Balanced Fertilizer Policy Required
Phosphorus is the backbone of balanced fertiliser use. Expansion in Phosphorus usage is, therefore, essential to match increasing amounts of Nitrogen required in the coming years and to reduce the mining of soil P. The ground realities suggest that for most of the years and even today, present fertilizer policies are not at all favorable for optimum and balanced fertilizer application. This is to be expected with N from highly subsidized urea at Rs.10/kg and P2O5 from DAP under "house arrest" (control within decontrol) at Rs.16/kg (close to the price of sugar). During much of the green revolution period, P was price at par with N or 10-15% above it.
Govt. Policy Holds The Key To Fertilizer Industry’s Well Being
Monsoon holds the key to the future prospects of the Indian fertilizer industry. A good monsoon will increase foodgrains production and consequently the demand for fertilizers.
The widely used fertilizers in India are nitrogenous (N), phosphatic (P) and potassic (K). Potassic fertilizer, which are not manufactured in India and therefore are imported. India has one of the lowest per hectare of arable land consumption of nutrients. So, the Urea demand is expected to reach 240 lakh tonnes by the year 2007.
The Long Term Fertilizer Policy announced by the government could have significant implications on the fertilizer industry going forward. While, in the medium term, it encourages the switch over from naphtha/fuel oil based units to gas based ones and creation of a regulator to allocate feedstock, over the long term it plans to withdraw the setting of selling price and concession scheme.
Around 30% of India's fertilizer production, which is based on naphtha and fuel oil could become unviable, with the changes made in the new energy consumption norm. Only the gas-based units will be able to survive the deregulated era. The likely closure of many naphtha and fuel oil based units could disturb the demand supply position in the country and the Indian government may have to import its urea requirements a higher costs.
Naphtha and natural gas are the key feedstocks for the fertilizer industry. The prices of natural gas have not been increased in the past five years. Although a 12% hike in the natural gas prices has been recommended, the same has not been implemented. Hence, there is a very high probability of the prices being hiked going forward. This could affect production and profitability of the companies in this sector.
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