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Notice (8): Undefined variable: urlPrefix [APP/Template/Layout/printlayout.ctp, line 8]latest-news-updates/fertile-fields-elsewhere-12434.html"/> LATEST NEWS UPDATES | Fertile fields elsewhere | Im4change.org
Resource centre on India's rural distress
 
 

Fertile fields elsewhere

-The Business Standard

Recent reports of the acquisition of a foreign rock phosphate mine by an Indian fertiliser manufacturer through a joint venture with a Japanese firm — in order to secure the raw material supply to its domestic phosphatic plant — should be viewed as part of a trend that needs to be sustained. India is critically dependent on fertiliser imports, since the availability of raw material for indigenous production is woefully poor. While almost 25 per cent of the requirement of urea, the most-consumed fertiliser, is met through imports, this proportion is almost 100 per cent for potassic fertilisers and nearly 90 per cent in the case of phosphatic fertilisers. Urea is, indeed, the only fertiliser that can potentially be produced without any imported content. But the paucity of natural gas, the most preferred feed stock for its manufacture, is coming in the way of doing so, necessitating the setting up of joint ventures for urea production in gas-rich countries. In the case of the other fertilisers, the country has no source of potash, and only very limited resources of fertiliser-grade rock phosphate.

If India is to step up its consumption of fertiliser in order to energise its agricultural sector, one of two avenues to growing the sector must be taken. Either methods of producing these fertilisers in the countries where the required raw material and inputs are available must be found, or regular supplies of raw materials must be ensured. That latter can happen through the acquisition of mineral assets abroad, or by entering into long-term supply agreements with mine owners there. China, the only other country that imports as much fertiliser as India, has already taken this route for slashing its dependence on spot purchases of fertilisers from the international market. Yet this course is free of neither operational hurdles nor risk. Many mineral-rich countries now lay down very stringent terms for such deals. Countries like Tunisia and Morocco, which abound in rock phosphate resources, either refuse to allow outright purchases of their mines by foreign companies, or insist on adding value locally by setting up the manufacturing facilities there.

The Indian fertiliser industry is in frail health, and few local companies are likely to be able to set up joint ventures abroad unsupported. Calls for government backing have thus grown — the sector has asked for support ranging from sovereign guarantees and tax incentives to equity support and diplomatic assistance. Naturally, not all these demands will be reasonable, and only those that do not put additional strain on the exchequer should be considered. The essential truth is that India needs to go a step further and reform its domestic fertiliser pricing and distribution systems to make the fertiliser sector attractive for fresh investment, so that domestic firms are able to go forth and secure their supply for themselves.