Fertilizer comsumption pattern - 2001
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1) Fertilizer use in India has increased overall consumption from around 11.5 million tons in 1990-91 to over 41 million tons in 1999-2000, with nitrogenous fertilizers making up around 65% of total consumption. 2) Five states - Andhra Pradesh, Maharashtra, Karnataka, Tamil Nadu, and West Bengal - account for over 83% of NP/NPK fertilizer consumption in India, led by Andhra Pradesh. 3) The government's retention pricing scheme, introduced in the 1970s-80s, played a key role in facilitating growth of India's fertilizer industry and increasing consumption, through subsidies to maintain domestic production and consumption.
Fertilizer comsumption pattern - 2001
- 1. Fertilizer Fertilizer provides essential plant nutrients required for increasing productivity of food grains and other agricultural crops and therefore, has an extricable linkage with the objective of food security and achieving rapid and sustained growth of agriculture. In this context, it may be noted that the net sown area (cultivated area under crops and orchards including area sown more than once in the same year, only once), which had virtually stagnated at about 140 million hectares during the decade of 70s, increased marginally to about 142 million hectares at the end of 80s and thereafter, stagnated at that level during 90s (142.8 million). The Fertilizer policies of the Govt. of India particularly during the 70s and 80s played a vital role in facilitating rapid growth of the fertilizer Industry in India, on the one hand, and increased consumption on the other. The epicenter of these policies was at the Retention pricing and subsidy scheme (RPS) which was introduced in November 1977 for Nitrogenous Fertilizers and February 1979 for complex Phosphatic Fertilizers. Consumption The present level of fertilizer use in India i.e. 84.3 Kg per hectare (1996-97). (China at 266.4 Kg/hectare, Pakistan 111.5 Kg/hectare and Sri Lanka 108.3 Kg/ha) Annual fertilizer consumption in India is slightly more than 40 million tons. Total of N, P and K consumption in the year 1999-2000 rose to 18129.3 thousand tons from 11568.21 thousand tons in 1990-91. Domestic fertilizer consumption in the Rs. 35,000 crore industry has been witnessing CAGR of 12% since last 25 years.
- 2. Fertilizer consumption pattern in India 50000 Quantity ('000 tons) 40000 30000 20000 10000 0 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 Series1 30228.9 30093.5 28657.9 29635 32481.1 33365.8 34006.5 38022.2 39302.7 41814.2 Year 1) K2O- consum ption N - consum ption 2000 14000 12000 1500 10000 8000 1000 6000 500 4000 2000 0 0 Y ear Y ear G-I
- 3. Share of nitrogenous fertilizers is 65% (1999-00) to the total fertilizer consumption followed by phosphorous 26% and potash 9%. N, P2O5 and K2O consumption has been increasing on an average rate of 12.36 %, 17.17 % and 35.64 % over last 50 years. Share of Nitrogen in nutrient consumption is gradually declining (ref G-II) over the years whereas that of Potassium and Phosphorous has increased substantially in the recent past. Urea supplies around 83% of the total nitrogen requirement. (At present, only 50% of the total domestic capacity is gas-based, about 30% is based on naphtha and rest on fuel, oil and coal). Single super phosphate supplies 19% of the total phosphatic nutrients. (Both rock phosphate and sulphur are imported). Di-ammonium phosphate (DAP) meets 50% of phosphatic and 8% of nitrogenous nutrients. Rock phosphate is the main feedstock. Potassium fertilizers are not manufactured in India due to the non-availability of the basic feedstock. Muriate of potash (MOP) is imported from countries like Canada, Jordan and Germany. The domestic fertilizer demand was met largely by imports till the mid-1970s. To reduce import dependence, the government implemented a Retention Pricing Scheme (RPS – details next page) in 1977 to encourage domestic capacity creation. Earlier, all fertilizers were under government control. However, in 1992-93, potassium and phosphatic fertilizers were deregulated. Uttar Pradesh continued to be the highest consumer of fertilizer nutrients at 3.09mn tons followed by Andhra Pradesh (2.0), Maharashtra (1.66) and Punjab (1.38mn tons). These four states together account for 49% of all India consumption.
- 4. 1951-52 1960-61 1970-71 10% 10% P2O5 11% 18% 21% N 89% 69% 72% 1990-91 1999-00 1980-81 11% 9% 11% 26% 26% 22% 63% 65% 67% Decadal variation in percentage consumption of N, P & K G-II
- 5. Retention pricing scheme Urea, the most widely used fertilizer, is under government control. The production cost for each unit is calculated separately, at a normative capacity level of 90% (80% in year 1). Adding the cost of production and a fixed return on investment, one can arrive at the retention price. The government reimburses the difference between the retention price and the selling price, which is also fixed by the government. Operating at higher than 90% utilization levels enables a producer to generate more than 12% returns as all costs are covered at 90% utilization. The retention price for most units is higher than the selling price. The difference is compensated to the producer and reflected in the fertilizer subsidy. The revised estimate for urea subsidy is Rs86bn. The concessions available to P and K will add another Rs40bn. Implications of controls Under the regime of assured returns, capacities were set up at high capital costs. These coexisted with older units with lower retention prices. The system lacked incentives for upgradation and investments in modernization. Although the profitability of the sector was assured, modernization efforts were limited because of limited operational freedom and incentives. Under political compulsions, successive governments have not been able to raise fertilizer prices in spite of cost increases. With other sectors witnessing liberalization, especially the hydrocarbon sector, the prices of petroleum feedstock (gas, fuel oil and naphtha) have increased. In line with the economic reforms, the government decontrolled DAP, SSP and other fertilizers in August 1992, while urea was kept under state control. DAP and SSP prices doubled. This has led to undesirable changes in the fertilizer mix used by the farmers. This resulted in the NPK ratio changing to 10:3:1. In an attempt to mitigate this, DAP and other complex fertilizers were given price sops.
- 6. '000 tons ooo' tons 0 500 1000 1500 2000 2500 19 90 0 5000 10000 15000 20000 25000 -9 1 1990-91 19 91 -9 2 1991-92 19 92 -9 3 1992-93 19 93 -9 4 19 1993-94 94 -9 5 19 1994-95 95 -9 6 Ye ar 19 1995-96 96 Y ear -9 7 19 G - III 97 1996-97 -9 8 19 C o n su m p ti o n C o n s u m p tio n 98 1997-98 -9 9 19 99 1998-99 -0 0 1999-00 N Ps SOP CA N SSP DAP U rea MOP o th e r s NPKs
- 7. Selling Price of Major Fertilisers before and after decontrol Excluding Sales Tax and other Local Taxes Date Urea DAP MOP SSP 10:26:26 12:32:16 15:15:15 16:20:00 20:20:00 Prior to decontrol 25-7-91 3300 5040 1820 1340 4140 4560 2940 3220 3640 14-8-1991 3060 4680 1700 1240 3840 4220 2740 3000 3380 After decontrol of P & K Fertilizer (Urea remained under control) (with concession) 25-8-1992 2760 7500- 5500- 2400- 6660- 6730- 5330- 6020- 5565- 8000 6000 2600 7050 6890 6255 6300 6120 1-4-1994 2760 6466- 3800- 2400- 660-6900 7160- 5880- 5100- 5600- 8038 5400 2600 7800 6600 6100 6300 1-4-1995 3320 9200- 4100- 2660- 8800- 9000- 6440- 6700- 6570- 9860 4600 3000 9100 9900 6500 6760 7500 1-4-1996 3320 6500- 3500- 2000- 7554- 6220- 4980- 6080- 5130- 11000 5800 4200 9885 9887 7000 6731 7800 21-2-97 3660 7700- 4100- 2000- 7554- 7410- 5804- 6020- 6165- 9840 5540 4165 8360 8400 6500 7054 7300 1-4-1997 3660 8300 3700 2335- 7300 7400 6200 6400 6500 3057 1-4-1999 4000 8300 3700 2500- 7300 7400 6200 6400 6500 3500 Note: Rs. 1000 per ton concessions on DAP and MOP and proportionally on complexes.
- 8. B ih a r DAP 6% T a m iln a d u O ris s a A s s a m 1% 1% 1 9 % U tta r 4% O th e rs P ra d e s h W est ben gal 1% 6% K a rn a ta k a A n d h ra 6% p ra d e s h 10% R a ja s th a n 6% H a ry a n a M adh ya P u n ja b 7 % G u ja ra t 10% M a h a ra s h tra P ra d e s h 7% 8% 8% UP Andhra MP Maharashtra Gujarat Haryana Rajasthan Karnataka 1131.2 697.97 565.84 549.99 481.99 468.49 453.18 446.31 WB Bihar Tamilnadu Orissa Assam J& K Punjab others 426.79 389.08 272.42 95.91 36.09 29.92 674.49 102.49 SO Tam P Andhra 10:26:26 Karnataka 12:32:16 ilna Orissa pradesh Kerala Gujarat 3% Andhra 4% Madhya du 3% 3% 2% pradesh Pradesh Haryana M adhya Tamilnadu West bengal 4% 3% 2% 6% Pradesh 38% Andhra Karnataka Himachal 11% 12% Pradesh pradesh 5% Karnata 52% Uttar Pradesh Maharashtra Punjab ka 36% 8% Bihar 62% 37% 9% G - IV
- 9. The state wise NP/NPK market concentration is as per the following diagram: percentage share in NP/NPK market concentration 120 consumption 83.2 % Cumulative 100 80 60 40 20 0 h sh Ta aka h ra rry an a tb u sh la l ab at r oa sa ga ha es es Po yan ad ra ht ar de de th he nj G ris en ad Bi at ad iln as Ke uj as Pu ra ra ar ic O rn G Pr m pr ar nd lP aj H rP Ka es ah R a a ha tta hr hy W M ac d U ad States An im M H This excludes DAP which is consumed by all the states across the country and it is considered to be the most popular fertilizer next to Urea. The above diagram shows that only five states namely Andhra Pradesh, Maharashtra, Karnataka, Tamilnadu and West Bengal consumes 83.2 % of NP/NPK. Andhra Pradesh (AP) is the highest consumer of NP/NPKs (excluding DAP) with 1110.54 thousand tons in the year 1999-00 (increased by 10.51 % compared to previous year). Next to AP, Maharashtra is the second largest consumer of NP/NPKs in India with 924.74 thousand tons in the year 1999-00. Increase in consumption over last year is 36.8 %. In the similar pattern as above, Karnataka holds the third rank with a consumption of 783.1 thousand tons with an increase of 8.4 % over last year. Tamilnadu (398.93 thousand tons in 1999-00) and West Bengal (314.06 thousand tons) are viz. 4th and 5 5th largest consumer in this category. Increase in consumption over last year in these states are 5.6 % and 43.5 % respectively.
- 10. Andhra 16:20:00 19:19:19 pradesh 23:23:00 Arunachal Tamilnadu Madhya Andhra 4% Gujarat Pradesh 6% Pradesh 2% pradesh Goa 3% 0% 10% 5% Karnataka Maharasht 5% Andhra ra pradesh 46% Karnataka Karnataka Maharashtr 41% 51% 39% a 88% 17:17:17 Pondicherry Madhya Rajasthan West bengal 1% Pradesh 1% 20:20:00 1% W est 2 :2 :0 8 8 0 Kerala Andhra 2% Bihar M d ya ah Maharashtra 4% b ga en l 4% pradesh Gujarat 1% Punjab P d ra esh 35% 1% 1% 1 2% 2% Uttar Pradesh Tamilnadu Andhra 3% 26% pradesh Kerala 34% Orissa A d ra nh Karnataka 8% Maharashtra 2%8 30% Karnataka 18% p d ra esh Tamilnadu 11% 18% 5% 9 Andhra 14:35:14 pradesh 15:15:15 Madhya Gujarat Maharash 3% Bihar Pradesh Orissa Tamilnadu 1% tra 2% 1% 13% 3% Himachal West 2% Pradesh bengal Uttar 1% 13% Pradesh Andhra 3% Maharashtra Madhya pradesh 49% Pradesh 56% West bengal Karnataka 16% 15% 22% G-V
- 11. On including Uttar Pradesh and Kerela 92.4% of the market is under cover where the consumption are 242.19 (5.6 % of all India) and 152.33 (3.6%) thousand tons respectively. Uttar Pradesh (UP) consumes highest quantities of SSP (693.71), DAP (1131.2) and NPK grade 12:32:16 (186.32) apart from normal consumption of CAN, MOP, 20:20:00 and 15:15:15. Here it is important to note that consumption of NP/NPKs are least in the Northern states of the country. UP is the only state which consumes the above two grades of NPK fertilizers. Moreover catapulted growth in consumption rate has been observed in these categories in the recent past. Next to UP Punjab and Haryana in the North also consumes considerable amounts of each of SSP (92.14 & 49.94), MOP (37.71 & 7.08), DAP (674.49 & 468.49). Penetration of NPKs is negligible in the northern states (barring UP). In the east, West Bengal (WB) is the main market for NP/NPKs (14:35:14 & 15:15:15) where the consumption has positively changed by 22% as compared to the previous year (1998-99). The overall increase in all India consumption of NP/NPKs (including DAP) has been 7%. For grades 16:20:00, 17:17:17, 20:20:00, 23:23:00 and 28:28:00 consumption increased by more than 50%.