Government Policies and Indian Fertilizer Industry

Government policies and Indian fertilizer industry share a direct nexus, with pricing mechanisms, productive growth and subsidies forming the crux of the economic objectives of the government. The government policies for the fertilizer industry are devised to ensure a sustainable growth and development path in one of the most intensive sectors of the Indian economy.

[br]Growth, production and usage of the fertilizer industry are directly dependent on the government policies. Production of foodgrain in India derives the main stimulus for its growth from the fertilizer industry. The government has intervened time and again in determining the prices, movement and distribution of the fertilizers and its successful policies have pitted India as the third largest consumer and producer of the agro-input in the world after China and the United States.

The policies pursued by the government are devised in response to the recommendations of the high-powered committees of the country. The Sivaraman Committee Report (1966) highlighted the importance of the balanced use of fertilizers along with providing adequate credit support for its distribution and usage. The committee also provided inputs for realizing the importance of liberalization of fertilizer marketing that would promote the production of the domestic companies.

The Retention Price Scheme introduced by the government followed the recommendation of the Marathe Committee that explored the possibilities of maintaining the farm gate prices of fertilizers. This would enable the government to maintain prices of the fertilizers during the time of crisis.

The first decontrol policies of the government were introduced in 1992 on the recommendations of the Joint Parliamentary Committee. Phosphatic and potassic fertilizer industries were decontrolled by the government while urea industry continued to produce under subsidized rates.

[br]The complex fertilizer industries were subdivided onto two categories in 2001 after the modification of the 1998 Tariff Commission. Group I comprised of imported ammonia or industrial units using gas while Group II included industries using naphtha or fuel oil. Concessions to the naphtha based units were more than the other group as this showed lesser efficiency.

Other committees provided recommendations on the methods of promotion, marketing, distribution and pricing of the fertilizers in India.

Change in government policies is however often responsible for hampering new investments in the industry. Although the investment in this sector was Rs 20, 677 crore in September, 2007, most of the bottlenecked projects have not been cleared by the Department of Fertilizers. The industry will soar up new heights and create a new growth story with the clearance of the projects and the approval of the new policies.

The production of phosphatic fertilizers in India is heavily dependent on imports as the country is not endowed with phosphate raw materials. The present objective of the government policies is to develop a long term program that would protect the interests of the domestic manufacturers and reduce the dependence of this industry on foreign imports. Reaching stagnancy, the health of this industry can be restored with a more realistic policy pursued by the government.