Sunday, February 13, 2011

[Baraunians] Planning Commission report for the revival of HFC closed units-doc

Index

Chapter Subject Page No.

Introduction 2-10

Executive Summary 11-27

Performance of Fertilizer Industry 28-41
during Tenth Five Year Plan

Review of Fertilizer Policies 42-63

Global Demand and Supply Scenario 64-70

Assessment of Fertilizer Demand 71-92
during Eleventh Five Year Plan

Fertilizer Availability, Movement, 93-113
Distribution and infrastructure required

Capacity Addition and Production 114-124
Planning (Renovation, Modernization
and Expansion) for Eleventh Five Year Plan.

Requirement & Availability of Feedstock, 125-144
Raw Materials and Intermediates
for Eleventh Five Year Plan

Issues of Revival of Sick and Closed 145-148
Fertilizer Companies

Integrated Nutrient Management 149-159
and Balance Fertilization

Subsidy on Fertilizers – Various Projections and issues 160-185

R&D and Technical Issues in Fertilizer Industry 186-210

Professionalisation of manpower for Fertilizer Sector. 211-212

Recommendations 213-234

Appendix (A technical note) 235-242


CHAPTER-I

1.0 INTRODUCTION

1.1 Agriculture continues to be mainstay for livelihood of rural people. Fertilizers have been considered as an essential input to Indian agriculture for meeting the food grain requirements of the growing population of the country. Chemical fertilizers bear a direct relationship with food grain production along with a number of supporting factors like High Yielding Varieties (HYVs), irrigation, access to credit, enhanced total factors of productivity, the tenurial conditions, size of the product market and prices they face both for inputs and the outputs etc. Studies have shown that around 50 to 60% of the enhanced food production during 1960-77 could be attributed to fertilizers.

1.2 In the context of the Eleventh Five Year Plan (2007-2012), Planning Commission set up a Working Group on Fertilizers Industry under the Chairmanship of Secretary (fertilizers) with its Terms of Reference and composition indicated below:

1.3 TERMS OF REFERENCE

1.3.1 To review the status of the industry up to and during the Tenth Plan period along with an analysis of growth in demand, demand-supply gap, raw materials and infrastructural limitations, level of energy efficiency in production compared to best units in the international level and impact of policy changes made during the period.

1.3.2 To review and suggest measures on the following issues :
Efficient use of fertilizers;
Agronomical importance of low analysis fertilizers; specially SSP
Deficiencies of soil in nutrients other than NPK;
Production and use of bio-fertilizers;
Production of slow-release fertilizers; and
Declining response ratio of the soil to the fertilizer application.

1.3.3 To assess the region-wise/state-wise fertilizer demand-supply for the Eleventh Plan and beyond (in the perspective of 15 years);

To suggest the manner in which to meet the fertilizers demand, total and region-wise based on a critical techno-economic analysis of buy-versus-make options or strategic reasons and to suggest optimum level of indigenous capacity addition, after assessing the possible joint ventures by companies in countries having comparatively cheaper feedstock/energy sources; and to examine the need to proactively pursue joint ventures of Indian entities abroad.

To assess the requirement of various inputs and infrastructural facilities required during the next five years to fill the gap between demand and supply as far as possible and in the perspective of 15 years. This should also throw light on strength and weakness of our domestic industry that need strengthening;

Feedstock limitations in general and measures to sustain the pace of growth in domestic production of fertilizers;

To assess the health of the fertilizer industry particularly PSEs and to suggest measures for improvements and mobilize the required investment.

To assess the need for revival of closed PSUs, particularly with reference to the need for having production capacities in the eastern part of the country. To assess the year-wise investment required to be made by the public sector, cooperative and the private sector fertilizer units for augmenting their production capacity or modernization including investments for change-over by the existing naphtha/FO (Fuel Oil)/Low Sulphur Heavy Stock (LSHS) units into gas based production.

(i) To assess the current status of research and development in the fertilizer sector and areas of strength and weakness including industry’s linkages with institutions for R&D and to identify new thrust areas for R&D;
(ii) To quantify fund requirement for R&D and means to source them and
(iii) Also suggest measures for improving the industry-institutional linkage for
R&D.

To assess the need for a regulatory body under FCO for fast track approval of new products.

To review the present status of various taxes/duties, state-wise, on fertilizers/raw materials and suggest measures for their rationalization.

To make any other recommendations that may be considered appropriate for increasing efficiency, reducing cost and import, etc.

1.4 COMPOSITION OF THE WORKING GROUP

Secretary, Department of Fertilizers Chairman Dr. Arvind Virmani, Principal Adviser, Planning
Commission Member Joint Secretary (Fertilizers), Deptt. of Agriculture
& Cooperation Member Executive Director, Member Fertilizer Industry Coordination Committee Member Joint Secretary, Ministry of Petroleum & Natural Gas Member Representative of Ministry of Railway Member Representative of Ministry of Shipping & Road & Highways Member

Joint Secretary, (A&M), DoF Member Joint Secretary, Plan Finance – II Member Adviser (I&VSE), Planning Commission Member Representative of Planning Commission
(Agriculture Division) Member Representative of Planning Commission (PPD) Member Representative of Planning Commission (PAMD) Member Director-General, Fertilizer Association of India Member Chairman & Managing Director, PDIL Member Managing Director, IFFCO Member Managing Director, KRIBHCO Member Managing Director,
Indo-Gulf Fertilizer Complex, Jagdishpur Member Representative Of ONGC, Dehradun Member Representative Of GAIL, New Delhi Member Chairman & Managing Director, NFL Member Chairman & Managing Director. RCF Member Chairman & Managing Director, GSFC, Baroda Member Executive Director, FICC, DoF Member Shri Suman Bery, DG, National Council of Applied Research, New Delhi Member Dr. Ahmad Masood, former Adviser PAMD Member Shri B.K. Tiwari, FB-25, Lajapatnagar, Sahibabad Member Joint Secretary (Fertilizers), DoF Member-Secretary


Subsequently, to give a proper representation of private sector in the above Working Group, it was decided to co-opt the followings as member in the Working Group:

1. Shri Ajay S. Shriram,
Chairman & Sr. Managing Director
Shriram Fertilizers & Chemicals
New Delhi

2. Shri P.R. Menon,
Managing Director
Tata chemicals Limited,
Mumbai.

3. Shri V.K. Punshi,
Managing Director,
DMCC

To have expert opinion on specific emerging issues with regard to formulation of Eleventh Five Year Plan, the Working Group constituted the following Sub-Groups:

Sub-Group – I - Demand Projections and movement of fertilizers to end users and the use of new fertilizer practices under the Chairmanship of the Shri Vijay Chhibber, Joint Secretary (A&M)), Department of Fertilizers

Sub Group – II - Assessing the demand of raw materials to meet the projected demand requirements of Urea and to suggest technological up-gradation of current industry to international level with the end objective of reducing subsidy levels also under the Chairmanship of Shri Deepak Singhal, Joint Secretary (Fertilizers), Department of Fertilizers.

Sub Group – III -Assessing the demand of raw materials to meet the projected demand requirements of Phosphatic and Potassic fertilizers and to suggest technological upgradation of current industry to international level with the end objective of reducing concession levels also under the Chairmanship of Shri Vijay Chhibber, Joint Secretary (A&M)), Department of Fertilizers.

Sub Group – IV -Technological and R & D Issues relating to Fertilizer industry under the Chairmanship of Shri B.D. Sinha, Managing Director, KRIBHCO.

Reports of the Sub groups have extensively been used for discussion and finalization of the working Group Report.

1.6 FERTILIZER SECTOR: ELEVENTH PLAN PERSPECTIVE

1.6.1 The importance of the fertilizer sector in India need hardly be emphasized as it provides a very vital input for the growth of Indian agriculture and is an inevitable factor that has to be reckoned within the attainment of the goal of self-sufficiency in food grains. The fertilizer sector would cover not merely the fertilizer industry but also certain activities in the agricultural sector, which are very intimately linked with the production and distribution of fertilizers. The fertilizer industry has to cater to the needs of the farmers who are the most important consumers of the fertilizer industry.

1.6.2 Accurate forecasting of fertilizer demand is essential, both for companies producing, importing and marketing fertilizer and for governments in their efforts to monitor the development of agriculture. Because fertilizer demand depends on a variety of agro-economic factors it is not stable nor is it amenable to accurate prediction. The choice of forecasting methodologies is thus particularly important, both for successful operation of fertilizer companies and for the formulation of appropriate policies by governments. To arrange timely supplies of the right fertilizer types in thousands of villages, it is necessary to have an assessment of the likely demand for each fertilizer type at numerous locations at different times in both the short and medium terms. Effective demand forecasting can enable importers to take full advantage of world market price fluctuations. Required storage, transport, staffing, credit, financial and foreign exchange arrangements are dependent on demand. If actual fertilizer demand is less than the fertilizer produced in or imported into a country, heavy financing costs and product losses will be the result. Considering that fertilizer procured but not sold may have to be kept for a year before it finds a buyer and that a storage duration of a year can cause high quantity and quality losses, the importance of demand forecasting can be readily appreciated. If the actual demand is larger than forecast, this leads to shortages, lower agricultural production and, often, political implications. Demand forecasts have special significance for developing countries like India which are substantially dependent on fertilizer/raw material imports. The forecast can permit a reduction of the time between vessel arrival and fertilizer application. If vessels arrive during or just before the season, it is possible to move fertilizer direct from the port to field stores in the consuming areas. This avoids the costs of extra handling and storage in moving stocks to primary points for onward sale to wholesalers. In countries where the private sector dominates the marketing system this procedure is practised with a high degree of success.

1.6.3 There was a slow increase in fertilizer production in absolute terms during Tenth Five Year Plan. There was a shortfall in actual production vis-à-vis the target projected in the Working Group on Fertilizers for the Tenth Plan. The shortfall was on account of non-implementation of a number of projects, which were envisaged / expected to be implemented during the Tenth Plan. This included IFFCO-Nellore, KRIBHCO-Hazira third stream, KRIBHCO-Gorakhpur, RCF-Thal third stream and revamp of FCI-Sindri. The joint venture project, Oman-India Fertilizer Co (OMIFCO), which was expected to start production by 1999-2000, was delayed and was completed only during the course of Tenth Plan. In view of the growing demand of fertilizers, all efforts need to be made to achieve self-sufficiency through incentives for additional production of urea, Brownfield / Greenfield projects and revival of closed units of FCIL/HFCL. However, keeping in view the expected surplus availability of urea at global level, Government should enter into negotiations or encourage Indian fertilizer companies for tying up for long term supplies of urea from the countries which will have surplus urea capacities after commissioning of the urea projects, which are at present under construction. Option for setting up of Joint venture projects in the countries abroad with cheaper sources of natural gas needs to be explored. To ensure sufficient supplies of raw materials and intermediates relating to phosphatic sector over a sustained period, the Indian companies need to invest outside in the resource rich countries by way of joint ventures in mining, production of phosphoric acid, production of finished fertilizers etc. This will not only provided some control over the world resources, which are so vital to our agriculture, but will also help in stablising the international prices in what is primarily a seller’s market.

1.6.4 The consumption of fertilizers is as important a factor as their production. There should be appropriate balance in the consumption of different fertilizer nutrients. The appropriate NPK ratio under Indian soil conditions is stated to be 4:2:1. In 1991-92, the year immediately preceding the decontrol of phosphatic and potassic fertilizers, the NPK ratio was 5.9:2.4:1. Consequent on decontrol of phosphatic and potassic fertilizers, the NPK ratio got distorted to 9.68:2.94:1 in 1993-94. The same has considerably improved to 5.3:2.2:1 in 2005-06. The farmers have to be educated in the matter of nutrient balance which is of great long term significance for the Indian agricultural economy and policy measures on balanced use of fertilizers have to be initiated. Apart from the need for increase in the consumption of fertilizers in appropriate ratio, there is a need to evenly spread the consumption of fertilizers all over the country. The studies have shown that lack of irrigation and lack of credit were the two main stumbling blocks that came in the way of maximizing the consumption of fertilizers. Further, the emphasis is shifting in favour of water-shed concept. In order to encourage consumption of fertilizers in rainfed areas, it would be useful to have a national project for fertilizer use.

1.6.5 Bio-fertilizers are cheap, renewable and eco-friendly, with great potential to supplement plant nutrients if applied properly; however, they are not a substitute to chemical fertilizers. They improve health of the soil. Since it provides nutrients to soil in a small and steady manner, its immediate effects are not very visible. Sales of bio fertilizers in the country has not picked up because of lack of knowledge and its slow impact on the productivity of the soil. Use of bio fertilizers is necessary to maintain the soil health as more and more use of chemical fertilizers kills all the micro organisms available in the soil, which are so essential for maintain the soil health. Supplementary use of bio fertilizers with chemical fertilizers can help maintain the soil fertility over a long period.

1.6.6 Concerns also are growing about the long-term sustainability of agriculture. Both the over and under-application of fertilizer and poor management of resources have damaged the environment. The overall strategy for increasing crop yields and sustaining them at a high level must include an integrated approach to the management of soil nutrients, along with other complementary measures. An integrated approach recognizes that soils are the storehouse of most of the plant nutrients essential for plant growth and that the way in which nutrients are managed will have a major impact on plant growth, soil fertility, and agricultural sustainability. Farmers, researchers, institutions, and Government all have an important role to play in sustaining agricultural productivity.

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