Indian fertilizer market report

Fertilizer market overview

With a sales turnover of around $17 billion, the Indian fertilizer industry produces around 42 million tonnes of fertilizer annually. These are distributed nationally through a network of 226,000 agricultural dealers. The subcontinent is the world’s largest importer of fertilizer and fertilizer raw materials. Each year, the country typically imports:

• 19 million tonnes of fertilizers
• 14 million tonnes of phosphate rock, sulphur, ammonia and phosphoric acid
• Nine billion m3 of liquid natural gas (LNG) feedstock.

India’s fertilizer market remains heavily subsidised – at an estimated government cost of $10.0 billion in 2020/21. Although subsidies peaked at $21.7 billion in 2008/09, and have generally been on a downward trajectory since, the current annual subsidy bill is triple what it was twenty years ago. The Fertilizer Association of India (FAI) also reports huge arrears in subsidy payment ($8.45 billion) and an inadequate budget allocation ($10.04 billion) versus the budget requirement ($19.01 billion).

The Indian government has long supported self-sufficiency in urea production under its 2012 New Investment Policy (NIP). Implementation of this policy involves expanding domestic urea production capacity by funding the revival of a number of mothballed urea plants (Table 1). The policy is finally starting to deliver results – with Chambal Fertilizers & Chemicals Limited (CFCL) commencing production at its 1.3 million t/a Gadepan III urea project in Rajasthan in January 2019.

India’s demand for urea is particularly high (33.5 million tonnes), accounting for around 55 percent of total fertilizer consumption in 2019/20 (60.6 million tonnes). Around three-quarters of this demand is met by domestic production with the remainder being imported (9.1 million t/a).

Most Indian urea plants use natural gas as feedstock. This accounts for around 70-80 percent of production costs. India has insufficient natural gas reserves to meet its national consumption needs. Consequently, the country relies on imported liquid natural gas (LNG) for around 60 percent of its total gas demand (Fertilizer International 495, p15).

For phosphate fertilizers, DAP and NP/NPK are preferred by Indian farmers. The combined demand for these two product types (19.7 million in 2019/20) equates to around one-third of total fertilizer consumption. Almost 50 percent of DAP and 7-8 percent of NP/NPK requirements needed to be imported in 2019/20. India also produces large volumes of single superphosphate (SSP) (4.2 million tonnes in 2019/20) for domestic consumption.

India is import-reliant for the majority of raw materials and intermediates (phosphate rock, phosphoric acid, ammonia and sulphur) consumed by its domestic phosphate industry. The country is also completely reliant on imported potash (3.7 million tonnes in 2019/20) for both direct application and NPK blends.

The emergence of the Covid-19 pandemic last year had mixed impacts on Indian fertilizer production (Fertilizer International 496, p18). CRU reported that eight of India’s 13 DAP production plants and 14 of its 17 NPK production plants were idled in April 2020. Six of the country’s 32 urea plants were also idled that month in response to lockdown measures.

Consequently, Indian DAP production, at 2.7 million tonnes for April-November 2020, was down 10 percent year-on-year. During the national lockdown, DAP production fell by 40 percent in April and 20 percent in May 2020, in comparison to 2019. This was linked to logistical snags, disruption to raw materials distribution and the shortage of labour and bagging materials. Domestic NP/ NPK production, in contrast, rose to 6.1 million tonnes in April-November 2020, up by three percent year-on-year.

On the demand side, domestic fertilizer consumption remained buoyant last year. Indeed, overall kharif season sales – for urea, potash, DAP, SSP and NPKs – received a large boost during 2020, with Argus reporting April-July sales of 20.4 million tonnes, up from 14.1 million tonnes for the same period in 2019. Mid-year fertilizer buying was fuelled by a rise in kharif crop acreages and strong monsoon rains in 2020.

Table 1: Indian urea project list, 2018/19-2023/24

INTERVIEW

Rakesh Kapur joint managing director, Indian Farmers Fertiliser Cooperative Limited (IFFCO)

The Indian Farmers Fertiliser Cooperative Limited (IFFCO) is India’s largest fertilizer producer. The society is also widely credited as being the world’s largest agricultural cooperative, expanding from just 57 cooperatives in 1967 to more than 35,000 today.

Dear Rakesh,

it’s a pleasure to have the opportunity to interview you on behalf of Fertilizer International magazine. You’re the immediate past chairman of the International Fertilizer Association (IFA), holding this position during a period of both change and reflection.

What do you feel were the main highlights and achievements during your tenure as IFA chairman – and was your chairmanship a timely recognition of the growing global status of the Indian fertilizer industry?

“It’s difficult to summarise, as substantial work was done in so many areas at IFA while I was chairman – on safety, the environment, climate change impacts, nutrient use efficiency, emissions reduction, phosphogypsum, water conservation etc. etc. But a major priority was definitely making the industry more visible and changing how we were perceived. That led to improvements in public affairs and external communications through active engagement with the UN, FAO, UNEP, WHO and others.

“My tenure as chairman also saw IFA switch its strategic focus to plant nutrition. Future scenario planning, part of the IFA 2030 initiative, allowed us to look at how the world is changing – and exactly what that was going to mean for the fertilizer industry moving forward. Resulting from that, IFA setting up an advisory Scientific Panel on Responsible Plant Nutrition. We also moved to strengthen our market intelligence and statistics (IFASTAT) capabilities by re-structuring IFA secretariat.

“It was a privilege as a member from the Indian fertilizer industry to be IFA’s chairman. In India, agricultural growth and fertilizer industry growth sustain one other. I am pleased to say that the Indian fertilizer industry is taking the lead in the transition towards a low-carbon and food-secure future. That will benefit both the country and the world overall in my view.”

IFFCO’s 2019-20 sales volumes rose by more than 15 percent year-on-year to reach 13.3 million tonnes, an all-time high. It was also record breaking year for production at all five of the society’s sites. IFFCO notably produced 4.9 million tonnes of neemcoated urea and 4.3 million tonnes of NP/NPKs, diammonium phosphate (DAP) and water-soluble fertilizers (WSFs) last financial year. Since then, of course, the world has suffered an unprecedented coronavirus outbreak.

How did IFFCO respond to the Covid-19 pandemic last year – continuing to make deliveries to its customers, while keep employees safe and overcoming this major operational challenge?

“Locking down a country of 1.3 billion people was indeed an unprecedented situation. The industry faced a number of challenges, post-lockdown in March 2020, such as raw material availability, labour management, handling/distribution and logistics. Besides this, the health and safety of employees was a big concern. Massive relief and awareness campaigns were undertaken by IFFCO across the country during this period.

“The government of India gave us pro-active support too, by exempting all agricultural-related activities – including fertilizer plants – from lockdown restrictions. Remarkably, the timely provision of seeds, pesticides, fertilizers, machinery and agricultural credit made it possible for large areas to remain under cultivation during the lockdown. Overall fertilizer consumption actually increased considerably – with a sales increase of more than 10 percent from April 2020 to January 2021, compared to the previous year.”

IFFCO has been prioritising energy efficiency by revamping all of its five ammonia-urea plants as part of a large-scale energy saving project (ESP).

Could you explain more about the rationale behind the ESP project and what’s been achieved to date?

“IFFCO, since its inception, had been a front-runner by constantly upgrading technologies at its manufacturing plants. Recently, we invested $270 million implementing massive energy savings at all our five ammonia-urea manufacturing units as part of the ESP. Today, energy consumption at these units is comparable to any new gas-based plants globally.

“Previously, during 2005-06, we also adopted BAT (Best Available Technologies) to cut our energy consumption and carbon emissions. The embrace of new technologies shows what an inventive work environment and culture of continuous learning we have at IFFCO. Similarly, we’ve also been actively reducing the water footprint across our operations. These actions and plans ensure IFFCO is fulfilling its responsibilities towards meeting Sustainable Development Goals.”

Water-soluble fertilizers are a market segment of growing importance to IFFCO. Growth has been phenomenal. Annual sales more than doubled year-on-year to almost 15,000 tonnes in 2018-19, for example, then increased by around one-third to more than 19,000 tonnes in 2019-20. This reflects the growing importance of fertigation in the cultivation of high-value crops such as fruit, vegetables, flowers and sugarcane. IFFCO also launched field trials for nanotechnology-based fertilizers in 2019.

How important is innovation and the development of new speciality/added-value products to IFFCO, and do they have an important role in raising crop productivity and improving water use and nutrient use efficiency in your view?

“We’re witnessing a transformation in India’s agricultural landscape currently. There’s been a shift away from the productivity-led philosophy of the ‘green revolution’ towards sustainable agriculture led by ‘green methods’ instead. That’s now leading to important changes in the way fertilizers are being produced and used.

“The emergence of the water-soluble fertilizer, specialty fertilizer and biostimulant segments holds the promise of lower fertiliser usage, improvement in water use efficiency and higher nutrient efficacy. These products are sold without any subsidy to farmers. We believe these new segments have the potential to reduce chemical fertilizer consumption by 25-30 percent overall.

“IFFCO is investing a lot in new products designed to help Indian farmers improve their productivity and profitability, and therefore become more competitive globally. We are shortly going to launch a new range of nanotechnology-based fertilizers. These products, particularly Nano Urea, really are going to be game-changers for nutrient management.

“Besides this, our liquid biofertilizer and seaweed extract product Sagarika is gaining popularity with farmers. Sagarika functions as a plant growth promoter and, by improving stress tolerance and pest resistance, increases yields across all crops by 10-15 percent.”

What role do you see IFFCO playing in meeting the goals set for India’s fertilizer and agricultural sector by government and others?

“IFFCO’s business model coincides completely with the government’s agenda of creating a sustainable food system and raising rural incomes in future. We are working hand-in-hand with government to achieve Prime Minister Narendra Modi’s ambition to double the income of farmers. IFFCO’s neem plantation campaign, digital agro-advisory services, agri-commodity exchange, rural finance, e-commerce and retail centres are just a few examples of how IFFCO is helping to achieve this. Affordable rural insurance is another unique IFFCO initiative that helps farmers mitigate the risks they face.

“IFFCO has collaborated with government’s e-service for the sale of fertilisers and other agricultural inputs across the country. We have also promoted the government’s digital initiative by integrating our e-commerce system with the Krishi Platform digital payment app. This allows us to cater to the agricultural needs of all the farmers, from sowing to harvesting.”

Looking ahead, how is IFFCO continuing to improve farm incomes and the welfare of farmers?

“IFFCO was an outcome of the ‘Green Revolution’, being formed in 1967 to meet the fertilizer needs of farmers and ensure food security in the country. Today, more than 35,000 cooperative societies cater to over 50 million farmers, reaching the country’s remotest rural areas. We have always had a clear business strategy from the very beginning – to enable Indian farmers to prosper through the timely supply of agriculture inputs and to undertake extension services to improve their welfare in a sustainable manner. Although this strategy has not changed, how we are delivering it has.

“IFFCO recently set up a vegetable processing project in Punjab as part of a joint venture with a leading food processing company from Spain. This should improve the income of farmers by reducing the wastage of perishable farm produce. Recently, we also formed an organic food venture, Sikkim IFFCO Organics Ltd, jointly with the Sikkim Government to benefit and incentivise the state’s farmers by adding value to their organic produce.

“IFFCO has extended its market access through its 1,400 retail outlets. These act as one-stops-shops for various agricultural inputs, and can even provide medical assistance.

“Our digital online store IFFCO Bazar, launched in 2016, delivers products and services to 30 million farmers nationally. The Smart Farm digital platform, offered through our subsidiary IFFCO Kisan Sanchar Limited, also offers a range of digital services, such as weekly farm health checks, pest and disease prediction and recognition, and irrigation and fertigation planners.”

What have been the highlights, major achievements and changes you have witnessed since joining IFFCO?

“Ensuring fertilizer availability was a challenge for the country when I first joined IFFCO in 2000. IFFCO responded by successfully setting up joint ventures in resource-rich countries like Oman, Jordan, and Senegal. We also expanded our in-house production capabilities. That included acquisition of a large underperforming integrated phosphate fertilizer unit and turning it into a profit centre.

“I’ve also contributed, in many ways, to IFFCO’s diversification into general insurance, telecoms services, trading, rural finance, commodity exchange, retail business, food processing, organic farming, urban gardening, etc. As a responsible company, we are now providing goods and services that will help farmers grow more food, economise on their input costs, improve their incomes, and protect the environment as well.”