India’s Fertiliser Sector – Recent Developments

India’s fertiliser sector has undergone changes in recent years. The government aims to enhance self-sufficiency in urea production and improve the availability of phosphatic and potassic fertilizers. This initiative is vital for supporting agriculture and ensuring food security in the country.

New Investment Policy for Urea

The New Investment Policy (NIP) was introduced in 2012 to encourage investment in the urea sector. The policy was amended in 2014 to further facilitate fresh investments. The goal is to make India self-sufficient in urea production. Six new urea units have been established under this policy. These include four units set up by Joint Venture Companies and two by private firms. Each unit has a capacity of 12.7 Lakh Metric Tonnes per annum (LMTPA).

Subsidies and Pricing Structure

Urea is sold to farmers at a Maximum Retail Price (MRP) set by the government. The subsidised price for a 45 kg bag of urea is ₹242. The government compensates urea manufacturers for the difference between production costs and the MRP. This ensures farmers receive urea at affordable rates.

Nutrient Based Subsidy Scheme

The Nutrient Based Subsidy (NBS) scheme was introduced to regulate subsidies for phosphatic and potassic (P&K) fertilizers. The subsidy rates are adjusted according to international market prices. For Kharif 2024, the subsidy for DAP was ₹21,676 per MT. For Rabi 2024-25, it increased to ₹21,911 per MT. Special packages have been introduced to ensure the availability of DAP at affordable prices.

Production Capacity Growth

Urea production capacity has increased. From 207.54 LMTPA in 2014-15, it rose to 283.74 LMTPA in 2024. The New Urea Policy (NUP) introduced in 2015 contributed to an additional production capacity of 20-25 LMTPA. This has boosted overall urea production from 225 LMT in 2014-15 to 314.07 LMT in 2023-24.

Promotion of Indigenous Fertilizers

The government promotes the production of indigenous fertilizers. Potash derived from molasses has been included in the NBS regime since 2021. The policy encourages companies to import or produce fertilizers based on market dynamics. This aims to enhance self-reliance in fertilizer manufacturing.

Focus on Sustainable Agriculture

The initiatives in the fertiliser sector align with the broader goal of sustainable agriculture. By ensuring affordable prices and increasing production capacity, the government supports farmers and strengthens food security.

Questions for UPSC:

1. Critically analyse the impact of the New Investment Policy on India’s urea production capabilities.
2. Estimate the role of Nutrient Based Subsidy in stabilising the fertiliser market in India.
3. Point out the significance of indigenous fertilisers in enhancing agricultural sustainability in India.
4. What are the challenges faced by the Government of India in achieving self-sufficiency in fertiliser production? Discuss with examples.

Answer Hints:

1. Critically analyse the impact of the New Investment Policy on India’s urea production capabilities.

1. The New Investment Policy (NIP) was introduced to attract investment and enhance urea production.
2. Six new urea units were established under NIP, increasing production capacity .
3. Indigenous urea production capacity rose from 207.54 LMTPA in 2014-15 to 283.74 LMTPA currently.
4. Joint Venture Companies and private firms contributed to the establishment of efficient, modern urea plants.
5. The policy has led to a substantial increase in overall urea production, from 225 LMT in 2014-15 to 314.07 LMT in 2023-24.

2. Estimate the role of Nutrient Based Subsidy in stabilising the fertiliser market in India.

1. The Nutrient Based Subsidy (NBS) scheme adjusts subsidy rates based on international market prices, stabilizing costs.
2. For Kharif 2024, the subsidy for DAP was ₹21,676 per MT, rising to ₹21,911 per MT for Rabi 2024-25.
3. Special packages ensure affordable DAP availability, supporting farmers’ purchasing power.
4. NBS encourages domestic production and import of fertilizers, promoting a balanced market environment.
5. Overall, NBS plays important role in maintaining price stability and ensuring fertilizer accessibility for farmers.

3. Point out the significance of indigenous fertilisers in enhancing agricultural sustainability in India.

1. Indigenous fertilizers reduce dependency on imports, enhancing self-sufficiency in agricultural inputs.
2. Promotion of Potash derived from molasses supports local production and utilization of domestic resources.
3. Indigenous fertilizers contribute to lower transportation costs and increased availability for farmers.
4. They align with sustainable agricultural practices by promoting eco-friendly production methods.
5. Supporting indigenous fertilizers strengthens the overall agricultural ecosystem and food security in India.

4. What are the challenges faced by the Government of India in achieving self-sufficiency in fertiliser production? Discuss with examples.

1. High dependence on imported raw materials for fertilizer production remains challenge.
2. Fluctuating international prices of fertilizers can disrupt domestic pricing and availability.
3. Environmental concerns and regulatory hurdles affect the establishment of new production units.
4. Infrastructure issues, such as transportation and distribution, hinder efficient supply chains.
5. Examples include delays in setting up new plants and the need for technological upgrades in existing units.