India’s Fertilizer Sector: Recent Developments
The Indian government is taking significant steps to enhance the country’s fertilizer production capabilities. Recent recommendations from the Standing Committee on Chemicals and Fertilizers have sparked discussions about reducing the Goods and Services Tax (GST) on micronutrients and raw materials. This matter has been referred to the Group of Ministers (GoM) on Rate Rationalisation for a comprehensive evaluation. These initiatives are part of a broader strategy to boost domestic production and reduce reliance on imports, ultimately aiming for self-sufficiency in the fertilizer sector.
GST Reduction Recommendations
The Standing Committee on Chemicals and Fertilizers has made important recommendations regarding the GST on micronutrients and raw materials. These recommendations aim to lower the tax burden on essential agricultural inputs. The 53rd GST Council meeting acknowledged these suggestions and decided to refer the matter to the Group of Ministers (GoM) on Rate Rationalisation. This group will conduct a thorough review to assess the implications of reducing GST rates.
The reduction in GST could significantly benefit farmers by lowering the cost of fertilizers. This move is expected to make fertilizers more affordable and accessible, thereby enhancing agricultural productivity. The government recognizes the importance of micronutrients in improving soil health and crop yield. By addressing the tax structure, the government aims to encourage the use of these essential inputs, which are crucial for sustainable agriculture.
New Investment Policy for Urea Production
Under the New Investment Policy (NIP), the Indian government is actively promoting fresh investments in the urea sector. To achieve self-sufficiency in urea production, six new urea units have been established, each with a production capacity of 12.7 lakh metric tons (MT). This initiative is a part of the government’s broader strategy to enhance domestic production capabilities.
Additionally, the revival of the Talcher unit of Fertilizers Corporation of India Limited (FCIL) has been approved. This revival will be executed through a Joint Venture Company (JVC) called Talcher Fertilizers Limited (TFL). A new Greenfield urea plant with a capacity of 12.7 lakh MT per annum will be set up using the coal gasification route. The government has also implemented the New Urea Policy (NUP) – 2015, which aims to maximize indigenous urea production from existing gas-based units.
These initiatives have led to a remarkable increase in urea production. From a production level of 225 lakh metric tons per annum in 2014-15, the output has surged to a record 314.09 lakh metric tons during the 2023-24 period. This growth reflects the government’s commitment to achieving self-reliance in urea production and ensuring food security for the nation.
Enhancements in Phosphatic and Potassic Fertilizers
The Indian government is also focusing on the production of Phosphatic and Potassic (P&K) fertilizers. Companies now have the freedom to import or produce fertilizer raw materials, intermediaries, and finished fertilizers based on their business needs. This flexibility encourages the establishment of new manufacturing units and the expansion of existing ones under the Nutrient Based Subsidy (NBS) scheme.
To promote indigenous production, the government has recognized Potash derived from Molasses (PDM) as a 100% domestically manufactured fertilizer. This initiative was notified under the NBS regime on October 13, 2021. Furthermore, a freight subsidy on Single Super Phosphate (SSP), another indigenously manufactured fertilizer, has been implemented since the Kharif season of 2022. This subsidy aims to promote the use of SSP, which provides essential phosphatic nutrients to the soil.
These measures have resulted in a significant increase in P&K fertilizer production. From 159.54 lakh metric tons in 2014-15, production has risen to 182.85 lakh metric tons in 2023-24. The government’s proactive approach in this sector is crucial for enhancing agricultural productivity and ensuring the availability of essential nutrients for crops.
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