What challenges does India face in fertilizer imports?

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With the crisis continuing in Ukraine and Gaza, experts and policymakers are concerned about further increases in the prices of the components used for making petroleum-based chemical fertilizers. Recently, Senior Economist of the Food and Agriculture Organization Nicholas Sitko told The Hindu that India has to increase its own fertilizer production capacity. The Agriculture Minister of the country’s largest foodgrains producing Uttar Pradesh recently complained that the State has the stock of fertilizers for only 10 more days. The sowing of winter rabi crops has started in almost all the wheat-growing States and fertilizers such as Diammonium phosphate (DAP) and NPK [Nitrogen, Phosphorus, and Potassium] are essential for its growth.

What is the current import fertilizer import scenario?

Though the latest data on import is yet to be made available by the Ministry, the Standing Committee of Parliament on Chemicals and Fertilizers, in August 2023, tabled a report on ‘Planning for Fertilizers Production and Import Policy on Fertilizers Including GST and Import Duty Thereon’ in both the Houses. It expressed concern that the “production capacity of fertilizers does not commensurate with its demand/requirement and, therefore, the gap between demand and supply is met through imports.” According to the report, about 20% of the domestic requirement of urea, 50-60% of the domestic requirement of DAP, and 100% of the domestic requirement of Muriate of Potassium (MOP, or Potash) is met through imports.

How has India’s fertilizer production changed?

In 2021-22, India’s yearly consumption of all major chemical fertilizers was approximately 579.67 lakh metric tonnes (LMT), comprising 341.73 LMT of urea, 92.64 LMT of DAP, 23.93 LMT of MOP, and 121.37 LMT of NPK. In 2020-21, the total consumption of fertilizers was about 629.83 LMT. The country produced 435.95 LMT of chemical fertilizers in 2021-22, resulting in a shortfall of 143.72 LMT relative to demand. While MOP is not produced here, in 2021-22, India produced 250.72 LMT of urea, 42.22 LMT of DAP, 89.67 LMT of NPK, and 53.34 LMT of Single Super Phosphate (SSP). Total production in 2014-15 was 385.39 LMT, indicating an increase of only about 50 LMT over seven years.

In the case of Urea, the most consumed fertilizer, in 2019-20, the production was 244.58 LMT and the use was 336.96 LMT. In 2020-21, the country produced 246.05 LMT of urea and consumed 350.51 LMT. In 2021-22, the figure was 250.72 LMT and 341.72 LMT, respectively.

The Centre allocated ₹ 1.79 lakh crore as fertilizer subsidy under the Budget estimates for 2023-24. Out of this, for indigenous P&K Fertilizers, the subsidy amount was ₹25,500 crore and ₹18,500 crore for imported P&K Fertilizers. For indigenous Urea, the subsidy was ₹1,04,063.20 crore while the subsidy for imported urea was ₹ 31,000 crore.

What is the situation in Ukraine and Gaza?

Dr. Sitko said that he does not see any stability in fertilizer markets now due to the situations in Ukraine and Gaza. He is primarily bothered about the impact of the crisis on the oil prices, which will spill over to the by-products such as fertilizers. According to an answer provided in Lok Sabha, in 2018-19, 2019-20, and 2020-21, India’s fertilizer imports were mostly from countries such as China, Russia, Saudi Arabia, UAE, Oman, Iran and Egypt. The worsening situation in West Asia and the ongoing conflict in Russia and Ukraine could impact imports from these regions.

What can India do?

Experts like Dr. Sitko have been asking India to enhance its fertilizer production capacity and to shift its farming systems to reduce dependence on imported fertilizers while making better use of the existing fertilizers. Suggestions such as using nano urea, shifting to natural farming, and enhancing the capacity of fertilizer factories have also been made to the government.

The Standing Committee of Parliament also pointed out the need for policy initiatives aimed at creating an environment that would facilitate investments in the public, co-operatives, and private sectors engaged in the manufacturing and marketing of fertilizers.

Commenting on the new investment policy, implemented in 2012, to streamline fertilizer production, the committee said it is satisfying to note that six new Urea plants have since been set up each having an annual production capacity of 12.7 LMT thereby adding Urea production capacity of 76.2 LMT per annum. “Now, 36 Urea manufacturing units are functioning, out of which, four new Urea Units viz Ramgundam, Gorakhpur, Sindri Unit of Fertilizers Corporation of India Limited and Barauni unit of Hindustan Fertiliser Corporation Limited, have been revived by setting up of new gas-based Greenfield units,” the panel had noted.