Urea Production Growth and Atmanirbharta

India’srecent-developments/" target="_blank" rel="noopener"> fertiliser sector has experienced notable changes in urea production, particularly in the context of the government’s self-reliance initiative, Atmanirbharta. Recent developments highlight increase in domestic urea production, contrasting with challenges in other fertiliser segments like di-ammonium phosphate (DAP). The rise in production capacity is driven by new greenfield projects and strategic investments.

Increase in Domestic Urea Production

Between 2011-12 and 2023-24, India’s domestic urea production surged from 22 million tonnes to 31.4 million tonnes. Concurrently, imports decreased from 7.8 million tonnes to 7 million tonnes, indicating a shift towards self-sufficiency. This drop in imports is particularly , as it is projected to reach below 5 million tonnes, marking the lowest level since 2006-07.

New Production Facilities

The increase in urea output is largely attributed to the establishment of six new plants. Three plants are operated by Hindustan Urvarak & Rasayan Ltd (HURL), while others are run by Chambal Fertilisers, Matix Fertilisers, and Ramagundam Fertilisers. These plants collectively produced 7.55 million tonnes of urea in 2023-24. The investments for these projects ranged from Rs 6,000 crore to Rs 8,600 crore, showcasing commitment to expanding domestic production capacity.

Energy Efficiency and Location

The new plants utilise natural gas and demonstrate improved energy efficiency. They require only about 5 giga-calories to produce one tonne of urea, compared to older units that consume more. Additionally, the plants are strategically located in eastern India, targeting regions with a growing agricultural base. This shift enhances accessibility for farmers in states like Uttar Pradesh, West Bengal, and Jharkhand.

Upcoming Projects and Innovations

A seventh urea plant is under construction in Talcher, Odisha, with an estimated cost of Rs 17,080.69 crore. This facility will utilise coal as feedstock, representing a departure from the gas-based projects. The Talcher project aims to leverage indigenous resources and innovative technology, further supporting the government’s self-reliance goals.

Cost Analysis – Make vs Buy

The economic viability of domestic urea production versus imports is a critical consideration. The current landed price of imported urea ranges from $370 to $403 per tonne. In contrast, the cost of producing urea domestically is approximately $493 per tonne. However, after accounting for various taxes and the logistics of transporting imported urea, the cost differential narrows , making domestic production increasingly competitive.

Market Dynamics and Consumption Trends

The consumption of urea in India has risen from 29.6 million tonnes in 2011-12 to 35.8 million tonnes in 2023-24. This growth contrasts with more stagnant trends in DAP and complex fertilisers. The government’s fixed pricing for urea since 2012 has contributed to this unbalanced growth, necessitating a review of pricing strategies to promote sustainable usage.

Future Directions

India’s fertiliser strategy may involve a combination of enhancing domestic production in northern and eastern regions while exploring import options for the western and southern markets. This dual approach can help balance supply and demand while addressing the inefficiencies of older production units.

Questions for UPSC:

1. Discuss the significance of Atmanirbharta in the context of India’s agricultural policies.
2. Critically examine the impact of energy efficiency in urea production on India’s fertiliser industry.
3. Explain the economic implications of the make versus buy strategy in the context of India’s urea market.
4. With suitable examples, discuss the role of government pricing policies in shaping fertiliser consumption patterns in India.

Answer Hints:

1. Discuss the significance of Atmanirbharta in the context of India’s agricultural policies.

1. Atmanirbharta promotes self-reliance, reducing dependence on imports for agricultural inputs like fertilizers.
2. It aligns with the government’s aim to enhance domestic production capabilities in the agricultural sector.
3. Encourages investment in local manufacturing, thereby creating jobs and boosting economic activity.
4. Supports sustainable agricultural practices by ensuring consistent supply and quality of fertilizers.
5. Enhances food security by increasing domestic crop yields through improved fertilizer availability.

2. Critically examine the impact of energy efficiency in urea production on India’s fertiliser industry.

1. New plants require less energy (5 GCal/tonne) compared to older units (5.5-6.5 GCal), lowering production costs.
2. Improved energy efficiency contributes to environmental sustainability by reducing carbon footprints.
3. Enhances competitiveness of domestic urea against imported fertilizers due to lower operational costs.
4. Encourages technological advancements and innovations in the fertilizer manufacturing process.
5. Supports the government’s goals of reducing energy consumption and promoting green technologies in agriculture.

3. Explain the economic implications of the make versus buy strategy in the context of India’s urea market.

1. Current cost of domestic production ($493/tonne) is higher than imported urea ($370-$403/tonne), influencing purchasing decisions.
2. After accounting for taxes and logistics, the cost difference narrows, making domestic production more viable.
3. Investments in local production facilities create jobs and stimulate local economies, supporting Atmanirbharta.
4. Shifts in strategy can lead to more efficient allocation of resources between domestic production and imports.
5. Long-term sustainability of the urea market depends on balancing production costs with agricultural demand and consumption trends.

4. With suitable examples, discuss the role of government pricing policies in shaping fertiliser consumption patterns in India.

1. The fixed urea price (Rs 5,360/tonne since 2012) has led to increased urea consumption (from 29.6 mt to 35.8 mt).
2. Stable pricing encourages farmers to rely heavily on urea, impacting the balanced use of other fertilizers like DAP.
3. Government subsidies can distort market dynamics, leading to overuse of urea and potential soil degradation.
4. Revising pricing policies could promote judicious fertilizer application and sustainable agricultural practices.
5. Examples include the need for rational pricing to manage demand and ensure efficient use of fertilizers in farming.