elets PSU Summit 2014 - Neeru Abrol

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elets PSU Summit 2014 - Neeru Abrol

elets PSU Summit 2014 - Neeru Abrol

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  • 1. Focused Growth & Planning forFocused Growth & Planning for Indian Fertilizer IndustryIndian Fertilizer Industry ByBy Neeru AbrolNeeru Abrol Chairman & Managing DirectorChairman & Managing Director National Fertilizers LimitedNational Fertilizers Limited
  • 2. AIMAIM To make India self-sufficient for itsTo make India self-sufficient for its Fertilizer requirement.Fertilizer requirement. This would ensure sustainableThis would ensure sustainable Agricultural productivityAgricultural productivity
  • 3. Indian Agricultural Scenario (2013-14)Indian Agricultural Scenario (2013-14)  India’s PopulationIndia’s Population -- 1.25 billion1.25 billion  Population growth ratePopulation growth rate -- 2% per annum2% per annum  FoodgrainFoodgrain productionproduction -- 264.38264.38 millionmillion tonnestonnes AdditionalAdditional foodgrainfoodgrain requiredrequired by 2020by 2020 -- 35-4035-40 millionmillion tonnestonnes  Share in GDP of AgriShare in GDP of Agri SectorSector -- 13.9% (23.2% in 1999)13.9% (23.2% in 1999)  Agricultural growthAgricultural growth -- 4.7% (average of 3%4.7% (average of 3% between 1999-2013)between 1999-2013)
  • 4. Indian Agricultural ScenarioIndian Agricultural Scenario  Total Geographical AreaTotal Geographical Area –– 328 million ha328 million ha  Gross Sown AreaGross Sown Area –– 195 “195 “  Net Sown AreaNet Sown Area –– 141 “141 “  Gross Irrigated AreaGross Irrigated Area –– 88 “88 “  Net Irrigated AreaNet Irrigated Area –– 63 “63 “  Major Crop Production million tonnes(2013-14)Major Crop Production million tonnes(2013-14) IndiaIndia WorldWorld WheatWheat 95.8595.85 715.10715.10 RiceRice 106.29106.29 496.90496.90 PulsesPulses 19.5719.57 293.50293.50 Coarse CerealCoarse Cereal 42.6842.68 1306.701306.70 TotalTotal 264.38264.38 2812.202812.20
  • 5. Indian Fertilizer ScenarioIndian Fertilizer Scenario  India is the second largest consumer and third largestIndia is the second largest consumer and third largest producer of fertilizer in the worldproducer of fertilizer in the world  India consumed 51.23 million tonnes (30.45 urea, 60%,India consumed 51.23 million tonnes (30.45 urea, 60%, 7.13 NPK, 6.85 DAP, 2.19 MOP & 4.00 SSP) and7.13 NPK, 6.85 DAP, 2.19 MOP & 4.00 SSP) and produced 38 million tonnes of fertilizer products inproduced 38 million tonnes of fertilizer products in 2013-142013-14  India imports : Urea(27%) DAP(60%) MOP(100%)India imports : Urea(27%) DAP(60%) MOP(100%)  India has large manufacturing base with 33 ureaIndia has large manufacturing base with 33 urea plants, 19 NP/NPK plants and more than 80 SSPplants, 19 NP/NPK plants and more than 80 SSP plants.plants.  Fertilizer is a controlled commodity in India –Fertilizer is a controlled commodity in India – movement and price is controlled by GOI.movement and price is controlled by GOI.
  • 6. Indian Fertilizer ScenarioIndian Fertilizer Scenario  The market share of CPSEs in the area of fertilizerThe market share of CPSEs in the area of fertilizer sector is more than 20%.sector is more than 20%.  There are seven CPSEs in Fertilizer Group(FACT,There are seven CPSEs in Fertilizer Group(FACT, FCI,MFL, NFL, HFCI, RCF & BVFCL) with a totalFCI,MFL, NFL, HFCI, RCF & BVFCL) with a total turnover of over Rs 19000 crores but with marginalturnover of over Rs 19000 crores but with marginal profitability.profitability.  Capacity and efficiency of Indian urea and NP/NPKCapacity and efficiency of Indian urea and NP/NPK plants is of world scaleplants is of world scale  India does not have process technology but hasIndia does not have process technology but has indigenous fabrication and Engineering capabilitiesindigenous fabrication and Engineering capabilities  India has some strength in production and R&D ofIndia has some strength in production and R&D of catalystscatalysts
  • 7. IndianIndian Fertilizer ScenarioFertilizer Scenario  Urea is highly subsidized – farmers pay Rs.5360 PMT whereasUrea is highly subsidized – farmers pay Rs.5360 PMT whereas Govt. pays Rs.11760 PMT as subsidy on an average.Govt. pays Rs.11760 PMT as subsidy on an average.  Subsidy on other fertilizers has been capped since 2010. OnSubsidy on other fertilizers has been capped since 2010. On introduction of Nutrient Based Subsidy Scheme for fertilizer otherintroduction of Nutrient Based Subsidy Scheme for fertilizer other than Urea.than Urea.  This is resulting in imbalance use of fertilizers. Against an idealThis is resulting in imbalance use of fertilizers. Against an ideal ratio of NPK(Nitrogern, Phosphorus, Potash of 4:2:1 presently itratio of NPK(Nitrogern, Phosphorus, Potash of 4:2:1 presently it is (8.2:3.2:1). Excessive use of Nitrogen does not lead to anyis (8.2:3.2:1). Excessive use of Nitrogen does not lead to any benefit but has zero or negative impact. As per Economicbenefit but has zero or negative impact. As per Economic Survey this results in over use of 5 mt urea leading to excessSurvey this results in over use of 5 mt urea leading to excess spent by farmers of Rs.2680 crores and by Govt of Rs.5860spent by farmers of Rs.2680 crores and by Govt of Rs.5860 crores.crores.
  • 8. Fertilizer production facilities in IndiaFertilizer production facilities in India Type of FertilizerType of Fertilizer ZoneZone No. of PlantsNo. of Plants Total in IndiaTotal in India Straight NitrogenousStraight Nitrogenous Fertilizers (Urea, AS, CANFertilizers (Urea, AS, CAN & ACl)& ACl) EastEast 77 3737WestWest 1313 NorthNorth 99 SouthSouth 88 DAP & Other ComplexDAP & Other Complex Fertilizers #Fertilizers # EastEast 33 1919WestWest 88 NorthNorth 00 SouthSouth 88 Single Super PhosphateSingle Super Phosphate (SSP)(SSP) EastEast 77 8282WestWest 5454 NorthNorth 88 SouthSouth 1313 # All the plants located in coastal areas
  • 9. Energy Efficiency of Ammonia PlantsEnergy Efficiency of Ammonia Plants 7.6 7.8 8 8.2 8.4 8.6 8.8 9 9.2 9.4 9.6 India Europe USA Saudi Arabia World Ukraine Russia 8.29 8.41 8.51 8.63 8.75 9.3 9.56
  • 10. Focused Growth & Planning for Indian Fertilizer IndustryFocused Growth & Planning for Indian Fertilizer Industry  Urea consumption 30 M.T. against domestic capacity of 22 M.T. NoUrea consumption 30 M.T. against domestic capacity of 22 M.T. No investment in Urea sector in last 13 years. Urea consumption toinvestment in Urea sector in last 13 years. Urea consumption to increase to 36 M.T. by 2016.increase to 36 M.T. by 2016.  MRP is only 30% of average concession price of Urea. BudgetaryMRP is only 30% of average concession price of Urea. Budgetary constraints resulting in delay of subsidy leading to additionalconstraints resulting in delay of subsidy leading to additional requirement of working capital which is affecting bottom line due torequirement of working capital which is affecting bottom line due to higher interest burden.higher interest burden.  For achieving self-sufficiency in UreaFor achieving self-sufficiency in Urea  Investment friendly policy requiredInvestment friendly policy required  Assuring priority gas supplies to Urea plantsAssuring priority gas supplies to Urea plants  Incorporating Urea under NBS (Nutrient Based Subsidy) scheme withIncorporating Urea under NBS (Nutrient Based Subsidy) scheme with pooling of gas as 80-85% of cost of attributed to main input i.e. natural gas.pooling of gas as 80-85% of cost of attributed to main input i.e. natural gas. This willThis will  make Industry more competitivemake Industry more competitive  Less dependence on subsidy would improve working capitalLess dependence on subsidy would improve working capital requirementrequirement 
  • 11. Focused Growth & Planning for Indian Fertilizer IndustryFocused Growth & Planning for Indian Fertilizer Industry  Wide variation in levy of local taxes across states viz VAT onWide variation in levy of local taxes across states viz VAT on natural gas ranges from 3% - 5%. Results in variation in subsidynatural gas ranges from 3% - 5%. Results in variation in subsidy component to different urea manufacturers: Need to levy uniformcomponent to different urea manufacturers: Need to levy uniform taxes across states.taxes across states.  Exploring JV for Urea manufacturing abroadExploring JV for Urea manufacturing abroad  assured Urea supplies at reasonable ratesassured Urea supplies at reasonable rates  A step towards self-sufficiencyA step towards self-sufficiency  Promoting SSP as alternate source to DAPPromoting SSP as alternate source to DAP  Sulphur content in SSP advantage for sulphur deficient soilsSulphur content in SSP advantage for sulphur deficient soils  would revive SSP industry, which presently has only 50%would revive SSP industry, which presently has only 50% capacity utilizationcapacity utilization
  • 12. Focused Growth & Planning for Indian Fertilizer IndustryFocused Growth & Planning for Indian Fertilizer Industry  Exploring JV for MOP manufacturing abroadExploring JV for MOP manufacturing abroad and/orand/or long-term tie up with importers, as there are no knownlong-term tie up with importers, as there are no known commercial sources of Potashcommercial sources of Potash  Extensive practices for soil health improvement forExtensive practices for soil health improvement for economical incremental growth in Agriculturaleconomical incremental growth in Agricultural production with incremental increase in fertilizerproduction with incremental increase in fertilizer consumption.consumption.  Budget 14-15 – Focus on Soil health card for everyBudget 14-15 – Focus on Soil health card for every farmer, setting up of additional mobile soil testing labsfarmer, setting up of additional mobile soil testing labs  Technology driven second green revolution requiredTechnology driven second green revolution required with focuson higher productivity – sustaining 4% growthwith focuson higher productivity – sustaining 4% growth in agri – Protein Revolutionin agri – Protein Revolution
  • 13. e-Governance in Fertilizer Industrye-Governance in Fertilizer Industry  Fertilizers are distributed in 6,82,000 villages through a vastFertilizers are distributed in 6,82,000 villages through a vast network of 2,75,000 sale points to 12 crore farming household.network of 2,75,000 sale points to 12 crore farming household.  Government of India introduced Fertilizer Monitoring System forGovernment of India introduced Fertilizer Monitoring System for tracking movement of all fertilizers upto district level.tracking movement of all fertilizers upto district level.  Government has planned to shift subsidy payment fromGovernment has planned to shift subsidy payment from manufacturers to farmers in phased manner through their onlinemanufacturers to farmers in phased manner through their online system of mFMS.system of mFMS.  Phase-IPhase-I  Identification of Wholesaler, Retailer Chain into the System.Identification of Wholesaler, Retailer Chain into the System.  Tracking of Fertilizers Movement upto retailer level using Mobile Technology.Tracking of Fertilizers Movement upto retailer level using Mobile Technology.  Capturing of information to/from retail points.Capturing of information to/from retail points.  Receipt of fertilizer at retailer level.Receipt of fertilizer at retailer level.  Daily sales reporting by Retailer.Daily sales reporting by Retailer.
  • 14. e-Governance in Fertilizer Industrye-Governance in Fertilizer Industry  Phase-IIPhase-II  Reconciliation of sales.Reconciliation of sales.  Subsidy payment to retailers.Subsidy payment to retailers.  Subsidy payment through banking channels.Subsidy payment through banking channels.  Phase-IIIPhase-III  Use of Smart Card by the farmers.Use of Smart Card by the farmers.  Registering individual sales into the system.Registering individual sales into the system.  Purchase at market price.Purchase at market price.  The subsidy will be disbursed-directly to the farmer on actual fertilizerThe subsidy will be disbursed-directly to the farmer on actual fertilizer purchases.purchases.  Subsidy released to farmer’s account by the designated bank.Subsidy released to farmer’s account by the designated bank.  Online and Real time banking network to be in place for subsidy management.Online and Real time banking network to be in place for subsidy management.  The funds will be provided by Govt. of India to the Nodal Bank of theThe funds will be provided by Govt. of India to the Nodal Bank of the designated Bank.designated Bank.
  • 15. Opportunities – Major Supplying Countries ofOpportunities – Major Supplying Countries of Fertilizers Products (MMT in 2012-13)Fertilizers Products (MMT in 2012-13) Urea DAP MOP NP/NPK China(3.7) China(2.5) CIS China(0.1) Iran(1.6) USA(1.0) Israel Estonia(0.1) Oman(1.9) CIS(0.1) Jordan Russia(0.1) CIS(0.7) Jordan(0.3) Canada Istonia(0.03) Indonesia(0.06) Morocco(0.6) Germany S.Arabia(1.0) Spain
  • 16. World Demand/Supply forecast of NutrientsWorld Demand/Supply forecast of Nutrients (in million MT)(in million MT) NutrientsNutrients 20122012 20132013 20142014 20152015 20162016 NitrogenNitrogen SupplySupply 140.7140.7 146.4146.4 149.7149.7 156.3156.3 158.4158.4 DemandDemand 137.7137.7 140.3140.3 142.8142.8 145.0145.0 147.1147.1 VariationVariation 3.03.0 6.16.1 6.96.9 11.311.3 11.311.3 PhosphatePhosphate (H3PO4(H3PO4 as P2O5)as P2O5) SupplySupply 44.344.3 45.845.8 47.447.4 48.848.8 49.849.8 DemandDemand 42.242.2 43.643.6 44.444.4 45.245.2 46.146.1 VariationVariation 2.12.1 2.22.2 3.03.0 3.63.6 3.73.7 PotashPotash SupplySupply 40.240.2 43.543.5 45.745.7 48.648.6 52.852.8 DemandDemand 32.232.2 33.233.2 34.734.7 36.236.2 37.237.2 VariationVariation 8.08.0 10.310.3 11.011.0 12.412.4 15.615.6 Urea Projects under implementation across globe : 90 MMT DAP/NPK/SSP/TSP Projects under implementation across globe : 27 MMT
  • 17. Average CFR (India) Prices of Urea, DAPAverage CFR (India) Prices of Urea, DAP & MOP in USD/MT& MOP in USD/MT 220 215 258 625 460 370 490 427 0 100 200 300 400 500 600 700 0 100 200 300 400 500 600 700 800 900 1000 USD Urea (Direct) Urea (JV) DAP MOP
  • 18. All India Production, Consumption & Imports ofAll India Production, Consumption & Imports of major Fertilizersmajor Fertilizers (in ‘MMT)(in ‘MMT) ProductsProducts 2000-012000-01 2004-052004-05 2010-112010-11 2012-132012-13 UreaUrea ProductionProduction 19.619.6 20.220.2 21.921.9 22.622.6 ConsumptionConsumption 19.219.2 20.720.7 28.128.1 30.030.0 ImportsImports 00 0.60.6 6.66.6 8.08.0 DAPDAP ProductionProduction 4.94.9 5.25.2 3.53.5 3.63.6 ConsumptionConsumption 5.95.9 6.36.3 10.910.9 9.29.2 ImportsImports 0.90.9 0.60.6 7.47.4 5.75.7 MOPMOP ProductionProduction 00 00 00 00 ConsumptionConsumption 1.81.8 2.42.4 3.93.9 2.22.2 ImportsImports 2.62.6 3.43.4 6.46.4 3.03.0 NP/NPKsNP/NPKs ProductionProduction 4.74.7 5.25.2 8.88.8 9.89.8 ConsumptionConsumption 4.84.8 5.55.5 9.99.9 7.57.5 ImportsImports 00 00 0.90.9 0.40.4 India is expected to be self sufficient in Urea in next 3-4 years. However, it will remain dependent on exports for its requirement of DAP & MOP.
  • 19. All India Fertilizer sales of last 5 yearsAll India Fertilizer sales of last 5 years (in ‘MMT)(in ‘MMT) UreaUrea DAPDAP SSPSSP MOPMOP NP/NPKNP/NPK TotalTotal 2009-102009-10 26.6726.67 10.4910.49 2.652.65 4.634.63 8.028.02 53.3053.30 2010-112010-11 28.1128.11 10.8710.87 3.823.82 3.933.93 9.769.76 57.4457.44 2011-122011-12 29.5629.56 10.1910.19 4.744.74 3.023.02 10.3910.39 58.9958.99 2012-132012-13 30.1730.17 9.159.15 4.034.03 2.142.14 7.307.30 53.7753.77 2013-142013-14 30.4530.45 6.856.85 4.004.00 2.192.19 7.137.13 51.2351.23