India will buy 47,000 tonnes Urea from the US in a first

In The News:

India will import substantial quantities of urea from America for the first time.

What's today's article?

Fertilizers: Basic details, India's Fertilizer Industry and Import Dependence, etc.
Fertilizer Subsidy (Working, Challenges, Government Initiatives, etc.)
News Summary

Fertilizers:

A fertilizer is a chemical product that has one or more essential nutrients for plants. It can be either mined or made from material.
Fertilizers are essential in agricultural production. They provide vital nutrients to crops and increase their demand over time.

India's Fertilizer Industry:

NPK (nitrogen-phosphorus-and potassium) fertilizers are most popular. Urea is the most commonly used fertilizer.
India imports a lot of raw materials, including ammonia, rock phosphate and phosphoric acids, in addition to crude and manufactured fertilizers.
India is second in fertilizer consumption globally, with a more than 55.0 million metric tons per year.
India's fertilizer market (via tenders) is divided between the Government of India and private buyers.
During fiscal year 2019, India's fertilizer imports were worth more than 500 billion Indian rupees.

India's Import Dependency on Fertilizers:

India's dependence on imports is so high that:
- 25% of our Urea requirement,
- 90% for Phosphates as either raw material or final fertilisers (DAP/MAP/TSP).
- Potash: 100%
The country's fertiliser production and use is greatly influenced by the urea industry.
- It is responsible for 60% of total fertilizer consumption and 50% of total fertilizer imports, in volume.
The country had a total urea requirement of 340 LMT (lakh tonnes) in 2019-20.
- As the country has 220 LMT of production capacity, 92.40 LMT were imported.

Fertilizer Subsidy

Fertilizers are purchased by farmers at maximum retail prices (MRP).
However, these MRPs are below their normal supply-and-demand-based market rates or what it costs to produce/import them.

For instance, the MRP for neem-coated urinea is Rs 5,922.22 per ton.
The average cost-plus price for domestic importers and manufacturers is Rs 17,000 per tonne.

The Centre provides subsidy to cover the difference. It varies depending on plant-wise production costs and import prices.
The companies have either decontrolled or fixed the MRPs for non-urea fertilizers.
To ensure fair prices, however, the Centre provides a flat per-tonne subsidy for these nutrients.

What is the Subsidy and Who gets it?

Although the subsidy is paid to fertiliser companies it ultimately benefits the farmer, who pays MRPs lower than the market-determined rates.
The Direct-Benefit Transfer system (DBT), would allow companies to receive subsidy payments only after farmers have sold to them.
Every retailer now has a Point-of-Sale (PoS), machine that is linked to the Department of Fertilisers eUrvarak DBT portal.
Anyone purchasing subsidised fertilisers must provide their Aadhar unique identification or Kisan credit card number.
A company can only claim subsidy if it is registered on the eUrvarak platform.

Problems associated Subsidizing Fertilizers Use in India:

After food, fertilizer is the second largest subsidy payment in the country. However, approximately 65% of fertilizer is not reached by the intended beneficiaries, which are small and marginal farmers.
Misuse/Overuse of Fertilizers

There are currently no restrictions on who or how much fertilizer can be purchased.
This has resulted in an overuse of fertilizers for cultivation and the diversion of the urea to other industries, such as dairy, textile, paint etc. ).
Through organized black-market traders, Urea is also being diverted into neighboring countries such as Bangladesh and Nepal.

In 2018, the Direct Benefit Transfer System was implemented in fertilizers.
The greatest benefit of the DBT system's is its ability to allow the Government to see exactly who is purchasing fertilizer.
It is important to remember that the system does not verify whether the buyer is a farmer. There is no Indian database of farmers.

Government Schemes/Initiatives

In January 2013, the Government had notified New Investment Policy 2012 with the primary objective of facilitating fresh investment, making India self-reliant, and reducing import dependence in the urea sector.

Neem-coated Urea is urea that has been coated with neem oil.
All domestic producers must produce 100 percent urea under the Neem Coated Urea (NCU) mandate from the Department of Fertilizers
NCU has many benefits:

In 2010, the Nutrient-Based Subsidy Program for Fertilizers was launched.
The government announces a fixed rate subsidy, in Rs per kilogram basis, for nutrients such as Nitrogen (N), Potash (K), and Sulphur(S), on an annual basis under the scheme.
It is designed to ensure a balanced fertilizer use, improve agricultural productivity, and reduce the Subsidy burden.

There are currently 30 units producing urea in the country. 27 are gas-based, and 3 are Naphtha-based.
The Government introduced the gas pooling mechanism in 2015.
Its purpose is to provide gas at a uniform delivery price to all fertilizer plant on the gas grid to produce urea by a pooling mechanism.

The Way Forward:

The Central government should offer farmers a cash subsidy of flat per-acre that can be used to buy any fertiliser.
The amount of the crop grown and the extent of irrigation could affect the amount.
This sustainable solution is designed to stop diversion and encourage the judicious use of fertilisers. It uses the correct nutrient (macro- and micro) combination, based on soil testing and crop-specific requirements.

News Summary

India will import almost 47,000 tonnes of US urea in a first.
The US is not a major exporter of urea. Data from the commerce ministry show that Indian imports from the US for 2019-20 were just 1.47 tonnes.
The US exported to India 2.19 tonnes in 2020-21 and 43.71 tons in 2021-22, respectively.
India imported 10.16 Mt of urea in FY22. This was mainly from China and Oman, UAE Egypt, Egypt, Ukraine and priced at $6.52 Billion.

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