Will the government expedite the new national policy on fertilisers?

'Improving the efficiency of fertiliser plants is vital so that every bit of energy saved is utilised in the right manner to produce more output:' R Mukundan, MD, Tata Chemicals

It may be recalled that, with effect from 1st October, the three southern urea producing units, viz, Mangalore Chemicals and Fertilizers (MCF), Southern Petrochemical Corporation (SPIC) and Madras Fertilizers Ltd (MFL) stopped their naphtha based urea production, at Mangalore, Tuticorin and Chennai as the government had stopped providing subsidy.

The immediate repercussion was felt by Chennai Petroleum, which supplied about 1,000 kilolitres a day of naphtha each, to MFL and SPIC. Indian Oil was also hit as it provided LPG, diesel and furnace oil to these units. Chennai Petroleum, it is reported, is totally dependent on MFL/SPIC to discharge naphtha and has now made them look for exports, possibly at a loss.

When this matter was taken up with Ananth Kumar, Union Minister for Chemicals & Fertilizers, he gave assurance that this matter would be taken up in the Cabinet, and that, very soon, a national policy on Fertilisers would be announced. So far, neither has happened.

The government through its New Investment Policy had told the Department of Fertilisers that there was a need for all project promoters to provide a Rs300-crore bank guarantee that will be linked to different stages of execution. At the same time, it does not provide a guaranteed "buy-back" of the urea produced from such new plants. Such a move, it was felt, would bring in serious players into the industry. At the moment, the retail price of urea is capped at Rs5,360 per tonne and the difference between it and the cost of production will be paid out as subsidy to the manufacturers.

In a recent article, R Mukundan, managing director of Tata Chemicals, has pointed out that "production costs can vary dramatically between manufacturers depending upon the vintage of the plant and machinery, upgradation of technology used and the competence of people in the plant". He is reported to have stated therein that as the energy accounts for 80% cost of production, survival of the industry depends upon improvement in energy efficiency. He further pointed out that, at the moment, as the Krishna-Godavari basin is the only source of gas supply to the Urea industry in India, it is important that every cubic metre of gas is saved to reduce the import of RLNG. Hence, he emphasised "improving the efficiency of fertiliser plants is vital so that every bit of energy saved is utilised in the right manner to produce more output".

Mukundan feels that removing price controls and incentivising efficient producers may lead to greater operational efficiency. He has suggested that inclusion of urea under Nutrient-Based Subsidy policy can bring balanced use and help address the issue of soil degradation also.

In a recent advertisement campaign, the chairman of The Fertiliser Association of India, S S Nandurdikar, who is also the managing director of Paradeep Phosphates, has stated that "food security for our population has been the main driver of our agricultural policies". From food deficit and food grain importing country, the green revolution, by use of HYV seeds, irrigation and fertiliser use, India has been able to export some 22 million tonnes of food grains during 2012-13. Exports of other agricultural produce have also increased considerably.

In this campaign, it has been pointed out that the fertiliser consumption has increased from a mere 1.1 million tonnes in 1966-67 to 28.1 million tonnes by 2010-11. However, due to the fertiliser policy of the government, the cost of urea, per bag, has been Rs300 to the farmer. DAP is priced at Rs1,150. Because of this wide variation, the tendency of the farmer has been to use more of urea and less of DAP, and, in any case, not in the right mix. The Nutrient-Based Subsidy scheme, which was to be applied to all the fertilisers, has been selectively applied to only P (phosphorus) & K (potassium) fertiliser from 1 April 2010, while leaving urea out of it!

Mr Nandurdikar also felt that the NBS has to be applied to Urea as well. He has stated that though the government pays the subsidy to the farmer through the fertiliser industry, by controlling the MRP, it never gets paid on time, leading to huge interest costs and leaving companies financially weak. He feels that time has come to arrange direct benefit transfer to farmer leaving the industry out of government control and enabling them to invest, time and money in farmer extension service like soil testing, training etc. Additionally, he has pointed out that spurious pesticides have also been imported by unscrupulous traders and these are sold to farmers, which, he feels government must take efforts to stop.

The Cabinet must now be persuaded by the Union Minister of Chemicals & Fertilisers, Ananth Kumar, to expeditiously bring out the National Fertiliser policy, and, in the meantime, ensure that the affected urea units in the South get immediate relief, besides assurance for continuing the urea subsidy.