise allocation, too, is decided by the government. In this case, it is usually a state-level joint director of agriculture who draws railway rake and road movement plans for individual companies — which district, when and how much material they would supply. Once a rake carrying around 2,600 tonnes reaches a designated rail head, the district agriculture officer concerned makes dealer-wise allocations. The companies are responsible for transport of the fertilisers up to the dealer or retail point on FOR (freight on road) delivery basis. In short, fertiliser firms may be private, state-owned or cooperative entities. But the business they do — where, when and how much to sell and at what price — is entirely government-controlled. The next level of control The Uttar Pradesh (UP) government has recently come out with a directive that takes control to a new level. The state agriculture directorate at Lucknow, on January 13, issued an order to all manufacturers and suppliers of urea in UP, banning them from selling any “gair-anudaanit (non-subsidised)” fertilisers. The “poornataya pratibandh (complete prohibition)” order, effective from January 1, has been issued to about 15 fertiliser concerns. These include the Indian Farmers Fertiliser Cooperative, Krishak Bharati Cooperative, Hindustan Urvarak & Rasayan Ltd, Indorama India Pvt. Ltd, Yara Fertilisers India Pvt. Ltd, Coromandel International Ltd, Chambal Fertilisers & Chemicals Ltd, Indian Potash Ltd, Matix Fertilisers & Chemicals, National Fertilizers, Rashtriya Chemicals & Fertilizers, Gujarat State Fertilizers & Chemicals, Gujarat Narmada Valley Fertilizers & Chemicals, Shriram Fertilisers & Chemicals, and Narmada Bio-Chem Ltd. ## What are non-subsidised fertilisers? Fertiliser firms sell both subsidised and non-subsidised nutrients. Yara Fertilisers markets fully water-soluble calcium nitrate, sulphate of potash, mono-ammonium phosphate, mono-potassium phosphate, micronutrients and bio-stimulants. These are products designed for high-efficiency, targeted delivery of nutrients to the plant root zone through drip irrigation systems (fertigation) or foliar application (spraying in liquid form directly onto leaves for rapid absorption). Chambal Fertilisers, likewise, sells bentonite sulphur, chelated zinc (containing 12% Zn), zinc sulphate monohydrate (33% Zn) and water-soluble NPK complexes (19:19:19, 0:52:34 and 0:0:50). Coromandel International, too, has a host of micro and secondary nutrient products from zinc oxide, chelated manganese and magnesium sulphate to boron powder and liquid. All of these are premium fertilisers applied in low doses for high-value crops. Take calcium nitrate, which has 15.5% N (in both fast-acting nitrate and slow-release ammoniacal forms) and 19% calcium. Farmers typically use a single 25-kg bag per acre of it in sugarcane, vegetables, mangoes, bananas, apples, grapes, pomegranates and other fruits. This is as against three or more 45-kg bags urea per acre for paddy, wheat and other normal field crops. Being non-subsidised, the MRPs of the above specialty fertilisers range from Rs 60/kg for calcium nitrate to Rs 70/kg for bentonite sulphur and Rs 90/kg for zinc sulphate monohydrate. Compare these with Rs 5.9/kg for urea, Rs 27/kg for DAP, Rs 29/kg for 20:20:0:13, Rs 36/kg for MOP and Rs 39-40/kg for other subsidised NPKS fertilisers. The estimated all-India market for speciality nutrients is roughly 0.4 million tonnes (mt) per year. That is a fraction of the 67 mt for subsidised commodity fertilisers, with urea alone at 40 mt. Ban logic and implications UP’s ban on sale of non-subsidised fertilisers by urea manufacturers and suppliers comes despite these being notified products under the Centre’s Fertiliser Control Order, 1985. “How can they tell me not to sell an officially approved product? It also flies in the face of Prime Minister Narendra Modi’s call for judicious application of fertilisers to protect soil health and promote innovative nutrient use-efficient products. Why will any company introduce such products hereon?,” an industry source pointed out. The UP government’s move follows allegations of companies resorting to “tagging” —forcing farmers to buy non-subsidised fertilisers along with subsidised fertilisers. “We sell both through the same dealer channels, with urea and DAP bringing in volumes and the speciality nutrients generating margins. How can such cross-selling be called tagging? The ban will only open the doors for unorganised fly-by-night players pushing low-quality products with no proper farmer training and education,” the source said. Moreover, the market for non-subsidised fertilisers in UP is reckoned at hardly over Rs 1,300 crore, a tenth of the MRP value of Rs 13,000 crore for subsidised fertilisers. “Given its relative size, how much tagging is possible? Farmers, in any case, will apply these fertilisers only in select crops where they see the higher MRPs delivering superior value,” he added. There have been reports of urea retailing at Rs 400/bag levels. The industry, however, attributes that to falling domestic production amid the relentless increase in consumption of this highly underpriced nitrogenous fertiliser (see table). Laying the blame on non-subsidised speciality fertilisers is not just barking up the wrong tree, but also bad from a nutrient use efficiency and investor sentiment standpoint. Harish Damodaran is National Rural Affairs & Agriculture Editor of The Indian Express. A journalist with over 33 years of experience in agri-business and macroeconomic policy reporting and analysis, he has previously worked with the Press Trust of India (1991-94) and The Hindu Business Line (1994-2014). ... Read More