1. Role of Fertilizers in Transforming
Agriculture in Asia:
A Case Study of India
Vijay Paul Sharma, Professor & Chair
Indian Institute of Management
Ahmedabad, India
Email: vijays@iimahd.ernet.in
Paper presented in the Conference on "Agricultural Transformation in Asia: Policy
Options for Food and Nutrition Security" organized by IFPRI and CDRI on September
25-27 in Siem Reap Province, Kingdom of Cambodia
2. Presentation Outline
Key Trends in Fertilizer Use
Market Structure and Supply-side Issue
The Pricing and Subsidy Environment
The Way Forward
Vijay Paul Sharma
4. Overview of Indian Fertilizer
Market
3rd Largest Producer & 2nd Largest Consumer
Production: 16.65 million tonnes in 2011-12 (CAGR
1.3% during 2000s)
Consumption: 27.79 Million Tonnes in 2011-12 (>6%)
RISING IMPORTS???
<2 million tonnes in 2002-03 12.4 million tonnes
in 2011-12
Largest Importer of Rock Phosphate & Phosphoric
Acid and 2nd Largest Importer of Ammonia
Vijay Paul Sharma
6. Total Consumption: ed from <1 million tonnes in
mid-1960s to 28.1 million tonnes in 2010-11 27.8
million tonnes in 2011-12
Per ha Consumption: ed from <10 kg in mid-1960s
to 146.3 kg in 2010-11 144.6 kg in 2011-12
Vast Regional Variations
104.1 kg/ha in West to 215.5 kg in South
56.5 kg/ha in Odisha to 266.1kg in A.P. & 243.6
kg in Punjab
Fertilizer Consumption Trends
Vijay Paul Sharma
7. Relatively Low Fertilizer Use in
India
0
100
200
300
400
500
Japan China France BangladeshPakistan Sri Lanka USA India World
212.5
400.3
176.8
224
184.7
135.8
121.2
165.8
112.7
Kg/haofarablelandincluding
permanentcrops
Vijay Paul Sharma
Source: FAI (2012)
8. Consumption TE 1989-90 TE1999-00 TE2011-12
Above 200 5
(1.4%)
31
(6.6%)
135
(25.4%)
150-200 21 (5.7) 45 (9.6) 77 (14.5)
100-150 42 (11.4) 94 (20.0) 115 (21.6)
75-100 46 (12.5) 62 (13.2) 57 (10.6)
50-75 70 (19.0) 78 (16.6) 59 (11.1)
25-50 85
(23.1)
80
(17.1)
55
(10.3)
<25 99
(26.9)
79
(16.8)
35
(6.5)
Distribution of Districts according to
Fertilizer use (kg/ha) in India
Vijay Paul Sharma
Source: FAI (2012)
9. All India Plant Nutrient
Consumption Ratio
Year N P2O5 K2O
1981-82 6.0 1.9 1
1991-92 6.0 2.9 1
1992-93 9.5 3.2 1
2000-01 6.8 2.6 1
2002-03 6.5 2.5 1
2008-09 5.3 2.3 1
2009-10 4.3 2.0 1
2010-11 4.7 2.3 1
2011-12 6.5 2.9 1
Vijay Paul Sharma
Partial decontrol of
Fertilizers in 1991-
92 and 2010-1
Source: FAI (2012)
17. 1. Pre-Retention Price Scheme (RPS) Period (Up
to mid-1970s)
2. RPS Era and Beyond (Late-70s to Early-90s)
3. Post-Economic Reforms (1990s & 2000s)
Decontrol of Phosphatic & Potassic Fertilizers
Introduction of Concession on Decontrolled
Fertilizers
New Pricing Scheme for Urea
Nutrient Based Subsidy (NBS) – Urea Excluded
Decontrol of Phosphatic & Potassic Fertilizers
Direct Transfer of Fertilizer Subsidy to Farmers
1990s
2000s
Fertilizer Sector Policy Evolution
18. Key Concerns
Decontrol of P & K Fertilizer Prices - Fixed Subsidy &
Floating Farm Gate Price
Very Significant Increase in Prices (DAP: Rs. 9350/MT in
2010 to Rs. 24000 in 2012; MOP: Rs. 4455 to Rs. 12000)
Reduction in Consumption of P&K Imbalanced Use
Urea Still under Govt. Control: No Significant Change in
Price (Rs.5350/MT) for Many Years
Steep Increase in Subsidy Bill
Regulation of Movement & Distribution Controls
Urea - 50% and Decontrolled Fertilizers – 20%
Vijay Paul Sharma
19. Burgeoning Fertilizer Subsidy
Vijay Paul Sharma
0
2
4
6
8
10
0
20000
40000
60000
80000
100000
120000
1990-91 1993-94 1996-97 1999-00 2002-03 2005-06 2008-09 2011-12
%ofAgri.GDP
Rs.crore
Fertilizer Subsidy
% to GDP Agri.
Source: GoI (2013)
20. Economics of Fertilizer Use
0
1
2
3
4
5
6
N P
Kgofrice/kgnutrient
1981-82 1991-92 1992-93 2001-02 2011-12
Vijay Paul Sharma
Source: FAI (2012)
21. Likely Impact of Fertilizer
Subsidy Withdrawal
Small and Marginal Farmers likely to be hurt
Marginal Farmers (190 kg/ha) vs Large Farmers (117
kg/ha)
High Input Costs vs High Output Prices Debate – Small and
Marginal Farmers either Self-sufficient or Small Marketed
Surplus
Farm Income to Decline Dramatically if Fertilizer
Subsidy is Withdrawn Completely
Vijay Paul Sharma
22. The Way Forward
Role of Fertilizers still Important but Need to Address
Some Concerns
Increasing Dependence on Imports: Volatile World Markets
Declining Fertilizer Use Efficiency
Regional Disparities in Fertilizer Use
Consistent Long-term Policy to attract Investment in the
Sector
Address Subsidy and Pricing Issue to Promote Balanced
Use of Nutrients
Better Targeting of Subsidies without Compromising Food
Security Concerns
Vijay Paul Sharma