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Context:

Persisting wars in Ukraine and Gaza are making fertilisers costly for India leading to a rise in imports.

Introduction

Fertilisers are Chemical substances which are applied to plants to ensure the supply of essential nutrients such as nitrogen, phosphorus, and potassium, required for optimal plant growth and development.

On the basis of Nutrient they supply to soil fertilisers are grouped as Primary, secondary and micronutrients:

Primary Fertilisers: These are based on availability of Nitrogen(N), Phosphorus(P) and Potassium(K):

Nitrogenous (Urea),
Phosphatic (di-ammonium phosphate or DAP) and
Potassic (muriate of potash (MOP) fertilisers.

Secondary Fertilisers: They include Calcium, Magnesium, Sulphur, zinc, etc.

Micronutrients: They include Iron, Zinc, Boron, Chloride etc.

Read about fertilisers and its role in detail here:

https://www.iasgyan.in/daily-current-affairs/balanced-fertilization

Fertilisers play a significant role in Indian agriculture and it was the backbone of the green revolution in India. However it is facing various challenges in terms of import and cost volatility.

India’s Current Fertiliser Scenario

India is the third largest producer of fertilisers overall in the World, the second largest producer in terms of nitrogen fertilisers, and the third largest producer in terms of phosphate fertilisers production.

Parliamentary Report in August 2023 highlighted that India's fertiliser production is insufficient for its demand, which leads to a perennial dependency on imports.

Import percentage of fertilisers in India are

Urea: 20% of the domestic demand of Urea is met through imports.

Di-ammonium phosphate or DAP: 50-60% of DAP is imported.

MOP (Muriate of Potash): It is 100% imported in India, as there is no domestic production of the MOP in India.

Year	Fertiliser Type	Consumption-Long Tons to Metric Tons(LMT)	Production (LMT)	Remarks
2020-21	Total(Urea, DAP, MP and SSP)	629.83	Unavailable	This was much higher demand than its succeeding period of 2021-22. The demand for urea for 2020-2021 was 35.1 million tons, which was 18.6% higher than 2016-2017. Import dependency of India on urea for the same period was 9.8 million tons, which was again an increase from 5.5 million tons in 2016-2017.
2020-21	Urea	350.51 LMT	246.05 LMT
2021-22	Total(Urea, DAP, MP and SSP)	579.67	435.95	There was a shortfall of 143.72 LMT in this period. This was the highest consumption among all fertilisers in the year.
	Urea	341.73	250.72
	DAP	92.64	42.22
	MOP	23.93	0
	SSP(Single Superphosphate)	-	53.34

Import Market of India

As per the Organisation of Economic Development(OECD), India imports Fertilizers primarily from the following countries:

Russia: $2.73Billion(B)
Saudi Arabia: $2.46B,
China: $2.1B,
Morocco: $1.74B, and
Oman: $1.26B.
Russia, Saudi Arabia, and Morocco are the fastest-growing import markets in Fertilisers for India between 2021 and 2022.

Impact of Global Crises:

Market Instability: The rising conflicts such as in Ukraine and Gaza have disrupted fertilizer imports due to an increase in oil prices.

Supply Chain Disruptions: These conflicts have significantly affected the global supply chains specifically in fertilizer-producing countries like Russia, from where India sources much of its fertilizer demand.

Price Volatility: Geopolitical tensions in Ukraine and Gaza directly or indirectly pent up the costs of fertilisers because fertilisers are often by-products of petroleum.

Financial Cost of Fertilizer Subsidies

Challenges from Budget allocation

The Indian government in 2023-24 Budget allocated a substantial budget to fertilisers:

The total subsidy allocated for fertiliser was ₹1.79 lakh crore,
Indigenous Urea subsidy amounted ₹1.04 lakh crore.
Urea Import subsidy was valued at ₹31,000 crore,
Indigenous P&K Fertilizer subsidy was ₹25,500 crore, and
Imported P&K Fertilizer subsidy amounted to ₹18,500 crore.

Government Initiatives

New Investment Policy (NIP):

It supports new urea manufacturing projects by the Public Sector Undertakings (PSUs) and private companies.

It has led to an increased production capacity from 207.54 LMT per annum(PA) in 2014-15 to 283.74 LMTPA today.

Nutrient-Based Subsidy (NBS):

This scheme gives fixed subsidies to fertiliser companies according to the nutrient content of fertilisers like nitrogen, phosphorus, potash, and sulphur.

Potash from Molasses was included under the NBS regime in 2021, with the aim to promote local production to reduce imports.

Public-Private Joint Ventures:

The government has been collaborating with PSUs and private firms in urea production.

GOI also established units like Ramagundam Fertilizers in Telangana and Hindustan Urvarak and Rasayan plants in northern states through Public Private Partnerships.

Way Forward

Boost Domestic Production:

India must expand fertilizer production capacity and support nano urea and sustainable fertilizers to reduce import dependency.

India Farmers Fertiliser Cooperative Limited (IFFCO), which developed the first nano liquid urea can expand it further in collaboration with Industries.

Standing Committee Recommendations:

Parliamentary Standing Committee on fertilisers have recommended increasing incentives for domestic fertiliser manufacturing, promoting nano urea, organic, and sustainable farming practices.

It has also recommended investing in infrastructure for efficient fertiliser utilisation to reduce the fertiliser loss in soil.

Adopt Policy Reforms:

There is a need to promote self-reliance with targeted subsidies for all sectors in the fertiliser industry to ensure an affordable supply of fertilizers.

Important articles for reference

Fertiliser subsidy

Making Urea More Efficient

Sources:

PIB

PRACTICE QUESTION

Q.Critically analyse the fertiliser scenario of India highlighting the challenges it faces in terms of import dependency and cost volatility. (25o words)

WHAT CHALLENGES DOES INDIA FACE IN FERTILISER IMPORTS?