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Prospects of SSP under NBS

C Narasimha Reddy
Business Unit Head Jubilant Industries Ltd

FAI Management Development Programme JAIPUR

16th April, 2011

Presentation Flow
Indian Fertilizer Scenario Single Super Phosphate (SSP) & Phosphatic Fertilizers SSP History & Manufacturing process Role of SSP in crops and soil SSP Industry in India Subsidy policy for fertilizers in India Changes in Subsidy policies for SSP Nutrient based subsidy policy (NBS) Impact of NBS on SSP Future prospects for SSP under NBS

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Indian Fertilizer Scenario

There are about 139 fertilizer plants in operation in India,
29 Urea 19 DAP and NP/NPK Complex

80 SSP
10 Ammonium Sulphate 1 Calcium Ammonium Nitrate Unit

Highest Consumption fertilizer in India is Urea (260 Lac MT), followed by DAP (94 Lac MT) and NPK Complex (70 Lac MT) & SSP (30 Lac MT) Potash based fertilizers are not produced in India, all of it is imported (Consumption in 09-10 - 36 Lac Mt) Total 268,120 Sale Points of which Private 78% and Institutional 22%

Indian Fertilizer Industry

India is the 3rd largest fertilizer producer in the world. The Indian fertilizer industry started operating in a big scale since 1940s, with setting up of Fertilizer & Chemicals Travancore of India Ltd. (Kerala) and Fertilizers corporation of India (Bihar). The fertilizer industry in India grew to a considerably in 1970s and 1980s after the emergence of the green revolution in the late sixties. Under the administrative control of the Department of Fertilizers, there are 9 public sector undertakings & two Cooperative societies. 56 large size fertilizer units manufacture wide varieties of nitrogenous and phosphatic/ complex fertilizers. The private sector produces 44% of nitrogenous fertilizers and 62% of phosphatic fertilizers. SSP contributes to 6.6% of total phosphatic inputs in India.

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Indian fertilizer Market Size & Growth

India contributes 16% of the Global Fertilizer consumption
Million MT

Products Urea DAP Complex SSP Potash Others TOTAL

2009-10 26.5 10.0 8.6 2.6 4.2 0.1 53.0

2010-11 Estimates 27.5 11.2 9.2 3.2 4.8 0.1 56.0

2013-14 Projection 30.0 11.5 10.0 3.5 6.0 0.1 61.1

Projected CAGR (in 13-14 over 09-10) in Urea (4%) , DAP (5%) & SSP (10%)
Source: FAI

SSP & yield of crops

Yields in select countries, depending on share of SSP Country Share of SSP Egypt China Brazil Uruguay Argentina India World 92.8 30.5 28.6 18.8 12.9 6.6 13.5 Source: International Fertilizer Association data released in 2007 Yield in Kilogram per Hectare Cereals 7562 5315 3553 N.A. 4352 2619 Pulses 3146 1309 834 N.A. 1341 611 Paddy 10288 6422 3826 N.A. N.A. 3303

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Country wise total Phosphatic & SSP consumption

India is third largest SSP consumer in world after China & Brazil
Source: FAI

Share of SSP to Phosphatic fertilizers

1 0.8 0.6 0.4 0.2 0 92.1%

% share of SSP to total P2O5 consumption

30.5%

28.6%

18.8%

13.5%

12.9%

6.6%

5.7%

4.2%

4.2%

4.0%

3.4%
6.6

% share of SSP to total P2O5 consumption

% of SSP to Phosphatic consumption in India

100 100 80 60 40 20 0 1950-51 1970-71 1980-81 1990-91 1991-92 2009-10 44.8 23.4 28.5 18.6

% of SSP to Phosphatic consumption in India

3.3%

Source: FAI

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Single Super Phosphate - History

1840 - Single Super Phosphate a fertilizer that contains P in water soluble form was first produced by the scientists of Rothamsted Experimental Station [UK] during the year 1840. Development of more complex phosphatic fertilizers such as Di-ammonium phosphate. 1906 - Single Super Phosphate (SSP) Fertilizer industry is the pioneering fertilizer industry in India and the first SSP plant have been established by EID Parry in the year 1906. Today In India there are 80 SSP manufacturing units with an installed capacity of 79 Lac Mt

S S P Manufacturing & Chemistry

SSP is produced by digesting grounded rock phosphate with Sulphuric Acid. In this process, water insoluble tri-calcium phosphate {Ca3(PO4)2} of Rock phosphate is converted into water soluble mono-calcium phosphate {Ca(H2PO4)2}. Calcium fluoride (CaF2) is main impurity present in the rock and also react with acid. Following reactions explain the chemistry of Sulphuric acid reaction with rock phosphate3Ca3(PO4)2 + CaF2 + 10H2SO4 3Ca3(PO4)2 + CaF2 + 14H3PO4 H2SO4 + CaF2 4HF + SiO2 3SiF4 + 4H2O 6H3PO4 + 10CaSO4 + 2HF 10Ca(H2PO4)2 + 2HF CaSO4 + 2HF SiF4 + H2O SiO2.2H2O + 2H2SiF6 diluted

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Steps in SSP Manufacturing

SSP Single Super Phosphate

SSP is a phosphatic fertilizer containing 16% P2O5 present in water soluble for available to plant Sulphur 11% available for plant utilization (one of the most critical nutrient for Oilseeds, sugarcane & Potato for their quality output) Improves lodging resistance (Calcium 21%) Trace Minerals available (Mg, Fe, Zn, Cu & B) These components improve root growth and chlorophyll synthesis in turn improves tuber / product quality Improves soil properties, sustained fertility Helps improve immunity (insects/disease resistance) Available in Powder and Granulated form to meet crop specific nutrient requirement

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Roles of SSP components

Role of Phosphorus Plant growth Quality & yield improvement Root development Enhance crop maturation Role of Sulphur Chlorophyll & Protein formation Oil synthesis Formation of enzymes and vitamins Promotes nodulation in legumes for N-fixation increases crop yield by 1525% in S deficient soils Role of Calcium Plant cell elongation and stability Improves lodging resistance Removes acidity and restore soil health Remove soil compaction

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SSP - Nutritional Solutions to Sustainable Yields

India has acute Sulfur Malnutrition in soils leading to sluggish Productivity Sulfur demand of crops can be met by Using Fertilizers like Single Super Phosphate DAP is dependent of Global Phos Acid suppliers and availability depends on global swings SSP could easily meet P requirement while simultaneously supplying S, Ca and micronutrients to Crops SSP also helps to protect the soil from disintegration SSP use in Sulphur deficient crops increases the crop yield by 1525%

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Location of SSP plants in India

Prim. Kap Prim. Kap

SSP - All India Production capacity and market size

(LAC MT)

Consumption increased by 8% over previous year Production increased by 24% over previous year
Source: FAI
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SSP - India Capacity, Production & Consumption

(LAC MT)

FY 2009-10
80 70 60 50 40 30 20 10 0 Production capacity Production Large consolidated Consumption Small fragmented

47

11

32

8.6

20

18

Production during 2009-10 increased by 19% over previous year Consumption during 09-10 remained static resulting in high carry over stock in view of NBS policy
Source: FAI

Major SSP consuming States (09-10)

Lac MT
9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0
8.8 6.9 5.7 5.4 3.3 2.5 4.7

1.7

UP

MP

MAH
Cons 2009-10 Prodn 09-10

RAJ

Above 5 states have 80% consumption of total SSP in the country Rajasthan has excess production which caters to MP, MH, CG, PB, HR and UP markets due to RM availability in the state. GUJ additional production goes to MP, MH
Source: FAI

0.8

GUJ

2.0

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Top 10 SSP Companies (09-10)

9 8 7 6 5 4 3 2 1 0

8.47

6.24 4.34

4.29

3.33

3.22

4.29 2.54

2.01

1.79

1.32

1.32 0.99

0.89

0.76

1.6

1.6

1.2
61%
BASANT AGRO

KHAITAN

LIBERTY PHOSPHATE

RAMA PHOSPHATE

JUBILANT

B.E.C

HLL/TCL

JAYSHREE CHEM

COROMANDAL

TEESTA AGRO

BASANT AGRO

Capacity (Lac MT)

Production (Lac MT)

% Capacity Utilization
100% 80% 60% 39% 40% 20% 0%
KHAITAN LIBERTY PHOSPHATE RAMA PHOSPHATE JUBILANT B.E.C HLL/TCL JAYSHREE CHEM COROMANDAL TEESTA AGRO

89% 70% 75% 59% 56% 48% 76% 75%

% Capacity Utilization
19

0.73
Source: FAI

Indian Fertilizer sector - Subsidy

Indian fertilizer industry is highly regulated and dependent on subsidy given by Government of India (GoI) to maintain farm gate prices The fertilizers are regulated by GoI under Fertilizer Control Order 1985 The MRP of each fertilizer product is fixed by the Government and the difference of production cost or import cost is paid to companies in the form of subsidy. Till 2009-10, the subsidy was fixed by the government on quarterly basis based on the input cost/ Import cost to the manufacturer A new subsidy policy, called Nutrient Based Policy (NBS) announced by GoI for 2010-11, valid for 1 year. Same policy is being continued for another year 2011-12 Under NBS the subsidy amount for each fertilizer is fixed based on the nutrient composition in the fertilizer.

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SSP subsidy process & documentation

Manufacturer sells the product to dealer Dealer confirms the quantity received Auditor certificate verifying sales Manufacturer submits the bills to claim 85% subsidy Dealer enters the material in his stock register Dealer submits monthly sales information to district DoA Dist DoA verifies the sold quantity & reports to DoA state DoA sends a report to GoI for release of balance 15% subsidy GoI releases balance subsidy amount to manufacturer
DoA Department of Agriculture GoI Government of India

Documents required to claim 85% subsidy: License no & validity of dealer for state Selling permission copy to manufacturer issued by state govt. Monthly quality certificate issued by state of manufacturing Auditors certificate verifying sales quantity Signature of authorized signatory & auditor verified by Board of Company

Subsidy on SSP is on sold quantity and not on dispatched quantity as in DAP & Urea

SSP subsidy policy 1993-2007

YEAR 1993 2000-01 PERIOD From 1993-94 to 95-96 1st April 1st July 1st Oct 1st Jan 1st April 1st July 1st Oct 1st Jan 12th March 28th Feb 1st April 1st July 1st Oct 1st Jan 1st April To 340 30th June 30th Sep 31st Dec 31st March 30th June 30th Sep 31st Dec 27th Feb 31st March 11th March 30th June 30th Sep 31st Dec 31st March 31st March Gp 1 Gp 2 800 700 700 700 650 650 650 650 650 650 650 650 650 975 975 1100 4450 3700 3900 4100 2598 2591 2425 2694 2488 4215 4250 5420 5417 6875 7292 34.00% 18.00% 18.90% 17.90% 17.10% 25.00% 25.10% 26.80% 24.10% 26.10% 15.40% 15.30% 12.00% 12.00% 14.20% 13.40%
Source: FAI

Concession Rs per MT SSP DAP

SSP as % on DAP %

2002-03

2004-05

2006-07

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SSP Subsidy policies 2007 onwards

The discrimination of SSP subsidy policy, affected the stability of growth in the production and despatches of SSP till 2007-08. The year 2008-09 witnessed a major change in the policy, although announced for a brief period, i.e., for one year and four months effective from 1st May 2008. Changed policy introduced fixation of uniform MRP by the Central Govt. against earlier practice of MRP fixed by the State Govts. The policy also provided for monthly revision in the concession rates to reflect the variation in prices of raw materials vis--vis imported rock phosphate and imported sulphur. For the first time, the policy recognized sulphur content in SSP while fixing

SSP Subsidy policies 2007 onwards

The policy continued upto September, 2009. Consequently, the production of SSP showed significant increase to the tune of 53% during Kharif 2009 over Kharif 2008. W.e.f. 1st Oct 09, the concession policy revised with fixed subsidy of Rs. 2000 per ton and open selling price for SSP. However,. The open MRP did not work as DAP prices remained controlled with variable subsidy leaving a gap in farm gate price of SSP & DAP. Increase in raw materials (particularly, sulphur) during the period resulted in reduced production. W.e.f. 1st May 2010, NBS policy for SSP announced recognizing SSP also as key fertilizer.

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NBS Policy
As per the Nutrient Based Subsidy, the Government is offering a Fixed per Kg subsidy for application on N, P, K & S as well as micronutrients with multi-fold objective
Increase availability of secondary and micronutrients in the soil by encouraging the producers to innovate and experiment with customized fertilizers, leading to higher demand due to higher response Reduce the subsidy bill by decontrolling the prices.

NBS has brought the price parity to the farmers for P&K fertilizers based on nutrient content NBS was announced in March 2010 for 2010-11 and revised again in March 2011 for FY 2011-12 considering international prices of Urea & DAP
Sl No. Nutrients NBS (Rs per Kg of Nutrients) as on 16.3.2010 NBS (Rs per Kg of Nutrients) as on 09.03.2011

1 2 3 4

N P K S

23.227 26.276 24.487 1.784

27.481 29.407 24.628 1.692

NBS policy 2010-11 & 11-12

S No 1 2 3 Product DAP SSP MOP Fertilizer MAP TSP MOP 16-20-0-13 20-20-0-13 23-23-0-0 10-26-26-0 12-32-16-0 14-28-14-0 14-35-14-0 15-15-15-0 Ammonium Sulphate NBS Rs per MT (16.03.2010) 16268 4400 14692 2011-12 16219 16087 14692 9203 10133 11386 15521 15114 14037 15877 11099 5195 2010-11 12770 9340 12831 7431 8236 9295 12850 12332 11495 12916 9270 4413 NBS Rs per MT (09.03.11) 18474 4891 14777

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Expected Effect of NBS on fertilizer sector

Nutrient based subsidy has enabled a level playing field for all fertilizers based on their nutrient content Farm gate price for a nutrient to be almost same irrespective of formulation/ type of fertilizer giving flexibility to customer for choosing product as per his requirement NBS encourages fertilizer companies to work at farmers level for branding and promotion and move to open market scenario Diversity in product mix expected to lead to differentiation and better competition Producers with lesser overheads will gain competitive situation in the market As the P component is offered both by DAP & SSP, expected fillip is towards SSP consumption due to price advantage

Pre NBS - Production of SSP

Year Production '000 MT 2742 2505 2408 2543 2461 2795 2972 2246 2534 3093

(2000-01 to 2009-10)

Increase/ decrease over previous year Qty MT Percent -22.4 -8.7 -3.9 5.6 -3.2 13.6 6.3 -24.4 12.8 22.1 -791 -238 -97 136 -82 334 177 -726 287 559

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Almost stagnant growth in production of SSP during the current decade up to 2007-08 with recovery in production from 2008-09.

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Impact of NBS - Change in SSP production

Zone Annual installed capacity 09-10 EAST ZONE NORTH ZONE SOUTH ZONE WEST ZONE TOTAL SSP 736.7 556 871 5775 7938.7 10-11 781.7 576 871 5775 8003.7 % change 09-10 258.3 230.2 302.2 2022.4 2813.2 Production 10-11 390.1 254.5 393.4 2163.5 3201.5 % change Capacity Utilization % 09-10 38.3 50.1 37.8 39.4 41.5 10-11 59.2 53.3 50.6 46.5 49.2 % change

6% 4% 0% 0% 1%

51% 11% 30% 7% 14%

55% 6% 34% 18% 19%

Positive change in subsidy policy has resulted in higher production and capacity utilization

SSP status April-February 2010-11

Increase in production
Cumulative production of SSP increased by 13.8%, from a total of 2813.2 thousand tonnes during April-February 2009-10 to 3201.5 thousand tonnes during April-February 2010-11

Capacity utilisation improved

All-India capacity utilisation of SSP went up from 41.5% during April-February 2009-10 to 49.2% during April-February 2010-11.

Increase in despatches
Despatches of SSP increased by 22.6%, from a total of 2588.7 thousand tonnes during April-February 2009-10 to 3174.4 thousand tonnes during AprilFebruary 2010-11.

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SSP - Future prospects

Acknowledging SSP as key Phophatic fertilizer at par with DAP on nutrient content, it is expected: Improved Productivity as soil will get the much desired Sulphur. Farmer gets P at lower rate. Government benefits due to lower subsidy bill. Option with farmer at lower P price in SSP along with other nutrients (S & Ca) availability without additional cost. Employment creation by local SSP manufacture and value within the country. Win-win situation to ensure that the NBS is sustained.

SSP - Future prospects

The NBS on SSP is expected to have impact on following: New investment in the sector Large fertilizer companies entering into the sector Further increase in capacity utilization Consolidation for economy of scale Improved and assured quality Better availability to farmers across the country as smaller plants are located in multiple locations. This would also save precious saving in fuel oil used for transportation. Forex saving through utilization of indigenous Raw Material in SSP (local rock phosphate and Sulphuric acid) against imported Phosphoric acid in DAP.

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