India has done well in a volatile business environment, thanks to the proactive Government measures in fertiliser segment

As part of the agricultural value chain, fertilisers play a key role in ensuring the improvement in farm output and achieving food security goals for the nation. India is the second largest consumer of fertilisers globally after China, servicing over 190 million hectares of gross cropped area and reaching 140 million farmlands.

While India is the third largest producer of agri-nutrients globally, it is scarcely endowed with fertiliser raw material (rock phosphate, phosphoric acid sulphur, ammonia, natural gas, MOP, etc.) and depends on imports for meeting close to one-third of its fertiliser requirements.

In the past two years, pandemic-induced supply chain uncertainties, higher global demand in competing markets, protectionist measures, and disruption in supplies from Baltic region have impacted the raw material and finished product prices and availability, exposing vulnerabilities of an imperfect global market. The Fertilizer Index, as measured by the International Monetary Fund (IMF), surged by a whopping 201 per cent from January 2020 to July 2022, putting a major strain on importing nations like India.

However, India has sailed reasonably well in a volatile business environment, thanks to the proactive measures undertaken by the Government in the fertiliser segment. Recognising its importance to the farming community, the Government has not only ensured timely nutrient availability but also contained the increase in fertiliser prices.

At the farm-gate level, the impact of the fertiliser price hike in the international markets has been absorbed by the Government through extending subsidy support to the farmers. Though the subsidy burden for the Government has gone up in the last two years—Rs 2.5 lakh crore estimate in FY22-23 and Rs 1.62 lakh crore in FY21-22 compared to an average annual outgo of Rs 80,000 crore—it has prioritised farmer welfare and food security goals for India. As a result, the fertiliser consumption has remained stable and India continues to do well in agri-production, not only addressing the nutritional needs of the nation but also exporting to over 150 countries during last year.

India’s fertiliser sector is slowly turning this adversity into opportunity through strengthening its domestic operations, building capacities, and investing in backward integration projects to improve its bargaining power. In the past six months, India,  has been actively engaging with resource-rich nations for strengthening its supply tie-ups. This includes Government spearheading major industry delegations for signing MoUs with partners like Jordan (for rock phosphate, phosphoric acid, MoP, DAP), Saudi Arabia (ammonia, DAP, NPKs), Russia (DAP, NPKs), and Canada (MOP).

India engaged in Government-to-Government level negotiations with Russia for long-term supply of fertilisers that ensured DAP availability in a tight market situation. A recent instance of this has been the competitive prices at which phosphoric acid for Oct-Dec FY23 have been finalised at $1,175/ ton, down from $1,715 that prevailed in the previous quarter. This will significantly bring down the domestic cost of manufacturing.

The Government is also encouraging industry to set up overseas joint ventures for securing raw material and there has been an active engagement at the Government level to revive the existing joint ventures. There has been an increased thrust on reviving the Single Super Phosphate (SSP) industry, the cheapest source of phosphate providing multiple nutrients like sulphur and calcium. In the current elevated commodity cycle, SSP has emerged as a good substitute, especially for oilseeds and pulses for semi-arid and rainfed regions. The Government is promoting use of alternate fertilisers and supporting the adoption of new technology solutions like nano, liquid and bio-fertilisers. The response of nano products from the farming community is quite encouraging.

There has been an increased focus on application technologies like drone-based spraying, improving resource utilisation and driving farm efficiencies. The Government is also encouraging the adoption of aerospace and geographic information system-driven technologies in agriculture, which holds the potential of transforming farming practices and driving farm prosperity.

The participative governance approach followed by the Department of Fertilisers (DoF) has strengthened the communication and coordination between the Government and Industry. While there is still some way to go before India achieves self-sufficiency in fertilisers, the actions undertaken in the last few months have strengthened its standing in the global fertiliser supply chain. It underpins successful fertiliser diplomacy and indicates India’s strong position to deal with similar commodity shocks in future.

(The author is a former Fertilisers Secretary)