Financial Daily from THE HINDU group of publications
Tuesday, Dec 10, 2002
Agri-Biz & Commodities
Industry & Economy - Industry Associations
Stagnant consumption worries fertiliser industry
NEW DELHI, Dec. 9
THE Fertiliser Association of India (FAI) is concerned over the virtual stagnation in consumption of fertilisers in the last 3-4 years.
"It is a real problem that requires in-depth analysis. We are yet to properly ascertain the causes for the stagnation in fertiliser consumption and work out remedial measures. In fact, this will be a prominent subject in our forthcoming Annual Seminar,'' the Director-General of FAI, Mr Viren Kaushik told Business Line.
The theme of the three-day seminar, beginning December 16, is `Fertiliser and Agriculture Meeting the Challenges'.
Total consumption of fertiliser nutrients more than doubled from 5.52 million tonnes (mt) in 1980-81 to 12.55 mt in 1990-91. While consumption rose marginally to 13.88 mt in 1995-96 largely on account of declining use of phosphatic and potassic fertilisers, following decontrol of price and subsidy bias towards nitrogen, especially urea it went up significantly in the subsequent years to peak at 18.07 mt.
But since then, the consumption has tended to stagnate, if not decline. The current kharif season witnessed an 8.8 per cent decline in total nutrient sales, largely due to the widespread monsoon failure. Even assuming normal offtake in the rabi season early trends for October are reportedly not particularly encouraging the year is likely to end up with total consumption of below 17 mt.
While the expected fall in consumption in 2002-03 may be basically drought-induced, what the industry is worried about, however, is whether a more serious secular stagnation trend has set in, similar to that of say, tractors. Total tractor sales rose impressively from 1.38 lakh units in 1993-94 to 2.50 lakh units in 1997-98, after which they went up gradually to touch 2.58 lakh units in 1999-2000, before falling to 2.56 lakhs in 2000-01 and 2.22 lakhs in 2001-02. In the current fiscal, sales are likely to dip further to below 1.9 lakh units.
The drop in tractor sales is seen to be a reflection of declining purchasing power in rural areas. This, in turn, has been the result of falling prices of most agricultural commodities, particularly during the latter half of the 1990s. Whether this phenomenon is now affecting the fertiliser industry's fortunes as well is a moot point.
The industry's basic contention is that fertiliser usage in India is still way below international levels, which means that there is no basis for stagnation in consumption now. Average per hectare nutrient consumption in India is about 106 kgs per year, which is not only below the corresponding levels of 501 kgs for Netherlands, 343 kgs for United Kingdom, 459 kgs for South Korea, 295 kgs for Japan and 271 kgs for China, but even lower than the 129 kgs for Pakistan and 154 kgs for Bangladesh. Even in Punjab, the per hectare fertiliser use of 250 kgs is below that of China.
Impact of Reliance's gas finds: According to Mr Kaushik, the recent gas finds by Reliance Industries Ltd off the Krishna-Godavari basis would have a positive impact on the domestic fertiliser industry, "provided it is priced competititvely at $ 3.5-4 per million British Thermal Units (btu)''.
Mr Kaushik said urea units in India were currently sourcing naphtha and furnace oil at $ 6.5-7 per million btu, as against the corresponding feedstock (i.e gas) cost of $ 0.77 per million btu in Oman and $ 2.5-3 per million btu in Europe. "The average energy consumption for producing one tonne of urea here is about 24 million btu, which is very good by international standards. If we are supplied gas at $ 4 per million Btu, our feedstock cost for each tonne of urea will come to $ 96 per tonne. After adding conversion costs and various capital related charges, we can certainly produce urea at below the international price of $ 125 per tonne,'' he added.
According to Mr Kaushik, there was a need to appoint a regulator for pricing of hydrocarbons at the earliest to pre-empt any possibility of abuse of monopoly power. "This is more so in a scenario where pricing of crude oil and gas would be fully de-regulated and the user industries will be dealing with a handful of state-owned and private suppliers of feedstock,'' he pointed out.
Stories in this Section
The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | The Sportstar | Frontline | Home |
Copyright © 2002, The
Hindu Business Line. Republication or redissemination of the contents of
this screen are expressly prohibited without the written consent of
The Hindu Business Line