Fertilizer policies and pricing of NPK in India

UNIVERISITY OF AGRICULTURAL SCIENCES, DHARWAD
Department of Agricultural Economics
MASTER’S SEMINAR- I
ON
FERTILIZER POLICIES AND PRICING OF NPK IN INDIA
PRESENTED BY
HARISH KUMAR H.R
Sr. M.Sc. (Agri.)
PGS17AGR7377
Dept. of Agricultural Economics
MAJOR ADVISOR
Dr. B.R. JAMAKHANDI
Assistant professor
Dept. of Agricultural Economics
Date: 30.11.2018
Time: 2:00 PM
9986640586
Venue: Seminar Hall
1

FLOW OF PRESENTATION
 Introduction
 Need of fertilizers
 History of fertilizers
 Current scenario
 Fertilizer policies and their objectives
 Classification of fertilizer policies
 Case study
 Conclusion
2

Fertilizer is defined as any organic or inorganic
substance, natural or artificial in nature supplying one or
more nutrients required for plant growth.
Primary nutrients
N, P, and K
Secondary nutrients
Ca, Mg, S
Micro nutrients
B, Cl, Cu, Mo, Mn, Fe
Zn and Ni
INTRODUCTION
Structural nutrients
C, H, O
3

NEED OF FERTILIZER
Deficient in Nutrients
Soil condition.
Fertilizers help plants to overcome these situations by
increasing their capacity to hold more water and improve
the rooting depth.
When added to soil or water, plants can develop tolerance
against pests, weeds, insects and diseases.
Fertilizers not only assist in increasing yields but also in
their growth and development.
 Nitrogen -Green colour of plants
 Phosphorus -Seed formation and root development.
 Potassium -Stalks and straws of plants stronger.
4

HISTORY
First fertilizer plant in India was
established in Ranipet (TN) in
1906
Super-phosphate plant.
 Expedicion Fertilizantes
 Founded in 1812 in Spain.
 Producer of superphosphate
 Oldest fertilizer industry in the
world
5

Contd…
 FCI- Sindri (Jharkhand) in
1962.
 The Fertilizer & Chemical
Travancore Ltd. at Cochin
(Kerala) in 1943.
 Green revolution in the late 1960’s gave an impetus to the
growth of fertilizer. 6

FERTILIZER PLANTS IN INDIA
62 large sized
plants
13 plants manufacture
Ammonium Sulphate
(AS), Calcium
Ammonium Nitrate
(CAN) and other
nitrogenous fertilizers.
20 Plants produce
DAP
29 Plants produce
urea
64 medium and
small-scale units
producing SSP
8

Fig-1:WORLD FERTILIZER PRODUCTION (2016-17)
21.67
12.24
9.77
8.73 8.22
3.04 3.03
2.08 1.76
0
5
10
15
20
25
China USA India Russia Canada Belarus Germany Indonesia Brazil
Per cent in global
Source: International Fertilizer Association Report, 2017-18. 9
Percent
Countries

Fig -2: WORLD FERTILIZER CONSUMPTION (2016-17)
31%
14%
11%
6%
4%
34%
China India USA Brazil Indonesia Rest of the World
Source: International fertilizer Association report, 2017-18.
10

Fig-3: INTENSITY OF FERTILIZER USE IN WORLD (Kg/ha)
2016-17
123
188 205
396
0
50
100
150
200
250
300
350
400
450
India Bangladesh Pakistan China
Fertilizer(kg/ha)
11Source: www.faostat.in

TABLE 1: SECTOR WISE PRODUCTION OF FERILIZERS IN INDIA
Source: Annual report 2017-18, Department of fertilizers.
SECTOR 2016-17
Urea(LMT) % DAP(LMT) % Complex
fertilizer(LMT)
%
Public 71.41 29 21.67 30 11.72 14
Private 103.79 42 25.78 36 44.44 55
Co-opreative 66.81 27 17.87 25 23.50 29
Total (392.99) 242.01 71.32 79.66
12

Fig-4: STATE WISE INTENSITY OF FERTILIZER
CONSUMPTION IN INDIA(Kg/ha) 2016-17
Source: Indian Fertilizer Scenario 2017.
0
50
100
150
200
250
300
350
(kg/ha)
14
290
20

TABLE 2: PRICES OF FERTILIZER (as on September 2018)
Sl.No FERTILIZER Rs./50Kg Bag
1 Urea 268
2 SSP (Single super phosphate) 450
3 DAP (Diammonium phosphate) 1500
4 MOP (Muriate of potash) 800
5 Complex NPK 664
6 MAP (Mono-Ammonium phosphate) 910
7 19-19-19 1200
8 Ammounium sulphate 600
9 17-17-17 1065
10 15-15-15 971
15
Source: www.Indiastat.com

1. To sustain agricultural growth
2.To ensure adequate availability of right quality of fertilizers
at right time and at the right price to farmers.
4. Unbiased distribution
3. To promote balanced nutrient application
OBJECTIVES
17

CATEGORIES OF POLICIES
I. Pricing and subsidy policies
II. Marketing and distribution policies
III. Production and import policies
18

I. PRICING AND SUBSIDY POLICIES
1976
• Fixed subsidy
1977
• Retention Price Scheme
1991
• Decontrol of prices
2003
• New Pricing Scheme
2010 • Nutrient Based Subsidy Scheme
19

I. PRICING AND SUBSIDY POLICIES
 Yom Kippur war
(Arab-Israel)
 OPEC imposed
OIL EMBARGO
 Stops oil extraction
 First oil shock
 $ 3 – $12 per barrel
20

1. Fixed subsidy (1976)
 The prices of fertilizers and raw materials
increased highly in the international market as
a result of oil crisis.
 Government of India initially introduced fixed
subsidy of Rs.1250 per tonne P205.
21

2. Retention Price Scheme (1977-2003)
 1977: Fertilizer prices committee/Marathe committee.
 To provide fertilizers at a cheaper rate to farmers and provide a
reasonable returns on investment for the fertilizer producer
(assuring 12 % of returns on their investment).
 The difference between the Retention Price* and Selling
price was paid as subsidy.
 In 1979-RPS extended to phosphatic and other complex
fertilizers.
*Retention price=Conversion cost + selling cost + interest on debt + depreciation + capacity utilization +
12% of returns
22

Effects of RPS
• Domestic capacity production
consumption of fertilizers
• Increase in productivity overall food
grains production
• Subsidy Increased Fiscal Deficit
23

3. Decontrol of prices (1991)
 Joint Parliamentary Committee (JPC) – appointed Sri. Pratap
Rao Bhosle-1991 to review fertilizer pricing.
 Committee recommended the decontrol of all P and K fertilizers
except urea.
 DAP (Rs. 4000-8000 per MT) and MOP (Rs.1000-4000 per
MT).
 Subsidy of Rs.1000 per tonne each for DAP and MOP based on
the grants provided by DAC (Department of Agriculture and
Cooperation). 24

4. New Pricing Scheme (2003)
• 1999: High Powered Committee (HPC) headed
by Prof. C.H. Hanumantha Rao.
• New Pricing Scheme came into force from 1st
April 2003.
• Aim: Greater transparency and uniformity and
increase the urea production.
25

Phases of NPS
NPS I
• 2003-04
• Group based
subsidy scheme
NPS II
• 2004-06
• Non-gas based
plants which are
modernizing and
able to switch over
to Gas based plants.
NPS III
• 2006-2010
• Incentives for
additional
production
• Promote usage of
cheaper feedstock
(Natural Gas)
26

Effect of NPS
Nutrition imbalance for soils
Source: The Hindu 2009 27

5. Nutrient Based Subsidy Scheme
Nutrient Based Subsidy Policy was introduced in 2010.
Objectives
1. To ensure the balanced application of fertilizers.
2. To improve agricultural productivity.
3. To ensure nation's food security.
 A fixed rate of subsidy (in Rs. per Kg basis) was announced on
nutrients namely N, P, K and S by the Government on annual basis.
 22 grades of P&K fertilizers and 16 grades of NPKS complex
fertilizers are covered .
28

Table 3 : PRICES OF N P K & S UNDER NBS SCHEME (2018-2019)
Sl.No Fertilizer Rs./Kg
1 ‘N’ (Nitrogen) 18.901
2 ‘P’ (Phosphorus) 15.216
3 ‘K’ (Potash) 11.124
4 ‘S’ (Sulphur) 2.722
Source: NBS notification 2018-2019, Department of Fertilizers.
29

Table 4: SUBSIDY FOR FERTILIZERS UNDER NBS POLICY (2018-19)
Sl.No (N,P,K,S nutrients) 2018-19 (Rs./MT)
MRP (2018-19) (Rs./MT)
1 DAP (18-46-0-0) 8937 26721
2 MAP (11-52-0-0) 8327 24900
3 TSP(0-46-0-0) 5519 18200
4 MOP (0-0-60-0) 7437 14822
5 SSP (0-16-0-11) 2166 7905
6 16-20-0-13 5729 18900
7 20-20-0-13 6488 20900
8 20-20-0-0 6197 17666
9 28-28-0-0 8676 22440
10 10-26-26-0 8241 21409
11 12-32-16-0 8101 24995
12 14-28-14-0 7752 21900
13 14-35-14-0 8593 26190
14 15-15-15-0 6507 19425
15 17-17-17-0 7375 21300
16 19-19-19-0 8242 23560
17 20.6-0-0-23 4408 15700
18 16-16-16-0 6941 17840
19 15-15-15-9 6709 17800
20 24-24-0-0 7437 24748
21 24-24-0-8 7437 24094
30
Source: NBS notification 2018-2019, Department of Fertilizers

31
Fig 6: SUBSIDY FOR FERTILIZERS UNDER NBS POLICY (2018-19)
Source: NBS notification 2018-2019, Department of Fertilizers
0
5000
10000
15000
20000
25000
30000
Subsidy (2018-19)
MRP (2018-19)
26721
7905
2166
8937
Rs/MT

II. MARKETING AND DISTRIBUTION
POLICIES
• Fertilizer Control Order1957
• Liberalization of fertilizer marketing1966
• Fertilizer Movement Control Order1973
• Block Delivery Scheme1980
32

1. Fertilizer Control Order (1957)
 Under the Essential Commodities Act, 1955.
 Regulate sale, price, and the quality of fertilizers.
 FCO provides for compulsory registration of
fertilizer manufacturers, importers and dealers,
specification of all fertilizer manufactured/imported
and sold in the country.
 74 Fertilizer quality control laboratories.
33

2. Liberalization of fertilizer marketing (1966)
 Fertilizer Pool-1944.
 Sivaraman Committee-1966 recommended for
liberalization of fertilizer marketing.
 Freedom to market up to the 50% of production.
 1969-complete freedom for
manufacturers/importers was given.
34

3. Fertilizer Movement Control Order (1973)
o In 1973 the fertilizer shortages occurred.
o Inter-state movement kept under government
control.
o Prohibition of export of fertilizer.
35

4. Block Delivery Scheme (1980)
 To promote the use of fertilizers in the remote areas.
 The government introduced "Block Delivery
Scheme" (BDS) during 1980-81.
 The objective of the policy was to make fertilizers
available in at least one or two places in each block.
36

III. PRODUCTION AND IMPORT
POLICIES
• Production and
availability of fortified
and coated fertilizers.2009
• Neem Coated Urea
Policy
2015
37

To promote use of secondary and micro nutrients
and to improve fertilizer use efficiency.
The GOI has allowed the fortification/coating of
fertilizers specified in Fertilizer Control Order
(FCO), up to 20% of their total production.
Approved fortified/coated subsidized fertilizers at a
price up to 5% above the MRP.
1. Production and availability of fortified and coated
fertilizers (2009)
38

2. Neem coated urea policy (2015)
39
Mandatory for all indigenous producers of
urea to produce 100% of urea as neem coated only.
Benefits:
Neem coated urea leads to more gradual release
of urea, helping plants gain more nutrients and
resulting in higher yield.
Neem serves as a natural insecticide.
Less groundwater contamination.
No industrial use.

PRICING MECHANISM OF NPK
• UREA (N)
• Retail price: Rs. 270/50kg bag (Fixed by Government)
• Cost of supply: Rs. 970/50kg bag
• Subsidy: cost of supply-Retail price(970-270=700)
• DAP/MOP (P and K)
• Retail price: Rs. 1190/50kg bag
• Subsidy: Fixed by the government(35%)
• Cost of supply: Rs. 1810/50 kg bag
• Retail price calculation: Cost of supply-Subsidy
40

Fig 7:PRICE TREND IN FERTILIZER INDUSTRY
41
Source: www.indiastat.com
Rs./MT
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
1980-81
1981-82
1982-83
1983-84
1984-85
1985-86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-07
2008-09
2009-10
2010-11
2011-12
2012-13
2014-15
2015-16
2016-17
2017-18
2018-19
Urea
DAP
MOP

FERTILIZER USE AND IMBALANCE IN
INDIA
Ramesh Chand and
Pavithra S (2015)
42
CASE STUDY

State-wise Actual and Normative Ratio of NPK use (2009–11)
43
States Actual Ratio Normative Ratio
N P K N P K
Andra Pradesh 4.41 2.28 1.00 2.40 1.43 1.00
Assam 1.94 0.73 1.00 1.77 1.28 1.00
Bihar 6.79 1.95 1.00 2.81 1.50 1.00
Chhattisgarh 5.27 2.72 1.00 2.39 1.43 1.00
Gujarath 6.89 2.78 1.00 2.73 0.99 1.00
Haryana 19.55 6.87 1.00 3.99 1.67 1.00
Himachal Pradesh 3.00 1.02 1.00 2.48 1.29 1.00
Jharkhand 7.20 3.31 1.00 1.99 1.20 1.00
Jammu & Kashmir 6.16 2.72 1.00 3.26 1.96 1.00
Karnataka 2.60 1.69 1.00 1.60 1.01 1.00
Kerala 1.28 0.66 1.00 0.65 0.47 1.00
Madhya Pradesh 8.90 6.14 1.00 2.41 2.63 1.00
Maharashtra 2.87 1.91 1.00 2.67 1.80 1.00
Odisha 3.79 1.88 1.00 1.78 1.01 1.00
Punjab 21.20 6.48 1.00 4.05 1.60 1.00
Rajasthan 25.08 11.18 1.00 10.30 5.72 1.00
Tamil Nadu 2.16 0.95 1.00 2.26 0.91 1.00
Uttarakhand 10.24 2.63 1.00 3.18 1.47 1.00
Uttar Pradesh 11.14 3.88 1.00 2.96 1.32 1.00
West Bengal 1.98 1.29 1.00 1.85 1.12 1.00
Others 4.01 1.70 1.00 1.55 1.12 1.00

• The existing norm for usage of N:P:K was
found to be 4:2:1.
• Ideal ratio based on recommendation of SAUs
and ICAR institutes is 2.6:1.4:1.0
• The policy should be to achieve optimum
levels rather than achieving a particular ratio
of composition.
44

Fertilizer policies and pricing of NPK in India