Challenges before Indian Fertilizer Industry

The growth trajectory of the Indian fertilizer industry has camouflaged the impending challenges with which it is faced. Growth and development of agriculture in India derives a significant stimulus from the fertilizer industry.

[br]Agricultural milieu in India could be jeopardized by the uncertainties in the fertilizer industry. The government is faced with the piquant situation, which demands a balance between the needs of the farmers and the fertilizer manufacturers.

The challenges before the Indian fertilizer industry relate to the incertitude in the supply of fertilizers. There has been a surge in the demand for fertilizers in the past few years. Good monsoonal showers have led to the growth in agriculture, inadvertently increasing the consumption rate of fertilizers. However, the robust growth in consumption propensity has not been met with the required surge in fertilizer production. This has widened the gap between the demand and supply of fertilizers, which has led to an increase in the dependence of the country on imports. This also reflects on the lack of realizing of the domestic capacity utilization of the reserves in the country.

Another important factor that has led to the stunted growth of the fertilizer industry is the rise in prices of the feedstock. The fertilizer industry is dependent on gas for the production of urea and phosphoric acid for the production of phosphatic fertilizers and DAP. The country imports its inputs from other countries. The overseas suppliers of raw materials realize the predicament of the Indian fertilizer industry and have started exploiting the shortage through clever pricing.

In recent years, some of the private companies, dedicated to the production of fertilizers have affectively taken stakes in the overseas sources of raw materials. Although this has aided the industry, it has however been unable to reduce the government’s burden of subsidizing the rates. The fertilizer industry is remained protected under the umbrella of the Retention pricing scheme of the Indian government.

[br] The government has introduced policies to decontrol the prices but delayed the implementation of the parameters that have not augured in favor of the industry. As a result, fertilizer subsidies continue to mount and are expected to cross Rs. 50,000 crore in the year 2008. The pricing of the fertilizers are also dependent on the freight charges that are Baltic dry index.

The small size of the older plants and the low efficiency of the public sectors also pose as drawbacks of the industry. Recent policies of the government are directed towards revamping of these industries and restoring them to health.

The fertilizer industry is faced with other challenges inter alia infrastructural bottlenecks and the uncertainties in government policies. The delay in decision making and obscurity in setting parameters are among some of the major drawbacks of the government policies directed towards the industry.

To retrieve the health and growth of the fertilizer industry, the government of India is in need of long term realistic policies that would enable the industry to overcome the challenges and survive the present impasse.