Offering complete basket of agri products to the farmers

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DCM Shriram Ltd. is a leading business conglomerate with a group turnover of Rs. 6400 crores. The business portfolio of DCM Shriram comprises primarily of two types of businesses -Agri-Rural BusinessandChlor- Vinyl Business. Their urea plant has a production capacity of 379,000 TPA. The complex comprises a 700 TPD Ammonia plant and a 1200TPD Urea plant. DCM’s fertiliser plants have consistently earned production and productivity awards for their performance. Over the last four decades of operations, their brand ‘SHRIRAM’, has developed a strong presence in the rural market and is identified with premium quality, reliability and high trust. The Company has also built up an extensive distribution network over the entire northern and central India. They have also made successful entry into the Southern region. In an interview with Agriculture Today, Mr Ajay S Shriram, Chairman & Sr. Managing Director, DCM Shriram Ltd. and President CII, elaborates on the Indian Fertilizer industry.

What is the product profile of DCM Shriram in the fertilizer segment? In the fertilizer segment, DCM Shriram’s product profile comprises of bulk fertilizers such as Urea, DAP, MOP, SSP which provide complete nutrition solutions to the farming community. We also provide specialty chemicals, micro-nutrients and high quality hybrid seeds, vegetable seeds, and open pollinated seeds along with crop care chemicals such as Insecticides, Herbicides and Fungicides.

Where does India stand in terms of fertilizer consumption and production?
India with a consumption of 24.7 Million MT of fertilizer nutrients (N+P+K) during 2013-14, is the second largest consumer of fertilizers in the world after China which is the largest consumer of fertilizers with a nutrient consumption of 49.8 Million MT. In production of fertilizers, India is the third largest producer of fertilizer in the world with a production of 16.4 Million MT of nutrients (N+P) during 2013-14. China with production of 56.6 Million MT and USA with production of 22.2 Million MT stands first and second largest producers respectively.

The urea consumption has increased considerably over the years when compared to other fertilizers. How can this be brought to desired level?
Urea consumption has increased @ 3.9% CAGR over last nine years from 22.3 Million MT in 2005-06 to 30.5 MT in 2013-14. However, consumption of other fertilizers (P and K nutrients) has increased only @ 0.15% CAGR during same period from 7.6 Million MT in 2005- 06 to 7.7 Million MT in 2013-14. The primary reason for this is the present Fertilizer pricing policy which gives higher subsidy to Urea compared to other bulk Fertilizers like DAP, MOP, SSP etc. This result in a relatively cheaper farmer price for urea compared to other Fertilizers. Because of cheaper price, farmers use more urea than required leading to poor use efficiency and a highly distorted nutrient use ratio. The actual nutrient use ratio in 2013-14 is has been 8.3:2.7:1, against a desired use ratio of 4:2:1 (N:P:K).This distortion in fertilizer nutrient usage can be corrected by a rational pricing policy for fertilizers. Price subsidy scheme for fertilizers should be such that it drives fertilizer and nutrient consumption in a balanced way and helps to a correct nutrient use ratio. Nutrient Based Subsidy Scheme for all Fertilizers including Urea along with Farmer education will help to correct this distortion.

Nutrient Based Subsidy scheme, despite its implementation did not favor judicious application of fertilizers. What do you think are the reasons?
Nutrient Based Scheme was introduced for Phosphatic and Potassic fertilizers such as MOP, DAP, SSP etc. from 1.4.2010. The policy stipulated fixed subsidy per unit of nutrients and free retail prices. The objective of shifting from Product based subsidy scheme to Nutrient Based Subsidy scheme was to address the imbalance in the use of fertilizers and lack of secondary and micro nutrients. However, urea which is main fertilizer and constitutes about 60% of total fertiliser consumption in the country was kept away from NBS policy. The government continued to reduce fixed subsidy resulting in increasing MRPs of P & K fertilizers. The reduction in subsidies led to steep increase in fertilizer prices. As a result, the P & K fertilizers remained beyond the reach of farmers and preference of farmers continued to use of urea, which was a cheaper option. This has led to steep increase in urea consumption from 51% in 2009-10 (before NBS implementation) to 61% in 2013- 14. The NBS policy did not help to correct the ratio which remained at 8.3:2.7:1 in 2013-14 against an ideal ratio of 4:2:1.

What opportunities do you see under the soil Health cards scheme?
It is a very scientific and organized effort by the government and needs to be strengthened to improve productivity of the farmer. The farm community has endorsed the cards and is very happy with the scheme. Government of India has launched the Soil Health Card in a mission mode. The card issued to farmer contains vital information regarding crop wise recommendations for micronutrients / fertilizers required in farms and helps in improving productivity of farming by using appropriate inputs. This will also help in correcting the nutrient use ratio. State governments are provided assistance for setting up soil testing laboratories. Tamil Nadu, Gujarat, Andhra Pradesh and Haryana have already implemented the same and 48 crore soil cards have been already issued. Some of the states such as U.P., Bihar, Odisha, and West Bengal etc. are lagging behind in issuing such cards.

What is your take on mounting fertilizer subsidies? Do you think fertilizer subsidies are distorting the fertilizer use and stunting the growth of the industry?
Fertilizer subsidies are essential in all economies to support growth of agricultural sector and ensure enough food grain production to meet the requirement of growing population. A balanced use of fertilizer can occur only after the pricing is rationalized to eliminate farmer’s bias in use of urea.The price of imported fertilizers has increased considerably over the years. Also, due to increase in input prices, the cost of production of indigenous fertilizer has also gone up. On the other hand, the MRP of urea has not been changed since Apr.’10 and remained at Rs. 5310/MT. An increase of Rs. 50/MT was made from Nov.’12 towards maintenance of mFMS at dealers end. Increase in input price of domestic Urea and no corresponding increase in MRP has resulted in higher subsidy out go for urea. The subsidy on all fertilizers has increased from about Rs. 19400 Crs. in 2005-06 to Rs. 66000 Crs. in 2013-14 (estimated). Additionally, there is a carry forward unpaid subsidy of approx. Rs.40000 Crs.It is true that irrational pricing policies on fertilizers are restricting growth of Indian fertilizer industry. For example, in urea sector, there has been no new capacity addition during the last 15 years in absence of a suitable policy.

How was the performance of fertilizer industry last year in India?
Indian fertilizer industry’s performance in Production and energy consumption has been good and comparable to the best in the world. However the financial performance of the industry has been poor. Industry operates under an uncertain and unfavorable policy scenario and continues to suffer on account of under recovery of legitimate cost increase This is further compounded by lower budgetary provisions and resultant delays in payment of subsidy. A large sum of subsidy dues to the extent of Rs. 35000 crs.was carried forward from 2013-14 to 2014-15. The return on net worth (PAT/Net worth) of urea industry has been abysmally poor at only 4.5% in 2011-12.

What are the latest trends in the fertilizer segment in India?
The availability of feedstock and a suitable policy annunciation is holding the new investments in the country. There is a surplus projected in the international market and the urea prices are expected to remain low. The government probably thinks that imports may be viable in the short term and hence longer time is being taken to put a suitable policy in place to stimulate any growth of the sector. Currently, industries are exploring setting up of Urea plants at resource rich countries. However, such opportunities are limited and subjected to Government to Government agreements. In case of P & K fertilizers, dependence on imports would continue due to lack of raw materials in the country.Feedstock for the production of urea is a main constraint. Even today, natural gas for urea production is falling short. About 40% of the total urea capacity is sourcing natural gas in the form of LNG at very high price.

What are your future plans in fertilizer business?
It is our endeavor to offer complete basket of agri products to the farmers. Our company has been helping farming community by providing complete nutrition solutions and has plans to further increase this basket and provide Yield enhancement nutrition, improved quality seeds, crop protection chemicals and Extension services leveraging IT.

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