OUTLOOK OF DEMAND AND SUPPLY OF CHEMICAL FERTILISER IN INDIA

The three main nutrients for plant growth N (Nitrogen) P (Phosphate) and K (Potash) are primarily consumed through Urea, DAP and MOP fertiliser respectively. The global fertiliser demand has grown by about 10% over the past two year .This trend is likely to continue in the future the main drive being. Thus global fertiliser demand is expected to grow at about 2.8% p.a during the FY 2008 to FY 2013 which is higher than five year average growth of the past decade of the there main nutrients, nitrogen demand is expected to rise faster (2.9% p.a) than phosphate (2.6% p.a) or potash (2.4% p.a) India is one of the major region contributing to rising fertiliser demand in India is expected to increase at about 4.3% p.a FY 08 to FY 13 higher than the global rate of 2.8% p.a during the same period. In FY 08 India imported 6.8 mt of urea making it one of the largest urea imported in the world. Urea demand is forecast to increase by about 3% p.a to reach 29 mt by 2011 which we believe is very conservative estimate. India currently import about 2 mt of DAP p.a. Indian DAP demand expected to increase by about 5% till 2012.But the planed capacity addition are not expected to match the projected demand increasing India’s dependence on imports. India is the third largest producer and consumer of fertiliser in the world after China and USA and contributes to 12% of world production of nutrients and 12.6%of world consumption of NPK nutrients .Per hectare fertiliser consumption (Kg/ha) in neighboring countries 2001-02.China 225.1, India 91.5, Sri Lanka 122.7. Pakistan 131.9, Bangaladesh 159.1 World 89.9.

REGULATION:
Because of its direct linkage to national food security traditionally the fertiliser sector has been highly regulated. The production, distribution and pricing of fertiliser have been controlled by the Government of India. The burgeoning subsidy bill and huge demand necessities deregulation in this sector. Due to sensitivities involved complete deregulation of fertiliser sector is still not viable option.

FUTURE OUTLOOK:
By 2015 India is expected to face a demand supply deficit of 8.9mt of urea. The recent initiative may result in relieving its heavy dependence on import in the near future.

INDIA UREA -DEMAND-SUPPLY (Mn.tons)
YA ER 20 04 20 05 20 06 20 07 20 08 21( ) 0 1e DMN E AD 1 .7 9 2 .7 0 2 .3 2 2 .5 4 2 .7 6 2 .1 9 SPL UPY 1 9 2 .2 0 2 0 2 .3 0 2 0 2 .1 3 D F IT E IC E 0 .7 0 .5 2 .3 4 .2 6 .7 6

(Source: Crisil, IFA) INDIA ESTIMATED DAP -DEMAND-SUPPLY (Mn.tons)
YA E R 20 08 20 09 21 00 21 01 DM N E A D S P L UPY D F IT E IC E 7 .9 5 .9 2 8 .3 6 .2 2 .1 9 .1 6 .4 2 .7 9 .5 6 .5 3

(Source: Crisil, IFA) FERTILISER CONSUMPTION (NPK)
(In Million Tonnes)
YEA R 19 9 0 9 -0 20 1 2 0 -0 20 6 7 0 -0 20 1 2 1 -1 F O G A O D R IN F R IL R E T ISE P O U T N R D C IO C N M T N O SU P IO 2 9.8 0 1 .0 8 7 22 1 .02 1 .3 7 6 24 3 .29 2 .5 3 5 30 2 3 .9 7 2 PE H C A R E T R C N U P IO O S M T N 9 .23 5 9 .49 1 15 1 .23 18 6 .99

(Integrated Nutrient Management) Chemical fertilisers have played a vital role in the success if India green revolution and consequent self reliance in food grain production. The increase in fertiliser consumption has contributed significantly to sustainable production of production of food grain in the country. The Indian fertiliser had a very humble beginning in 1906 when the fertiliser manufacturing unit of SSP was set up Ranipet near Chennai with an annual capacity 6000 MT. Fertiliser is a key ingredient in ensuring the food security of the country by increasing the production and productivity of the soil. The domestic food grain production target has been set at 320 million tonnes by 2011-12 from the present production of 210million tonnes. This target could be achieved by higher productivity through improved farming practices expansion of irrigation, better seed and extensive and

balance use of fertiliser. The department of planning to raise the production of urea from the present installed capacity of 197 to 300 LMT by the end of 11th five year plan i.e. 2011-12 by taking concentrate steps to boost production and productivity removing regional imbalance in production and distribution securing long term Sector –wise and Nutrient-wise Installed Capacity of Fertiliser manufacturing units (as on 1st Jan 09)
Sector Public Sector Private Sector Co-operative sector Total Capacity LMT Nitrogen Phophatic 34.98 4.33 31.69 17.13 53.94 35.13 120.61 56.59 Percentage Nitrogen Phophatic 29 7.65 26.27 30.27 44.73 62.08 100 100

(Integrated Nutrient Management) 10th Five Year Plan 100% capacity utilization of existing plants (LMT)
DEMAND SUPPLY GAP DAP MOP UREA DAP UREA DAP 71.8 21.75 197.9 69.81 15.96 1.99 77.05 22.73 197.9 73.77 23.28 3.28 81.87 23.64 200.3 73.77 27.8 8.1 86.69 24.55 208.56 73.77 26.47 12.92 91.66 25.45 216.45 73.77 25.32 17.89

YEAR 2002-03 2003-04 2004-05 2005-06 2006-07

UREA 213.86 221.18 228.1 235.03 242.14

(Source: Department Of Fertilisers) The department of fertiliser has estimated the demand for urea on the basis of urea consumption in the last five years (1998-99 to 2002-03) and past growth trend. Such an estimate appear more realistic as any future policy on fertiliser usage world emphasis on balance use of phosphatic and potassic fertilisers to improved NPK ratio. Thus on an assumed annual compounded growth rate of 2% urea demand is likely to be 220 lakh tonnes in 2006-07 and 243 lakh tonnes by the end of 11th five year plan (2011-12).This would also indicate a urea demand supply gap of about 5 to7 lakh tonnes by the year 2005-06 assuming Oman Indian Fertilisers Company (OMIFCO) supplies are available as targeted. The gap would further grow to about 30 lakh tonnes by 2011-12.Thus would be need for additional urea production capacity given by the most conservative demand estimate.

SRATEGY FOR GROWTH:Setting up joint venture project in countries having abundant and cheaper raw material, expansion and capacity addition/efficiency Joint Venture Abroad:Oman Indian fertiliser Company Oman (OMIFCO) KRIBHCO, IFFCO and Oman Oil Company with share holding of 25%, 25% and 50% respectively have collaborated and set up world class urea ammonia fertiliser plant in Oman. It consists of 5060 MTPD. Jordan:SPIC Southern Petrochemical Industries Corporation Ltd. Jordan Phosphate Mine Company Ltd. (JPMC) and Arab Investment Company (AIC) joint venture project in Jordan to produced 2.24 lakh tonnes of phosphoric acid p.a. 52.17% of the equity of the joint venture named Jordan Chemical Company Ltd. is held by SPIC, 34.86% by JPMC and 12.97% by AIC Morocco:A joint venture (Indo Morocco Phosphore SA) between Office Cherifien Des Phosphates (OCP), Morocco and Chambal Fertilizers & Chemicals Ltd. (CFCL) to produce 3.30 lakh tonnes of phosphoric acid at a total cost of US $ 205 million had been commissioned in Morocco in October 1999. This venture did not involve any participation or buyback arrangement by the Government. The equity in the venture of US $ 65 million is held by OCP and CFCL equally.

Annexure

World Nitrogen Demand/ Supply Balance (Million metric tonnes)
2009 Supply Capacity Total Supply Demand fertiliser demand Non-fertiliser demand Distribution Losses Total Demand Potential Balance % Balance Supply 154.9 133.5 2010 158.3 137.4 2011 164.7 143.1 2012 172.7 149.5 108.2 26.8 3.4 138.4 11.1 8 2013 179 154.7 110.3 27.9 3.5 141.7 13 9

101 103.9 106.1 22.8 24.2 25.7 3.1 3.2 3.3 126.9 131.3 135.1 6.6 6.1 8 5 5 6 source:M.Prud'homme,IFA,june 2009

World Phosphoric Demand/ Supply Balance (Million metric tonnes)
2009 Supply Capacity Total Supply Demand fertiliser demand Non-fertiliser demand Distribution Losses Total Demand Potential Balance % Balance Supply 46.1 39.8 2010 47.6 41.8 2011 49.1 43.6 2012 53.1 45.2 35.7 5.6 0.8 42.1 3.1 7 2013 55.3 46.9 37.1 5.9 0.9 43.8 3.1 7

30.1 32.6 34.2 5.1 5.4 5.5 0.7 0.8 0.8 35.9 38.7 40.5 3.9 3.1 3.1 11 8 8 source:M.Prud'homme,IFA,june 2009

World Potash Demand/ Supply Balance (Million metric tonnes)
2009 Supply Capacity Total Supply Demand fertiliser demand Non-fertiliser demand Distribution Losses Total Demand Potential Balance % Balance Supply 41.8 38 2010 44.1 39.5 2011 45.9 41.6 2012 51.9 44.4 29.8 3 1 33.8 10.6 31 2013 54.7 47 31 3 1 35 12 34

24.9 26.9 28.5 2.8 2.9 2.9 0.8 0.9 0.9 28.5 30.7 32.3 9.5 8.8 9.3 33 29 29 source:M.Prud'homme,IFA,june 2009

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