This presentation summarizes fertilizer demand and supply trends in India. It finds that while fertilizer demand is increasing steadily, production growth has not kept pace, leading to widening deficits of nitrogen, phosphate, and potash nutrients. Deficits are expected to increase through 2009-10 before declining in 2010-12. India meets shortfalls through imports, but seeks to boost domestic production through industry incentives and investments abroad. Biofertilizers also offer opportunities but policy uncertainties pose threats to the fertilizer industry.

1. Name of presentation 2004 C o mpany name Fertilizer Demand and Supply - India

2. Introduction Fertilizer: Any material, organic or inorganic, natural or synthetic, which supplies one or more of the chemical elements required for the plants growth. Chemical fertilizers have played a vital role in the success of India's green revolution and consequent self-reliance in food-grain production. From a very modest level of 52 million MT in 1951-52, food grains production rose to above 208.6 million MT in 2005-06. And chemical fertilizers contribute to it. The Indian Fertilizer industry had a very humble beginning in 1906, when the first manufacturing unit of Single Super Phosphate (SSP) was set up in Ranipet near Chennai with an annual capacity of 6000 MT. The main fertilizers produced in India are Urea, Di-ammonium Phosphate, Complexes and Single Super Phosphates.

3. Rank of India in World Consumption of Fertilizer Nutrients (N+P+K) 2002-03

4. 2005-06 highlights. Fertilizer consumption Impressive growth in fertilizer consumption. Total nutrient consumption is estimated to increase by 8.2% Consumption of N, P2O5 and K2O recorded a growth of 6.3%, 10% and15.6%, respectively, over 2004-05 Fertilizer production Marginal increase in N and P2O5 production Production of N and P2O5 is estimated to increase by 0.9% and 3.2%,respectively, during 2005-06 over 2004-05

5. Location of Fertilizer Companies in India

6. Consumption

7. Consumption

8. DEMAND FACTORS Price factors Non -price factors Input prices: • Fertiliser • Other inputs Output prices: • Crop prices • Weather • Irrigation • HYV seeds • Availability of Fertilizers • Credit • Promotion & Awarness

9. SUPPLY CONSTRAINTS Production Imports • Technical / equipment problems • Feedstock / raw material shortage • Power problem • Marketing problem • Labour problem • Govt policies • High international prices • Low exportable surplus

10. CONSEQUENCE OF UNREALISTIC DEMAND AND PRODUCTIN FORECAST Scarcity Glut High Inventory - Leading to: - High inventory carrying cost - Liquidity crunch - Deterioration in quality of fertilisers due to long period of storage Higher Import - Leading to: -High international price - Addl burden on exchequer Non-availability of Ferts in time – resulting in : - Less farm yield

11. Forecast of Demand, Supply Balance of Fert nutrients – (‘000 tonnes) 3,238 -2,374 4,795 7,169 -795 15,146 15,941 2011-12 3,075 -2,075 4,795 6,870 -370 15,146 15,516 2010-11 2,917 -1,893 4,693 6,586 -1,666 13,422 15,088 2009-10 2,762 -1,755 4,538 6,293 -1,223 13,403 14,626 2008-09 2,621 -1,616 4,387 6,003 -1,404 12,728 14,132 2007-08 2,482 -1,428 4,253 5,681 -1,049 12,507 13,556 2006-07 Demand Surplus(+)/Deficit(-) Supply Demand Surplus(+)/Deficit(-) Supply Demand Year K2O P2O5 N

12. Forecast of demand and Supply of Fertilizers Nitrogen • Total demand for N is expected to increase at an annual rate of about 3.3% • Total supply of N is forecast to increase at an annual rate of about 3.9% • Total deficit of nitrogen will progressively increase from 2006-07 to 2009-10. It will reduce 2010-11 and 2011-12 • 14 urea plants proposed for debottlenecking / expansion. Out of a total of 14, 11plants (capacity - 2.23 Mte) proposed for debottlenecking and 3 for expansion (capacity - 3.35 Mte). Proposals of 2 plants for debottlenecking have been approved by the government. The remaining plants are awaiting clearance.

13. Forecast of demand and Supply of Fertilizers Phosphate • Total demand for P is expected to increase at an annual rate of about 4.8% • Total supply of P is forecast to increase at an annual rate of about 2.4% • Total deficit of P will increase progressively from 2006- 07 to 2011-12. Potash Total demand for K is expected to increase at an annual rate of about 5.5%

14. Demand - Supply Balance of N ( Nitrogen)

15. Demand - Supply Balance of P 2 O 5 (Phosphate)

16. Imports of Fertilizers 194640 Petroleum crude and products 19621.61 Iron and Steel 16693.4 Metalliferrous ores and metal scrap 8157.3 Non-ferrous Metals 1813.79 Crude rubber 1915.35 Newsprint 4347.77 Paper board and mfrs. 2471.43 Pulp and waste paper 651.8 Sugar 8716.32 Edible Oil 9158.94 Fertilisers 154.47 Cereals&preparations 268342.19 A. Bulk Imports 2005-06 Commodities

17. What is being Imported Phosphates : Raw materials and intermediates for production. Potash : Entire demand of potash in the country. Urea : Natural gas and LNG.

18. The value of urea imported in Government account during the last five year is as under:- 2054.94 155.09 13.25 2005-06 (From Oman under long Term Urea Off Take Agreement) 1890.07 258.56 7.31 2005-06 1524.83 237.88 6.41 2004-05 0.00 0.00 0.00 2003-04 0.00 0.00 0.00 2002-03 235.51 107.05 2.20 2001-02 Value in lakh US $ Weighted average price (US $ PMT) Qty. in Lakh MT Year

19. Measures to reduce Imports Encouragement of indigenous production. Incentives The capacity addition, expansion and setting up of new units A more investment friendly policy. Compensating for the disadvantages to the industry vis-à-vis the international industry. Encouraged to invest abroad in resource rich countries.

20. SUPPLEMENTRY GOODS BIO FERTILIZERS Bio fertilizers Product containing carrier based (solid or liquid )living micro organisms, which are agriculturally useful in terms of nitrogen fixation, phosphorus solubilization or nutrient mobilization, to increase the productivity of the soil and/ or crop. Advantage: Cheaper Easy availability. Their usage is already know Environment friendly. Supply is not affected by other factors.

21. Analysis Of Opportunity & Threat For Indian Fertilizer Industry OPPURTUNITY: Per capita fertilizer consumption is very low. New JV’s Deregularization Fast growing population 2/3 population still depends on farming for source of Income.

22. THREATS: Uncertainity prevailing over policy. Delay in decision making and implementation. Late payment of concession. Shortage of feedstock. Bio-fertilizers. Analysis Of Opportunity & Threat For Indian Fertilizer Industry

23. Conclusion In India, the deficit of N will progressively increase from 2006-07 to 2009-10. It is expected to reduce significantly during 2010-11 and 2011-12. The deficit of P and K will continue to increase. Global supply demand balance of N will increase until 2009-10. The global, surplus of N is expected to increase from 2006-07 due to commissioning of new projects. Supply demand balance of P and K may remain tight Realistic demand and production forecast is essential for macro planning and decision making. Over estimation leads to glut and under estimation causes scarcity