“We are looking at total fertiliser sale of ~880 LMT by 2030-31 … an almost 44% rise over 2020-21”
With the sale of fertiliser setting new records in 2020-21, the industry is poised to increase its production level in the coming years. This would amount to an almost 44 per cent increase in total fertiliser consumption over 2020-21 and for the first time, urea may comprise less than 50 per cent of total fertiliser sale. However, fertiliser consumption and its composition after 10 years later would depend upon various factors such as agroclimatic conditions, change in food habits (cereals may comprise a lower share of consumption), technological development in the introduction of efficient fertiliser grades, etc. In an email interview with Agrospectrum Manoj Mishra, CMD, National Fertilizers Limited (NFL) shared his views about the fertiliser industry by 2030. Edited excerpts -
How do you see the Indian fertiliser sector shaping up by 2030?
The robust growth in fertiliser consumption as observed during the previous years has led to record foodgrain output, providing food security to the nation. The population of the country will keep on increasing in the next decade, so the nation will need to feed more mouths. There is going to be higher relative prosperity with the economy crossing the $ 5 trillion mark.
The per capita income will surge more than double, from the present ~$ 2000 to ~$ 5000, resulting in a drastic change in food habits. The emerging fertiliser scenario in the next decade would also depend upon how the overall policy environment shall be created by the government for supporting higher fertiliser consumption for ensuring food security and for attracting investment in the sector.
Growth in fertiliser consumption over previous 6 years (Based on MFMS)
To understand future fertiliser consumption 10 years ahead, we need to look at the previous few years’ trends.
While the sale of Diammonium phosphate fertilizer (DAP) and Muriate of Potash (MOP) have seen higher peaks earlier (almost a decade back), sale of Urea and Complex scaled record highs during 2020-21, and riding on it, the overall fertiliser sales, too, reached its peak during the year. However, growth in fertiliser consumption does not follow any linear or consistent pattern. During the previous 10 years, fertiliser consumption actually declined for three years but had seven years of positive growth.
Projected fertiliser consumption in 2030-31
Statistically, if one were to arrive at the 203031 fertiliser consumption, solely based on the previous 6 years’ Compound Annual Growth Rate (CAGR) for each fertiliser, then we are looking at total fertiliser sale of a mammoth ~880 LMT, comprising of Urea (~435 LMT), DAP (~180 LMT), Nitrogen, Phosphorus, and Potassium (NPKS) (~216 LMT) and MOP (~49 LMT). This would amount to an almost 44 per cent increase in total fertiliser consumption over 2020-21 and for the first time, urea may comprise less than 50 per cent of the total fertiliser sale!
However, fertiliser consumption and its composition, after 10 years would depend upon various factors like agroclimatic conditions, change in food habits (cereals may comprise a lower share of consumption), technological development in the introduction of efficient fertiliser grades, etc. Also, the present fertiliser subsidy regime, where subsidised fertilisers are made available to farmers; could be replaced by DBT to farmers, and the fertiliser industry could be decontrolled to a large extent, which will also have some impact.
Urea Imports & new capacities
Five new urea plants are likely to go on stream in 2021-22, namely, Ramagundam, Gorakhpur, Barauni, Sindri and Matix producing ~65 LMT urea. With this development, the country’s dependence on import, which was close to 100 LMT (or 28 per cent) in 2020-21, will come down drastically in the immediate future. But, with a projected increase in urea consumption, urea imports will soon start increasing subsequently and, in fact, can go up beyond 100 lakh MT by 2030-31. Actually, this demand-supply gap will provide an opportunity for the government to plan new urea units in the north and also south India, as these regions’ consumption will far outweigh production capacity. With a slew of government fertiliser companies (having 9 urea units collectively) going up for sale under the new disinvestment policy of the government and also some weak companies, which may go under, will provide an exciting opportunity for consolidation to existing players.
Phosphatic Fertiliser scenario
Both DAP and NPKS have shown a robust
CAGR of over 5 per cent in the previous 6 years. During 2020-21, the ratio of domestic production and imports of DAP+NPKS was in the ratio of
2:1 of a total 214 LMT. For DAP, imports were higher at 60 per cent as compared to NPKS, where just 15 per cent was imported. Domestic players are more focused on NPKS where margins are better and face less competition from imports. The higher growth of phosphatic fertilisers than that of urea despite being 3 to 4 times costlier, has effectively demolished the myth of fertiliser demand being too price sensitive. Consumption of DAP+NPK is likely to touch a level of 400 lakh MT in 2030-31 from the level of 226 LMT in 2020-21. To cater to this huge jump in demand, it would be interesting to see whether the existing players will expand their capacity indigenously or would go for strategic tie-ups with the major suppliers of raw material as the dependence of the industry on imports of raw materials and intermediates (like rock phosphate, Sulphur, Phosphoric Acid, Ammonia, etc.) will continue to be acute. Government should encourage and provide diplomatic support to the companies to set up JV’S abroad as well as for tying up raw material linkages.large and growing domestic appetite for phosphatic fertilisers is also likely to attract some of large foreign suppliers to invest in India.
The above analysis does not cover the Single Super Phosphate (SSP), considered as poor man’s fertilizer, which has seen a huge growth of 16 per cent (49.34 LMT) in production in the year 2020-21 over the previous year (42.53 LMT) and has actually shown continuous growth during the previous decade.
MOP scenario
Our dependence on imports for MOP is 100 per cent. There are no known indigenous sources of MOP at present. While for the previous 6 years, the CAGR is 3.6 per cent, the MOP sale has seen higher numbers even a decade back than the 34 LMT sale seen in 2020-21. So, from a long-term perspective, there has hardly been any growth in MOP consumption previously and, therefore, it is difficult to envisage its growth in future too. The factors affecting the growth in MOP could be (a) its complete dependence on imports in an oligopolistic market (only 4-5 major suppliers),
(b) almost a monopolistic hold of one player on its import in the country leaving little space for
other players to get the material at a reasonable price, (c) more than 75 per cent Indian soils being categorized as moderate to high in respect of the availability of 'K' content and (d) of course, its relatively higher price in comparison to urea.
Can the current supply chain endure the burden of our country’s evergrowing demand for food? If not, what should be done?
The current supply chain for procuring and distributing food and meeting its demand is primarily with the private sector; with the exception of MSP procurement and PDS distribution, which is handled by government agencies. No doubt, there are gross inefficiencies in the existing supply chain resulting in huge wastages. There is a crying need for more investments in creating, strengthening and modernising segments of supply chain from cold storage, food processing, warehousing to layers of distribution to finally making the product available to the end consumer. With the three agricultural reforms laws, when implemented fully in the course of few years, will allow more private players entry and also bring investments in various stages of supply chain. These farm reforms have opened doors to private sector for making investments in Artificial Intelligencebased Agri-tech applications (disruptive technology) to unleash value in agriculture.
Will the fertiliser industry be affected by the increasing push given to Organic farming by the government?
The impetus for organic farming is overstated and over-stretched. After all, what is the size of organic farming or organic fertilisers/ manures in India or globally? They do not contain major nutrients in ample quantity as required by the crops. While organic farm products do have a niche value and will always command a premium in the market, it cannot become products of mass consumption due to higher price. It cannot achieve the scale and hence poses no threat to the fertiliser industry.
Various forms of organic fertilisers/ manures containing different micronutrients can be useful as a soil conditioner to make soil healthy, but they just cannot fulfil the major nutrient requirement of crops. And hence the question is not of ‘either/or for use of organic or chemical fertilisers. Both are necessary and useful. We should stop creating an illusion of organic farming being able to meet the entire food requirements of the country, now or in future.
The entire world is going digital, where does India’s fertiliser sector stand when it comes to digitisation?
Digitalization has a huge role in bringing speed of the transaction as well as the ease of doing activities. The FMS (Fertiliser Monitoring System) introduced many years back, with its newer avatars is an excellent example of digitalization through which all the production, import, dispatch & sale data for the entire fertiliser industry is available to everyone easily. Similarly, the present DBT system adopted for capturing sale of fertilisers and disbursal of subsidy is also a great leap in digitization.
Further digitalization of the fertiliser sector could create opportunities for new avenues of value-added revenue stream. But digitalisation as such may not be quite helpful in enhancing growth.
Do you think that the present trend of importing cheap water-soluble fertilisers from European countries will continue in future as well?
The ‘Water Soluble Fertiliser’ (WSF), as a segment has shown immense growth during the previous few years. Most of the WSFS are imported, despite the fact that they can be manufactured domestically. But with a huge subsidy for bulk chemical fertilisers, WSF cannot compete against it on the price front despite its higher efficiency. Due to the meagre size of the segment (just 3 LMT in 2020-21, by some estimates), probably it is not attracting much attention from major players. Only after full decontrol of the entire fertiliser sector and ensuring free and fair market play in the industry, all types of fertilisers, like customised fertilisers, organic fertilisers, WSF, value-added fertilisers will find their right scale and use based on their respective efficiencies and cost.
In order to promote WSF, the government needs to first promote drip irrigation. Adopting drip irrigation shall help in solving the water scarcity problem of most states, and promote balanced fertilisation and higher yields.