The Fertilizer sector in India- Vijay Paul Sharma

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The Fertilizer sector in India- Vijay Paul Sharma

  1. 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. 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
  3. 3. KEY TRENDS IN FERTILIZER USE Vijay Paul Sharma
  4. 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
  5. 5. Urea 50% DAP 19% NP/NPK 16% MOP 9% SSP 5% AS/CAN 1% Share of Fertilizer Products in India Vijay Paul Sharma Source: FAI (2012)
  6. 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. 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. 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. 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)
  10. 10. Declining Fertilizer Response - Irrigated Areas 0 2 4 6 8 10 12 14 16 1970 1975 1980 1985 1990 1995 2000 2005 Responseratio(kggrain/kg NPK) Source: Biswas and Sharma (2008)
  11. 11. MARKET STRUCTURE AND SUPPLY SIDE ISSUES Vijay Paul Sharma
  12. 12. Changing Market Structure 145 Fertilizer Plants 29 Urea, 19 DAP and NP/NPK Complex, 1 CAN, 85 SSP, 1 Ammonium Chloride & 10 Ammonium Sulphate Rising Share of Coops & Pvt. Sector in Fertilizer Production Imports: N Canalised; P&K Decontrolled Vijay Paul Sharma Sector N (%) P (%) 1981 2011 1981 2011 Public 60.0 25.9 45.6 5.4 Private 29.6 46.8 37.8 64.1 Coops 10.4 27.3 16.7 30.5 Source: FAI (2012)
  13. 13. Stagnation in Domestic Production 10.9 N 12.3 3.7 P2O5 4.4 0 2 4 6 8 10 12 14 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Production(milliontonnes) N P Vijay Paul SharmaSource: FAI (2012)
  14. 14. 1.41 N 32.20 9.40 P2O5 53.90 0 10 20 30 40 50 60 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 ShareofImports(%) Consumption vis-à-vis Imports: Rising Dependence on Imports Vijay Paul Sharma Source: FAI (2012)
  15. 15. Level of Self-Sufficiency N 98.7 67.8 P2O5 94.3 46.1 40 60 80 100 1971-72 1981-82 1991-92 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008.09 2009-10 2010-11 2011-12 % Vijay Paul Sharma Source: FAI (2012)
  16. 16. Fertiliser Pricing Policy and Subsidy Environment Vijay Paul Sharma
  17. 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. 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. 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. 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. 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. 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
  23. 23. Vijay Paul Sharma

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