Fertilizer Industry in India

• The Fertilizer Industry in India is 1 of the 8 core industries. Fertilizer has the minimum share in the Index of Core Industries.
• India is the 2nd largest consumer of Urea fertilizers after China. India also ranks 2nd in the production of nitrogenous fertilizers and 3rd in phosphatic fertilizers. Potash requirement is met through imports since we have limited reserves of potash. There are 2 types of Fertilizers
  1. Primary Fertilizers: classified on the basis of nutrients they supply to the soil like N:P:K:
     1. Nitrogenous (Urea),
     2. Phosphatic (di-ammonium phosphate - DAP) and
     3. Potassic (muriate of potash (MOP) fertilizers. 
  2. Secondary Fertilizers includes Calcium, Magnesium and Sulphur.
  3. Micronutrients include Iron, Zinc, Boron, Chloride etc.

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• Fertilizer subsidy (Food > Fertilizer > Petroleum > Interest payments)
  1. Earlier no Fertilizer subsidy was paid till 1977. The oil crisis of 1973 led to increasing in Fertilizer prices leading to a decline in consumption and an increase in food prices. In 1977, Govt subsidized manufacturers.
  2. After the 1991 crisis, Govt decontrolled the import of Phosphate and Potash but Urea imports is restricted. 

Urea Production and Pricing mechanism

• Urea is the source of Nitrogenous fertilizer and it is heavily subsidized by the Center. Today Urea is the only fertilizer that remains controlled.
• CCEA approved the continuation of the Urea Subsidy Scheme up to 2020
  1. It is a part of the Central Sector Scheme. Urea price will be the same till 2020. 
  2. Now DBT Scheme is approved for fertilizer subsidy to urea manufacturers and importers. It also includes Imported Urea subsidy which is directed towards import to bridge the gap between demand and indigenous production of urea. It also includes freight subsidies for the movement of urea.
  3. Benefits
     1. DBT will ensure timely payment of subsidies to urea manufacturers. Fertilizer Co. leads to timely availability of urea to farmers.
     2. This will reduce the leakage of fertilizer subsidy and black marketing.
     3. The ceiling might be put to reduce the overuse of Nitrogenous fertilizers.
  4. Subsidy to Fertilizer manufacturer/ importer = Farm Gate price - MRP paid by Farmers. 

• New Urea Policy of 2015 (till 2019-20) 

  1. With the objective of maximizing indigenous urea production, promoting energy efficiency in urea production and rationalize subsidy.
  2. It is applicable to the existing 25 gas-based units.
  3. It ensures timely payment to urea manufacturers resulting in timely availability of urea to farmers.
• Urea is given at a statutorily controlled price = Rs. 5360/ MT. Other charges for Neem coating.
• Center plans to ease control on the retail prices of Urea and wants to make it more targeted.
• Earlier Mandatory Neem coated urea production was done to slow down the dissolution of nitrogen into the soil, resulting in less nutrient requirement.
• Govt is also planning over fixing a Nutrient Based Subsidy (NBS) rate for Urea to promote balanced use of fertilizers and bring efficiency in the industry.

CCEA approved the continuation of Nutrient Based Subsidy scheme till 2020

• Under this scheme a fixed amount of subsidy decided on an annual basis, is provided to fertilizer companies (other than Urea)  depending on its nutrient content. It is applicable to 22 fertilizers (other than Urea). 
• Govt announces a fixed rate of subsidy on each nutrient of subsidized Nitrogen, Phosphate, Potash and Sulphur fertilizers. MRP is decided by considering international and domestic prices of P&K fertilizers, exchange rate and inventory level in the country.

Infrastructure

• Fertilizer Corporation of India Limited: has 4 units at Sindri (Jharkhand); Gorakhpur (UP); Ramagundam (AP) and Talcher (Odisha) and Korbe (Chattisgarh).
• Hindustan Fertilizer Corporation Limited: at Barauni (Bihar); Durgapur (WB) and Namrup (Assam).
• Rashtriya Chemicals and Fertilizers Limited, Trombay.
• National Fertilizers Limited at Bhatinda (Punjab) and Panipat (Haryana).

What is Agriculture Infrastructure Fund?

Cabinet gave its approval to the following modifications in the Central Sector Scheme of Financing Facility under the ‘Agriculture Infrastructure Fund’:

• Eligibility has now been extended to State Agencies/APMCs, National & State Federations of Cooperatives, Federations of Farmers Producers Organizations (FPOs) and Federations of Self Help Groups (SHGs).
• At present Interest subvention for a loan up to Rs. 2 crore in one location is eligible under the scheme.

1. In case, one eligible entity puts up projects in different locations then all such projects will now be eligible for interest subvention for loans up to Rs. 2 crores.
2. However, for a private sector entity, there will be a limit of a maximum of 25  such projects.
3. This limitation of 25 projects will not be applicable to state agencies, national and state federations of cooperatives, federations of FPOs and federations of SHGs.
4. Location will mean the physical boundary of a village or town having a distinct LGD (Local Government Directory) code. Each of such projects should be in a location having a separate LGD code.

• For APMCs, interest subvention for a loan up to Rs. 2 crores will be provided for each project of different infrastructure types e.g. cold storage, sorting, grading and assaying units, silos, et within the same market yard.
• The power has been delegated to Hon’ble Minister of Agriculture & Farmers Welfare to make necessary changes with regard to the addition or deletion of the beneficiary in such a manner so that the basic spirit of the scheme is not altered
• The period of the financial facility has been extended from 4 to 6 years up to 2025-26 and the overall period of the scheme has been extended from 10 to 13 up to 2032-33.
• The modifications in the Scheme will help to achieve a multiplier effect in generating investments while ensuring that the benefits reach small and marginal farmers.  APMC markets are set up to provide market linkages and create an ecosystem of post-harvest public infrastructure open to all farmers.

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Agriculture Infrastructure Fund

• It is a part of the over Rs. 20 lakh crore stimulus package announced in response to the Covid-19 crisis. For FY 2020-2029.
• Aim: To provide medium - long term debt financing facility for investment in viable projects for post-harvest management Infrastructure and community farming assets.
• The funds will be provided for setting up cold stores and chains, warehousing, silos, assaying, grading and packaging units, e-marketing points linked to e-trading platforms and ripening chambers, besides PPP projects for crop aggregation sponsored by central/state/local bodies.
• Financial Support: Rs. 1 Lakh Crore will be provided by banks and financial institutions as loans to Primary Agricultural Credit Societies (PACS), Marketing Cooperative Societies, Farmer Producers Organizations (FPOs), Self Help Group (SHG), Farmers, Joint Liability Groups (JLG), Multipurpose Cooperative Societies, Agri-entrepreneurs and Central/State agencies or Local Bodies sponsored by Public-Private Partnership Projects.
• Loans will be disbursed in four years starting with a sanction of Rs. 10,000 crore in the current year and Rs. 30,000 crore each in the next three financial years.
• CGTMSE Scheme: A credit guarantee coverage will be available for eligible borrowers from the scheme under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme for a loan up to Rs. 2 crores.
• In the case of FPOs, the credit guarantee may be availed from the facility created under the FPO promotion scheme.
• The moratorium for repayment may vary subject to a minimum of 6 months and a maximum of 2 years.
• Loans will have interest subvention of 3% per annum up to a limit of Rs. 2 crores. This subvention will be available for a maximum period of seven years.
• The fund will be managed and monitored through an online Management Information System (MIS) platform. It will enable all the qualified entities to apply for loans under the Fund.
• The National, State and District level monitoring committees will be set up to ensure real-time monitoring and effective feed-back.

National Mission on Edible Oil-Oil Palm: New Edible oil mission

• The Centre will spend Rs. 11,000 crores on a new mission to ensure self-sufficiency in edible oil production at a time when India’s dependence on expensive imports has driven retail oil prices to new highs.
• This financial outlay for the National Mission on Edible Oil-Oil Palm (NMEO-OP) will be over a five-year period.

• “Today, when India is being recognised as a major agricultural exporting country, then it is not appropriate for us to depend on imports for our edible oil needs,” Mr. Modi said noting that the share of imported palm oil is more than 55%. “We have to change this situation. The thousands of crores that we have to give to others abroad to buy edible oil should be given to the farmers of the country only,” he added, naming north-eastern India and the Andaman and Nicobar Islands as prime locations for oil palm cultivation.
• NMEO's proposal would aim to reduce import dependence from 60% to 45% by 2024-25, by increasing domestic edible oil production from 10.5 million tonnes to 18 million tonnes, a 70% growth target.

• It projected a 55% growth in oilseed production, to 47.8 million tonnes. It is not clear whether these targets have changed under the final version of the mission.
• The NMEO-OP’s predecessor was the National Mission on Oil Seeds and Oil Palm , which was launched at the fag end of the UPA government’s tenure and later merged with the National Food Security Mission.
• Laying out its achievements in May 2020, the Agriculture Ministry said oilseed production had grown 35% from 27.5 million tonnes in 2014-15 to 37.3 million tonnes by 2020-21. Although oilseed acreage rose only 8.6% over that six-year period, yields rose more than 20%.
• At the PM-Kisan event, Mr Modi noted that although the country’s granaries were full of cereals such as rice and wheat, with the government making record purchases from farmers at MSP rates, self-sufficiency was yet to be attained in pulses and oil. Previous efforts to boost the production of pulses in the country had resulted in a 50% growth over the last six years, he said. “The work we did in pulses, or in the past with wheat and paddy, now we have to take the same resolution for the production of edible oil also. For our country to be self-sufficient in this edible oil, we have to work fast,” he added.
• “Through this mission, more than Rs. 11,000 crores will be invested in the edible oil ecosystem. The government will ensure that farmers get all the needed facilities, from quality seeds to technology. Along with promoting the cultivation of oil palm, this mission will also expand the cultivation of our other traditional oilseed crops,” he said.