Govt. (Public Sector)

Fertilizers are essential inputs in agriculture and in particular production of foodgrains naturally there is a straw positive correlation between the two. Government delicenced fertilizer industry in 1991 and decontrolled phosphatic and potassic fertilizers in 1992.

The subsidy on indigenous fertilizers rose from Rs.1,600 crores in 1985-86 to Rs.7,360 crores (revised estimate) in 1998-99, with the current budget estimate at for 1999-2000 Rs.8,000 crores.

On imported fertilizer, however, the subsidy has been fluctuating erratically during the 15-year period, in accordance with the domestic and global price situation leading to Government intervention. There is a levy of a basic rate of 5% and valorem customs duty on fertilizer project imports. It can attract a 10% surcharge, besides a countervailing duty of 10%.

In 1992-93, when phosphate and potassic (complex) fertilizers were decontrolled, keeping only the urea segment under control, it led to a piquant situation of the domestic prices of complex fertilizers ruling high against low international prices.

India is the third largest producer of fertilizer in the world. At the end of the Eighth Plan, the production capacity of nitrogenous fertilizer stood at 97.77 lakh tonnes (N) and that of phosphate at 29.05 lakh tonnes (P2O5). At the end of the second year of the Ninth Plan (1998-99) they were 10.52 million tonnes and 3.17 million tonnes respectively. Actual production of nitrogen in 1998-99 was 10.45 million tonnes and that of phosphates 3 million tonnes. While private fertilizer units and cooperative units producing urea could achieve respectively 117.7% and 108.5% capacity utilization last year, the viable public sector units achieved 94.6% capacity utilization and loss-making units 23.1%. As for phosphates, cooperative units topped the table with 143.6%, followed by public sector units (91.3%) and private plants (88.7%).

The Government is considering the following proposals for expansion/new projects, totally valued at Rs.6,973 crores, form PSEs and cooperatives; National Fertilizers' expansion of its Nangal and Panipat plants; KRIBHCO's (Krishak Bharati) expansion of its Hazira plant and an new urea plant at Gorakhpur; IFFCO's grass roots urea plant at Nellore; and Rashtriya Chemicals and fertilizers' (RCF) Thal plant expansion.

With a view to cutting down costs of importing raw materials, the Government is encouraging fertilizer units to enter into joint ventures with buy-back arrangements in other countries, which have rich reserves of natural gas and rock phosphate. Already the following three projects are in operation; Union Government, IFFCO and Southern Petrochemical Industries Corporation (SPIC) pattering with Industries Chimiques du Senegal (ICS) to produce 3.5 lakh tonnes of phosphoric acid; ICS and IFFCO implementing a project to double the production capacities of the formers phosphoric acid plants and development of new rock phosphate mines; and a phosphoric acid plant by SPIC and Jordan Phosphate Mines Company.