Trend, imbalance,Gst and subsidy of fertilizer industry in India

TREND, IMBALANCE AND SUBSIDY OF FERTILIZER

INDUSTRY IN INDIA

Credit seminar

Sunil kumar B.R20637

Contents

• Introduction • Production ,consumption and import of fertilizers• Imbalance of fertilizers.• Prices of NPK. • Prices of NPK relative to MSP (rice & wheat)• Speciality fertilizers and consumption after NBS• Balanced Fertilization• GST and fertilizers• conclusion

3

LOW

Medium

High

Nitrogen content in Indian soils

Source: IISS, Bhopal

4

states Fertilizer cost

Total cost Fertilizer share in total cost

Total returns Fertilizer share in gross returns

Andhra Pradesh 1181 6191 19.1 8482 13.92

Gujarat 476 2250 21.2 5773 8.25Haryana 1025 6228 16.457 17144 5.98

Karnataka 821 2779 29.543 7908 10.38Kerala 573 2270 25.242 5872 9.76

Madhya Pradesh 587 2284 25.700 6538 8.98

Maharashtra 835 2654 31.461 6675 12.51

Punjab 1765 11768 14.998 28117 6.28Tamilnadu 642 2538 25.295 5012 12.81

Telangana 1141 4267 26.740 8666 13.17

Uttar Pradesh 459 1790 25.642 4912 9.34

All India 526 2129 24.706 5542 9.49

LION SHARE OF FERTILIZERS IN COST OF PRODUCTION

Based on Situation assessment survey, 2014

INTRODUCTION

• Fertilizer Contributing as much as 50 percent of the yield growth in asia (hopper 1993 and fao 1998).

• Others have found that one-third of the cereal production world-wide is due to the use of fertiliser (bumb 1995)

• Fertiliser was as important as seed in the green revolution (tomich et. Al. 1995)

Trend of Area ,production and yield of food grain crop

1985-1995 1995-2005 2005-20150

500

1000

1500

2000

YIELD

Kg/ha

1985-1995 1995-2005 2005-2015050

100150200250

PRODUCTION

mt

1985-1995 1995-2005 2005-2015120

121

122

123

124

125

AREA

000H

A

43%42%

source-Authors calculation based on FAI 2014-2015.

Production of N and P (000 tonnes)

1985-86

1987-88

1989-90

1991-92

1993-94

1995-96

1997-98

1999-200

2001-02

2003-04

2005-06

2007-08

2009-10

2011-12

2013-140.00

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

12,000.00

14,000.00

PRODUCTION "N"PRODUCTION "P"

4110

12435

India 3rd in production next to Chaina and USA. source-Authors calculation based on FAI 2014-2015.

Trend of Fertilizer Consumption (N,P and K ) in India:(000tonnes)

1985-86

1987-88

1988-89

1990-91

1992-93

1994-95

1996-97

1998-99

2000-01

2002-03

2004-05

2006-07

2008-09

2010-11

2012-13

2014-150.00

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

12,000.00

14,000.00

16,000.00

18,000.00

20,000.00

npk

2532

6098

16945

INDIA 2nd in consumption after chaina


Gap between consumption and production of fertilizers(000tonnes)

1985-86

1987-88

1989-90

1991-92

1993-94

1995-96

1997-98

1999-00

2001-02

2003-04

2005-06

2007-08

2009-10

2011-12

2013-140

10000

20000

30000

40000

50000

60000

70000

80000

90000

total consumptiontotal productiontotal import(NPK)

16544

25576

9303

importing about 36%of total consumption and 56%of total production

Main causes for this stagnation in domestic production:• Lack of raw material for potassic and phosphatic fertilisers.(Increase

price of gas for urea)• Low investment in the fertiliser sector.


Indian share with world in consumption and production(percentage)

TOTAL N P K0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

8.62

11.04

9.13

0.00

13.54

15.1613.98

7.00

share of india with world production share of india with world consumptionsource-Authors calculation based on FAI 2014-2015.

All India consumption of plant nutrients per unit of gross cropped area

1985-86

1987-88

1989-90

1991-92

1993-94

1995-96

1997-98

1999-2000

2001-02

2003-04

2005-06

2007-08

2009-10

2011-12

2013-140

20

40

60

80

100

120

140

160

NPKtotal

87.17

13.03

131.57

31.37

Kg/ha


State wise consumption of plant nutrients per unit of gross cropped area

2014-15 Total N P K

Andhra Pradesh 218.4 135.2 55.7 27.5Punjab 218.3 171.8 41.7 4.8telangana 206.45 145.3 47.1 14.05Haryana 203.4 158.9 38.8 5.7

Tamil Nadu 197.4 117 43.4 37Bihar 173.1 128.6 30.2 14.3

West Bengal 151.6 78.2 40.4 33Gujarat 133.6 96.6 27.9 9.1

Maharashtra 128.6 70.4 34.8 23.4Odisha 98.6 62 24.9 11.7

(Kg/ha)


Consumption of plant nutrients per unit of gross cropped area in region wise

EAST NORTH All India SOUTH WEST 0

20

40

60

80

100

120

140

76.9

133.3

87.2

109.1

59.5

27.336

31.4

44.6

25.519

6.813

26.7

8.8

N P K


Imbalance in fertilizer consumption ratio

Year N P K Imbalance

2003-04 6.9 2.6 1.0 1.72004-05 5.7 2.2 1.0 1.02005-06 5.3 2.2 1.0 0.72006-07 5.9 2.4 1.0 1.12007-08 5.5 2.1 1.0 0.92008-09 4.6 2.0 1.0 0.32009-10 4.3 2.0 1.0 0.22010-11 4.7 2.3 1.0 0.42011-12 6.7 3.1 1.0 1.72012-13 8.2 3.2 1.0 2.52013-14 8.0 2.7 1.0 2.3

source-Authors calculation based on FAI 2014-2015

Imbalance in fertilizer consumptionimbalance index 2015

EAST 0.33Bihar 2.88

Nagaland 0.79Odisha 0.75Tripura 1.07

West Bengal 1.04NORTH 9.21Haryana 14.06Punjab 18.76

Uttar Pradesh 7.58Uttarakhand 8.59

SOUTH 0.20Andhra Pradesh 0.53

telangana 2.52Karnataka 0.64Tamil Nadu 0.68Puducherry 0.64A & N Islands 1.06

WEST 1.68Gujarat 3.87

Chhattisgarh 1.60Maharashtra 0.64All India 1.58

I = √ {(Na- Nn)2+(Pa- Pn)2+(Ka- Kn)2}/3

Reasons for such imbalances are:-

1 Government’s steps to bring Urea (N) under price control mechanism and make it very cheap compared to other kinds of fertilizers.2 Non-availability of sufficient P and K fertilizers in farmlands across the country and higher prices when available has led to reduced usage.3 Lack of awareness among the farming community about the dangers of fertilizer imbalance, and the harm it could cause to the soil and future crop yield.


All India Plant Nutrient Consumption Ratio

N P K1991-92 5.91 2.44 1.001992-93 9.53 3.22 1.002000-01 6.97 2.69 1.002001-02 6.78 2.63 1.002010-11 4.71 2.29 1.002011-12 6.72 3.07 1.002013-14 7.98 2.68 1.002014-15 6.69 2.41 1.00

Partial decontrol of Fertilizers in 1991- 92 and 2010-1 1

Causes

1.Deficiency of secondary and micro nutrients2.Damages to environments (contaminate ground water, health hazards)3.Decrease crop to fertilizer response ratio


Relatively Low Fertilizer Use in India

egypt chaina korea bangaladesh pakistan india world canada s africa nepal0

50

100

150

200

250

300

350

400

450

500

Kg/ha of arable land

includ

ing pe

rmanen

t crop

s REASONLow Fertile Land And Loss Of Fertilizer


Imbalances in fertiliser attributed to

• Price structure of fertiliser • Variations in subsidies available on different types of

fertilizers.

Trend in price of Urea, DAP,MOP (Rs/kg)

1980-81

1982-83

1984-85

1986-87

1988-89

1990-91

1992-93

1994-95

1996-97

1998-99

2000-01

2002-03

2004-05

2006-07

2008-09

2010-11

2012-13

2014-150

5

10

15

20

25

30

35

40

45

50

NKP

twice P DAP

Annual growth rate NPK price 3.2:6.4:6.8 in %source-Authors calculation based on FAI 2014-2015.

40%

RPS to NPS

Price per Kg of nutrients

UREA DAP MOP SSP0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

Rs/kg

Rs/kg


Fertilizer & foodgrain prices

Inti

mately

related

affect

By

influencing

The Government efforts have been to regulate the fertilizer and food grain prices in such a way that the fertilizer use increases for increasing crop production.

Trend in price of rice and wheat (Rs/kg)

Percent increase in prices(1998-2015)Pr 68% Pn 39%Pw 62% Pp 62%

Pk 77%

1998-99

2000-01

2002-03

2004-05

2006-07

2008-09

2010-11

2012-13

2014-150

2

4

6

8

10

12

14

16

price per kg(grain) Prprice per kg(grain) Pw


Prices of N, P and K relative to MSP of paddy

1980-81

1982-83

1984-85

1986-87

1988-89

1990-91

1992-93

1994-95

1996-97

1998-99

2000-01

2002-03

2004-05

2006-07

2007-08

2009-10

2011-12

2013-14

2015-160.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

Pn/Pr Pp/Pr Pk/Pr


Prices of N, P and K relative to MSP of wheat

1980-81

1982-83

1984-85

1986-87

1988-89

1990-91

1992-93

1994-95

1996-97

1998-99

2000-01

2002-03

2004-05

2006-07

2007-08

2009-10

2011-12

2013-14

2015-160.00

1.00

2.00

3.00

4.00

5.00

6.00

Pn/Pw Pp/Pw Pk/Pw


Growth rates in prices of N,P and K relative to MSP of wheat and paddy

Wheat Pn/Pw Pp/Pw Pk/Pw

1980-81 to 1990-91 -3.94 -3.95 -3.91

2005-06 to 2015-16 -4.87 0.80 7.981980-81 to 2015-16 -4.14 -1.30 -0.92

Rice Pn/Pr Pp/Pr Pk/Pr

1980-81 to 1990-91 -4.69 -4.71 -4.65

2005-06 to 2015-16 -7.49 -2.00 4.971980-81 to 2015-16 -4.17 -1.34 -0.95


Comparison of MSP of rice & wheat to urea price in selected countries.

Source: Agricultural Statistics at a Glance 2014 and Fertiliser Statistics 2012-13

Subsidy

• Total subsidy 2.41lakh crore 2015-16.• For 3F’S 2.31lakh crore, fertilizer subsidy the third-

biggest share of India’s total subsidy .• Today subsidy of fertilizer was 72 thousand crores.• Urea(51000cr) is lion share in total fertilizer subsidy

(domestic>imported), followed by decontrolled fertilizers(19000cr).

increase subsidy

Increase in fertiliser use Increase in subsidy content per unit of fertiliser.

Increase in the world price of the fertilisers and inputs were attributed by 94 per cent of the increase in subsidy while only 6 per cent was due to increase in consumption which

contributed to fiscal deficit (ashok gulati).

Trend in fertilizer subsidy & food subsidy

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

2013-14

2014-15

2015-160

20,000

40,000

60,000

80,000

100,000

120,000

140,000

total fertilizer subsidy in crores

total food subsidy

Rs crore


Previous Subsidy Policy's Made

• The subsidy burden of the government has been increasing.

• Import dependency in the case of phosphatic and potassic fertilisers.

• No much increase in price of domestic fertilizer. To solve this issues NBS-2010, which consider international prices, exchange rate, inventory level as well as the existing MRP of DAP and MOP.(fixed subsidy floating price)

NBS for nutrient N,P K,S(Rs per kg)

2010-11 2011-12 2012-13 2013-14 2014-15 2015-160

10

20

30

40

50

60

RS


Before and after NBS

total FS(Rs crs)

Consumption(mt)

Production(mt)

price urea(Rs)

price DAP(Rs)

price KMOP(Rs)

2004-2005 18460 18398 15343 10 16 7

2010-2011 62301 28122 16549 11.5 17.9 8.4

2014-2015 70967 25576 16544 11.6 44 26


Scope for Specialty Fertilizers

Fertilizers applied in Special condition of Soil & plantFertilizers applied for Specialized action in plant. Mainly production of high-value agricultural crops• All Water soluble Fertilizers• All Secondary & Micronutrients• Slow & Controlled release fertilizers – NCU, SCU, UDP etc.• Area & Crop Specific Fertilizers- Customized fertilizers, Fortified fertilizers

Water soluble Fertilizers(WSF)

Fertilizer Use efficiencies of conventional fertilizersN- 30- 45%P- 10-30%

K-50%This leads to lower return on money spent on per unit of fertilizer, along with increased soil salinity.

• FUE of WSF @ 80-85% • 100% Water soluble fertilizers, with low salt ,

chloride content .

Consumption of WSF after NBS

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

2013-14

0

20000

40000

60000

80000

100000

120000

140000

tonnes

increase

twice


Consumption of S after NBS

• Also 45% growth in consumption of Zn , B, Fe &Mn products• 49% increase In production of customised fertilizers

Total 's' in tonnes

Average consumption

2001-02 to2008-09 643.9

2009-2010 to 2014-15 975.5

S' increased by 34 %


Slow & Controlled release fertilizers

• Neem Coated Urea• Sulphur Coated Urea• Urea Deep Placement (UDP) Neem coated urea is cheap and creates employment in rural area.Neem Coating of Urea fertilizers contain 1/5 to 1/3 of its total N in insoluble or slow release form. This slow release nitrogen is helps to

(1)decrease the number of applications(2) reduce burn potential (3) give uniform growth (4) increase N efficiency by reducing leaching and volatilization loss. rice yields jump 9.6 per cent and wheat by 6.9 per cent(anonymous)

Scope for NCU

• Neem Coating of Urea: 25th May, 2015.• it has been made mandatory for all the indigenous

producers of urea to produce 100% of their total production of subsidized urea as Neem Coated urea.

• the use of neem-coated urea could save the government Rs 6,500 crores in subsidy annually(ministry).

• Since NCU cannot be used for industrial purposes, illegal diversion of subsidized urea to non-agricultural use would not be possible. the government aims to prevent subsidy leakages.

Production of Neem coated urea after NBS

2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-140

1000000

2000000

3000000

4000000

5000000

6000000

7000000

production tonnes

86% increase

NCU 60 lakh tonnes source-Authors calculation based on FAI 2014-2015.

Imbalanced Use of Nutrients: Pre- & Post-NBS Period

2010-11 2014-15 N P K N P K

Punjab 19.1 5.9 1 35.8 8.7 1Haryana 20.5 7.1 1 27.9 6.8 1

Andhra Pradesh 3.9 2.1 1 4.9 2.0 1

Tamil Nadu 2.1 0.9 1 3.2 1.2 1Bihar 5.8 1.9 1 9.0 2.1 1

West Bengal 2 1.4 1 2.4 1.2 1Odisha 3.3 1.7 1 5.3 2.1 1Gujarat 6.9 2.9 1 10.6 3.1 1All India 4.7 2.3 1 6.7 2.4 1


Balanced Fertilization

• Balanced fertilization means the application of all the deficient plant nutrients in sufficient amounts, appropriate forms and ratios.

• The soil test data arising out of soil tested laboratories help in formulating recommendation for balanced fertilization.

Balanced fertilization can be aimed:• To ensure increased crop yields.• To improve cost: benefit relationship.• To improve quality of crops.• To correct soil nutrient deficiency.• To maintain or improve soil fertility.• To avoid or check environmental/soil/underground water pollution.• To restore soil fertility impaired through imbalanced fertilizer use

GST and fertilizers

• Fertiliser sector which is currently allowed a number of tax concessions/exemptions both at input and output levels and there is also heavy subsidy on sale of fertilisers from both central and state.

Impact of proposed GST on fertiliser industry• The combined impact of these exemptions or concessions has

been that the total incidence of tax on fertiliser products has been reduced significantly and is about 5-10% of the value of products.

• GST at a level of 18%, the incidence of tax on fertilisers will increase significantly. This made

Either to • Increase the retail prices of fertilisers • Increase the fertiliser subsidy or both

Another issue Before GST:- incidence of tax on inputs is higher than the incidence of tax on finished fertilisers due to subsidy element.After GST:- taxing the subsidy result inaccumulation of large amount of Unutilized input tax credit blocking industry’s funds.

Another issue Subsidy given almost to 70% of cost of urea This is not taxed at present. On introduction of DBT, the GST will also be levied on 70% subsidy. This willincrease the incidence of tax on the fertiliser products

Solution?1.Zero rate GST2.No increase in cost of production directly/indirectly.

Agricultural subsidies (producer support estimate) in selected countries(US $ million)

20052006

20072008

20092010

20112012

20132014

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

European union Japan IndiaUSATurkeyRep. of Korea Canada Switzerland


Conclusion

• The increase in fertilizer prices gradually, which may be commensurate with the support prices for food grain and other agricultural commodities could be one way to check the fertilizer subsidy.

• The most effective way could be to improve the fertilizer use efficiency which would result into improved profitability of the farmers by way of saving in fertilizer use for a given land area and getting higher production per unit.

Fertiliser products are likely to suffer from higher incidence of taxes with implementation of GST. There is a need for the government to pay special attention to fertiliser sector.

• Lack of scientific awareness amongst farmers. The farmers are mostly illiterate. Farmers don't understand the requirements of different types of fertilizer depending upon soil type and geography.

• Govt. has shifted from urea to nutrient based subsidy. This scheme provides for subsidy per unit of nutrient added in the fertilizer. Thus the manufactures are now free to mix the nutrients as per the soil requirement.

• Initiative like soil health card will ensure that the status of nutrition of soil is regularly provided to the farmers and strengthening the soil testing labs need.

• NCU helps in increase NUF , increase employment ,and reduce the urea from non agricultural use, the government aims to prevent subsidy leakages.

THANK YOU

Trend, imbalance,Gst and subsidy of fertilizer industry in India

Economy & Finance

Transcript of Trend, imbalance,Gst and subsidy of fertilizer industry in India