Assessment of Fertiliser Industry in India - 9th August - Without Watermark

Assessment of the
fertiliser market in India

July 2021
Table of contents
1 Macroeconomic overview ................................................................................................................ 8
1.1 Global GDP review and outlook................................................................................................ 8
1.2 Review and outlook on inflation...............................................................................................22
1.3 Review and outlook on population ...........................................................................................23
2 Macroeconomic overview of India ...................................................................................................25

2.1 A review of India’s GDP growth...............................................................................................25
2.2 Outlook on India’s GDP growth ...............................................................................................26
2.3 Review of global per capita GDP .............................................................................................30
2.4 Review of trend in inflation (CPI) in India ..................................................................................31
2.5 Fundamental growth drivers of GDP ........................................................................................32
2.6 Review of budgetary expenditure of key states on agriculture and rural development ......................38
2.7 Review of private final consumption growth in India ....................................................................39
2.8 Overview of key recently announced fiscal measures to deal with COVID-19 pandemic ...................41
3 Overview of global agriculture sector ..............................................................................................48

3.1 Trend in global agriculture land ...............................................................................................48
3.2 Review and outlook for world cereal production .........................................................................54
3.3 Region wise production and consumption of major crops ............................................................57
3.4 Review and outlook for world horticulture production ..................................................................65
3.5 Global and regional food consumption .....................................................................................66
3.6 Overview of global agriculture trade scenario ............................................................................69
3.7 Key growth drivers of global agriculture industry ........................................................................73
4 Overview of agriculture sector in India ............................................................................................78

4.1 Introduction to Indian agriculture scenario.................................................................................78
4.2 Trend in Agri-GDP in India .....................................................................................................82
4.3 Impact of monsoon on agri-input consumption...........................................................................84
4.4 State-wise arable land distribution and production......................................................................85
4.5 Review of India’s agriculture trade scenario ..............................................................................95
4.6 Review and outlook on factors impacting farmer’s income ...........................................................97
4.7 Overview of agriculture reforms announced in fiscal 2021 to support farmers ............................... 100
4.8 Overview of industry crop protection and seeds industry in India ................................................ 105
5 Assessment of global fertiliser industry ........................................................................................ 108

5.1 Review and outlook on global demand ................................................................................... 108
5.2 Review of global capacity and supply of fertilisers .................................................................... 109
5.3 Impact of Covid-19 on global fertiliser industry......................................................................... 114
5.4 Overview of recent trends and growth drivers for global fertiliser industry..................................... 115
5.5 Review of key global players................................................................................................. 117
6 Overview of the fertiliser industry in India...................................................................................... 119

6.1 Introduction to fertilisers ....................................................................................................... 119
6.2 Review of key raw material required for manufacturing fertiliser ................................................. 121
6.3 Overview of domestic fertiliser industry................................................................................... 128
6.4 Overview of manufacturing process and technology ................................................................. 130
6.5 Overview of government policies and regulatory framework for fertiliser industry in India................ 135
6.6 Overview of key risk factors for the industry ............................................................................ 143
7 Assessment of the fertiliser industry in India ................................................................................. 146

7.1 Overview of fertiliser consumption pattern............................................................................... 146
7.2 Review and outlook of overall domestic fertiliser consumption.................................................... 146
7.3 Review of niche and value added products ............................................................................. 154
7.4 Review of state and nutrient level consumption........................................................................ 155
7.5 Review of government subsidy to the industry ......................................................................... 158
7.6 Review of profitability of industry ........................................................................................... 161
7.7 Growth drivers for Fertiliser sector ......................................................................................... 163
8 Assessment of phosphatic fertiliser segment ................................................................................ 167

8.1 Overview of phosphatic fertilisers .......................................................................................... 167
8.2 Overview of raw materials for phosphatic fertilisers .................................................................. 167
8.3 Overview of manufacturing process and technology for phosphatic fertilisers ............................... 170
8.4 Overview of government regulations for phosphatic fertilisers .................................................... 172
8.5 Overview of phosphatic fertilisers market in India..................................................................... 175
9 Assessment of competition in fertiliser industry in India ................................................................ 178

9.1 Comparative analysis of players in the fertiliser sector .............................................................. 178
9.2 Key operational parameters of major players........................................................................... 178
9.3 Key financial parameters of major players............................................................................... 192
3
List of figures
Figure 1: Trend and outlook on real GDP growth for World ............................................................................ 8
Figure 2: Trend and outlook on real GDP growth for regional Emerging & Developing economies ....................... 9
Figure 3: Trend and outlook on consumer prices .........................................................................................22
Figure 4:Trend and outlook on global population and its region-wise breakup..................................................23
Figure 5: Real GDP growth in India (new GDP series) .................................................................................25
Figure 6: Trend and outlook on real GDP growth (% on-year) .......................................................................26
Figure 7: Trend and outlook on real GDP growth (% on-year) .......................................................................27
Figure 8: In next three fiscals, India’s growth to be greater than the global GDP...............................................28
Figure 9:GDP growth in fiscal 2022%, y-o-y ...............................................................................................29
Figure 10: Trend and outlook on inflation (CPI) ...........................................................................................31
Figure 11: India’s population growth..........................................................................................................32
Figure 12: India’s urban versus rural population ..........................................................................................33
Figure 13: Dependency ratio (0-14-year population as a percentage of 15-69-year population) ..........................34
Figure 14: Trend in working population (15-69 years)...................................................................................34
Figure 15: Broad split of population into income groups................................................................................35
Figure 16: Review of growth in per capita NSDP for key states (FY14-20).......................................................38
Figure 17: Budgetary (Revenue and Capital) expenditure on Agriculture and allied activities, Irrigation and Rural
development by key states in fiscal 2020 and 2021 .....................................................................................39
Figure 18: PFCE (at constant prices).........................................................................................................39
Figure 19: Broad split of PFCE consumption into basic and discretionary items ...............................................40
Figure 20: Comparison of consumption pattern of India with US and UK .........................................................41
Figure 21: Trend in average monthly wage rates Figure 22: Trend in average monthly work allocation ...45
Figure 23: Trend in global agriculture land (billion hectares)..........................................................................48
Figure 24: Region-wise breakup of agricultural land.....................................................................................49
Figure 25: Top-10 countries in terms of share in agriculture land (2018) .........................................................50
Figure 26: Trend in global arable land (billion hectares)................................................................................50
Figure 27: Region-wise breakup of global arable land ..................................................................................51
Figure 28: Change in regional share in global arable land.............................................................................51
Figure 29: Outlook on change in agricultural land use, 2017-19 to 2029 .........................................................52
Figure 30: Key country-wise arable land (2018) ..........................................................................................53
Figure 31: Trend in region-wise fertilizer usage per hectare ..........................................................................54
Figure 32: Trend in global cereal production and consumption (in million tonnes) .............................................55
Figure 33: Outlook on global cereal production and consumption (in million tonnes) .........................................56
Figure 34: Regional contribution of growth in cereal production projections, 2017-19 to 2029.............................57
Figure 35: Region-wise breakup of global rice (paddy) production..................................................................58
Figure 36: Region-wise breakup of rice production (milled eq.)......................................................................59
Figure 37: Region-wise breakup of rice consumption (milled eq.)...................................................................59
Figure 38: Outlook on global rice production...............................................................................................59
Figure 39: Region wise per capita rice consumption (kg per capita) ...............................................................60
Figure 40: Region-wise breakup of global wheat production (in million tonnes) ................................................61
Figure 41: Region-wise breakup of wheat consumption................................................................................61
Figure 42: Outlook on global wheat production ...........................................................................................62
Figure 43: Region-wise breakup of global coarse grain production (in million tonnes)........................................63
Figure 44: Region-wise breakup of coarse grain consumption.......................................................................63
Figure 45: Outlook on global coarse grains production .................................................................................65
Figure 46: Trend in global horticulture production (in million tonnes)...............................................................65
Figure 47: Region-wise and category-wise trend in energy consumption (kcal per capita per day) ......................67
Figure 48: Per capita consumption of main food groups (protein equivalent), by income group ...........................68
Figure 49: Trend in global agriculture export (USD billion) ............................................................................70
Figure 50: Growth in trade volumes, by commodity......................................................................................71
Figure 51: Value of agriculture and fish exports relative to production by region ...............................................71
Figure 52: Value of agriculture and fish exports relative to production by region ...............................................73
Figure 53: Annual growth in demand for key commodity groups ....................................................................74
Figure 54: Share of different food segments in food consumption ..................................................................75
Figure 55: Food as a share of household expenditures, by income group .......................................................75
Figure 56: Commodity wise projected dietary energy consumption.................................................................76
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Figure 57: Trend in Indian agriculture land (million hectares).........................................................................78
Figure 58: India’s share in global agriculture land (2018) ..............................................................................79
Figure 59: Key country-wise arable land (2018) ..........................................................................................79
Figure 60: Projected crop yields for selected countries and regions (2029) ......................................................80
Figure 61: Trend in agricultural workers in India ..........................................................................................81
Figure 62: Trend in avg. size of landholding (in ha.) Figure 63: Trend in category -wise landholding distribution..82
Figure 64: Trend in Gross Value Added (GVA) of agriculture and allied sectors (Rs billion)................................82
Figure 65: Trend in segment-wise breakup of Gross Value Added (GVA) of agriculture & allied activities .............83
Figure 66: Growth trend in GVA of agri vs. economy Figure 67: Share of agri GVA in GVA of total economy ....84
Figure 68 :Trend in Rainfall in percentage of Long Period Average (LPA) .......................................................85
Figure 69:State-wise Rainfall Distribution (percentage departure from normal rainfall) ......................................85
Figure 70: Key state-wise arable land (fiscal 2016)......................................................................................86
Figure 71: Trend in production and yield for food grains in India ....................................................................88
Figure 72: Key state-wise food grain production (fiscal 2019) ........................................................................88
Figure 73: Trend in production and yield for rice in India ...............................................................................89
Figure 74: Top-3 states in terms of production (fiscal 2019) ..........................................................................89
Figure 75: Trend in production and yield for wheat in India ...........................................................................90
Figure 77: Trend in production and yield for sugarcane in India .....................................................................91
Figure 79: Trend in production and area under cultivation for horticulture in India.............................................92
Figure 80: Trend in horticulture production in India ......................................................................................92
Figure 81: Trend in yield for horticulture crops ............................................................................................93
Figure 82: Key state-wise breakup of horticulture production.........................................................................93
Figure 83: Top-3 states in terms of vegetable production (fiscal 2019)............................................................94
Figure 84: Top-3 states in terms of fruits production (fiscal 2019)...................................................................94
Figure 85: Trend in agricultural commodity import-export scenario.................................................................96
Figure 86: Key commodity-wise breakup of agricultural exports scenario (fiscal 2020) ......................................97
Figure 87: Trend in per hectare profitability from field crops ..........................................................................98
Figure 88: Trend in allocation under MNREGA (Rs billion)............................................................................99
Figure 89: Trend in milk procurement prices ...............................................................................................99
Figure 90: Trend in irrigation penetration level .......................................................................................... 102
Figure 91: Trend in Minimum Support Price (MSP) for key crops ................................................................. 103
Figure 92: Comparison of mandi prices and MSP for key crops ................................................................... 103
Figure 93: Crop protection market snapshot share in value terms(Consumption) (fiscal 2020).......................... 105
Figure 94: Seeds market snapshot (fiscal 2020)........................................................................................ 106
Figure 95: Trend and outlook on global fertiliser demand............................................................................ 108
Figure 96: Review and outlook on region-wise segmentation of global fertiliser demand.................................. 109
Figure 97: Review and outlook on region-wise segmentation of global Nitrogen capacities .............................. 110
Figure 98: Trend and outlook on global Nitrogen supply ............................................................................. 110
Figure 99: Review and outlook on region-wise segmentation of global P2O5 capacities .................................. 111
Figure 100: Trend in global rock phosphate capacities ............................................................................... 112
Figure 101: Region-wise share of rock phosphate capacities (2019) ............................................................ 112
Figure 102: Review and outlook on region-wise segmentation of global K2O capacities .................................. 112
Figure 103: Review of global fertiliser exports ........................................................................................... 113
Figure 104: Key country-wise share of global fertiliser consumption in nutrient terms (2018) ............................ 114
Figure 105: Trend in Natural gas offtake and consumption by Fertiliser sector ............................................... 122
Figure 106: Trend in total consumption of Naphtha and consumption by Fertiliser sector................................. 123
Figure 107: Player-wise breakup of Phosphoric Acid production capacities in India (fiscal 2020) ...................... 124
Figure 108: Trend in production and imports of Phosphoric acid .................................................................. 125
Figure 109: Trend in production and imports of rock phosphate ................................................................... 126
Figure 110: Feedstock-wise share of ammonia for nitrogenous capacity (as of November 2020) ...................... 126
Figure 111: Trend in production and imports of ammonia ........................................................................... 127
Figure 112: Trend in imports of sulphur.................................................................................................... 127
Figure 113: Breakup between manufactured and traded fertiliser volumes (fiscal 2021) .................................. 129
Figure 114: Sector-wise breakup of installed capacities (nutrient terms) (fiscal 2020)...................................... 130
Figure 115: DAP manufacturing process .................................................................................................. 133
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Figure 116: Comparison of India’s fertiliser consumption per hectare of Arable Land and Land under Permanent
Crops compared to other key markets and global average (2018)................................................................ 146
Figure 117: Trend and outlook on fertiliser consumption ............................................................................. 147
Figure 118: Share of products in fertiliser consumption .............................................................................. 148
Figure 119: Trend and outlook on consumption, production and imports of Urea............................................ 149
Figure 120: Trend and outlook on urea consumption in India....................................................................... 150
Figure 121: Trend and outlook on urea imports ......................................................................................... 150
Figure 122: Trend and outlook on non-urea fertiliser demand in India........................................................... 151
Figure 123: Trend and outlook on non-urea product demand ...................................................................... 152
Figure 124: Trend and outlook on NPK nutrient ratio.................................................................................. 153
Figure 125: Trend and outlook on bio-fertiliser industry growth .................................................................... 155
Figure 126: Key state-wise share of fertiliser consumption (fiscal 2019)........................................................ 157
Figure 127: Trend in subsidy bill ............................................................................................................. 159
Figure 128: Trend in unpaid subsidy carried forward next year .................................................................... 161
Figure 129: Trend and outlook on operating profitability of urea and non-urea players .................................... 162
Figure 130: Trend and outlook on prices of key raw material ....................................................................... 163
Figure 131: Trend in avg. size of landholding (in ha.) ................................................................................. 163
Figure 132: Trend in category-wise landholding distribution ........................................................................ 163
Figure 133: Trend in per capita food consumption (Kcal/capita/ day) ............................................................ 164
Figure 134: Per capita/kg/ annum consumption of key commodities ............................................................. 164
Figure 135: Trend in per capita income (Rs)............................................................................................. 165
Figure 136: Trend in non agri bank credit (Rs billion) ................................................................................. 165
Figure 137: Trend in production and imports of rock phosphate ................................................................... 168
Figure 138: Player-wise breakup of Phosphoric Acid production capacities in India (fiscal 2020) ...................... 169
Figure 139: Trend in production and imports of Phosphoric acid .................................................................. 169
Figure 140: DAP manufacturing process .................................................................................................. 170
Figure 141: Trend and outlook on non-urea product demand ...................................................................... 176
Figure 142: Breakup of production volume of key players in terms of Urea vs. Non-urea (Fiscal 2021) .............. 178
Figure 143: Urea production of major players (fiscal 2021) ......................................................................... 180
Figure 144: Non-urea production volume of major players (fiscal 2021) ........................................................ 181
Figure 145: Urea volumes sold by key players (Average FY18-21)............................................................... 182
Figure 146: Non-urea volumes sold by key players (Average FY18-21) ........................................................ 183
Figure 147: Product category-wise segmentation of volumes sold by key players (fiscal 2021)......................... 183
Figure 148: Geography-wise segmentation of volumes sold by key players (fiscal 2021) ................................. 185
Figure 149: Distribution network of key players in the industry ..................................................................... 185
6
List of tables
Table 1: Outlook on population of countries categorised as per income group (in million) ..................................24
Table 2: Per-capita GDP – Global and India (current prices) (USD per capita) .................................................30
Table 3: Trend in median ages across key countries....................................................................................35
Table 4: Per capita net national income at constant prices ............................................................................36
Table 5: State-wise trend in per capita Net State Domestic Product (NSDP)....................................................36
Table 6: Yield for key crop categories for countries with large arable land (2018) .............................................53
Table 7: Yield for key crop categories for countries with large arable land (2018) .............................................79
Table 8: Size classes and size holdings of agriculture land in India ................................................................81
Table 9: Trend in production of major crops (million tonnes)..........................................................................87
Table 10: Nutrient-wise deficiency for key States/UTs (FY2019) (Based on Soil Health Card Portal data provided by
NIC) .....................................................................................................................................................95
Table 11: Agriculture credit scenario ....................................................................................................... 101
Table 12: Review of demand-supply scenario for key nutrients.................................................................... 113
Table 13: Feedstock and related process technology for manufacturing urea ................................................ 131
Table 14: Different aspects of government policy ...................................................................................... 135
Table 15: Trend in nutrient-wise NBS rates .............................................................................................. 138
Table 16: Fertiliser grades covered under NBS subsidy ............................................................................. 139
Table 17: Features of freight subsidy....................................................................................................... 141
Table 18: Difference between earlier process and DBT Model..................................................................... 143
Table 19: Trend in import and production of non-urea fertilisers................................................................... 153
Table 20: Trend in key state-wise consumption of fertilisers in terms of nutrients............................................ 156
Table 21: Trend in key state-wise per hectare consumption of fertilisers in terms of nutrients ........................... 157
Table 22: Trend in nutrient subsidy rates (Rs/ kg)...................................................................................... 158
Table 15: Trend in nutrient-wise NBS rates .............................................................................................. 173
Table 24: Fertiliser grades covered under NBS subsidy ............................................................................. 173
Table 25: Trend in import and production of DAP and NPK fertilisers ........................................................... 177
Table 26: Overview of product-category-wise installed capacities of key players (in 000 tonnes) ...................... 179
Table 27: Key brands in the market......................................................................................................... 179
Table 28: Trend in region-wise top players in complex segment over the last four years.................................. 186
Table 29: Trend in region-wise top players in DAP segment over the last four years ....................................... 187
Table 30: Market share (in volume terms) for DAP and complex segment in key states (Fiscal 2021) ................ 188
Table 31: Distribution network (market reach) for DAP and complex segment in key states ............................. 189
Table 32: Wallet share (in volume terms) for DAP and complex segment in key states.................................... 189
Table 33: JVs entered into by key players ................................................................................................ 191
Table 34: Key financial parameters ......................................................................................................... 192
Table 35: Key financial parameters ......................................................................................................... 193
Table 36: Product segment-wise sales growth of key players during fiscals 2018 to 2021( %CAGR) ................. 194
Table 37: Key Financial Ratios for major players ....................................................................................... 195
Table 38: Key Financial Ratios for major players ....................................................................................... 195
7
1 Macroeconomic overview
1.1 Global GDP review and outlook
While global gross domestic product (GDP) declined sharply in 2020 owing to the Covid-
19 pandemic, it is expected to rebound strongly by the end of calendar year 2021 on
account of policy support and the vaccination drive
According to the International Monetary Fund (IMF), global real GDP grew at 3-4% compound annual growth rate
(CAGR) from calendar year 2015-18. It declined to 2.8% in 2019. The IMF estimated global real GDP de-grew 3.3%
in 2020 owing to the pandemic, which has disrupted businesses across the world. In response, almost all major
countries had announced stimulus packages, which resulted in a recovery in the second half of 2020.
In April, the IMF revised upwards its global GDP growth forecast, estimating a 6.0% on-year uptick by 2021-end. The
IMF had in January forecast growth at 5.5%, which was again a revision from the 5.3% increase forecast in October
2020. These changing estimates reflect the impact of vaccines supporting and strengthening economic activity during
the latter half of 2021 and the additional policy support in a few large economies which will provide further support in
CY 2021-22 to the global economy. The fiscal support announced for 2021 in some countries, including most recently
in the United States (US) and Japan, together with the unlocking of Next Generation EU funds which are covid-19
relied package announced for European Union countries, will help lift economic activity among advanced economies
with favourable spill overs to trading partners.
Although recent vaccine approvals have raised hopes of a turnaround in the pandemic later this year, renewed waves
and new variants of the virus pose concerns for the outlook. Global prospects remain highly uncertain one year into
the pandemic. Amid exceptional uncertainty, the global economy is projected to grow 4.4 % in 2022. The outlook
depends not just on the virus spread and vaccination drive to contain it , but it also hinges on how effectively economic
policies can limit lasting damage from this unprecedented crisis.
Figure 1: Trend and outlook on real GDP growth for World

100.0 ($ trillion) 8.0%
6.0%
4.4% 6.0%
80.0
3.4% 3.8% 3.5%
3.3% 4.0%
2.8%
60.0
2.0%
40.0
0.0%
20.0 84 -3.3%
-2.0%
76 78 81 84 87 89 93
0.0 -4.0%
2015 2016 2017 2018 2019 2020 2021P 2022P
GDP ($ trillion) GDP growth (%)
P: Projection
Source: IMF economic database, World Bank national accounts data and OECD national accounts data, CRISIL Research
Advanced economies have been able to provide expansive fiscal support to individuals and companies (direct tax
and spending measures as well as equity injections, loans, and guarantees). Central banks have reinforced the fiscal
policy support with expanded asset purchase programmes, funding-for-lending facilities, and, for some, interest rate
cuts. Reflecting the strong policy support and the anticipated widespread availability of vac cines in summer 2021,
8
the projected output loss compared with the pre-pandemic forecast is relatively smaller for advanced economies than
other countries.
Recovery paths vary within advanced economies, with the US and Japan projected to regain 2019-end activity levels
in the second half of 2021, while in the euro area and the United Kingdom (UK), activity is expected to remain below
2019-end levels into 2022.
Emerging market and developing economies are also projected to trace diverging recovery paths. Cons iderable
differentiation is expected between China, where effective containment measures, a forceful public investment
response, and central bank liquidity support have facilitated a strong recovery, and other economies. Oil exporters
and tourism-based economies within the emerging markets group face particularly difficult prospects considering the
expected slow normalisation of cross-border travel and the subdued outlook for oil prices. The pandemic is expected
to reverse the progress made in poverty reduction across the past two decades. Close to 90 million people are likely
to fall below the extreme poverty threshold during CY 2020-21.
Figure 2: Trend and outlook on real GDP growth for regional Emerging & Developing economies
2017 2018 2019 2020 2021 2022
Advanced econom ies 2.5 2.2 1.6 –4.7 5.1 3.6

United States 2.3 3.0 2.2 –3.5 6.4 3.5
Euro area 2.6 1.8 1.3 –6.6 4.4 3.8
Japan 2.2 0.3 0.3 –4.8 3.3 2.5
United Kingdom 1.2 1.3 1.4 –9.9 5.3 5.1
Em erging m arket and developing econom ies 4.8 4.5 3.6 –2.2 6.7 5.0
China 6.9 6.7 5.8 2.3 8.4 5.6
India 6.8 6.5 4.0 -7.3* 9.5* 7.8*
ASEAN 5.3 5.3 4.9 –3.4 4.9 6.1
Middle East and Central Asia 2.6 2.1 1.4 –2.9 3.7 3.8
World 3.8 3.5 2.8 –3.3 6.0 4.4

P: Projection as per IMF update
*-Numbers for India are for financial year (2020-FY21 and so on) and forecast for year 2021 and 2022 are as per CRISIL research forecast. IMF
forecast for CY20:-8% and CY21:12.5%,CY22:6.9%. For year 2020 provisional estimates are used as per government of In dia publications.
Emerging Asia comprises the ASEAN-5 (Indonesia, Malaysia, Philippines, Thailand, Vietnam) economies, China, and India.
Source: IMF economic database, World Bank national accounts data and OECD national accounts data, Mospi,CRISIL Research
India is expected to regain the top spot as world’s fastest growing major economy in year
2021
India was one of the fastest-growing economies in 2018 and 2019. In 2020, the GDP of all countries – including that
of developed ones such as the US and the UK but except China’s – is expected to de-grow, primarily due to the
impact of the pandemic. As per provisional estimates from government if India publications, India’s GDP declined
7.3% in 2020(Fiscal year 2021). Further, the GDP growth of all major economies is expected to rebound in 2021 as
economic activities resume and also due to the low base of 2020. As per CRISIL research ,among the major
economies, India, with a growth rate of ~9.5%(Fiscal year 2022), is expected to be the fastest-growing in 2021,
followed by China with 8.4%.
9
Asia-Pacific has been hit hard by the pandemic and is recovering from a severe recession. The outlook varies by
country depending on infection rates and containment measures, policy responses, reliance on contact -intensive
activities, and external demand. Output is expected to remain below pre-pandemic trends over the medium term,
with the most vulnerable in society likely to be hit the hardest. The projections remain hi ghly uncertain, with significant
downside risks. The Asia-Pacific region is also starting to recover tentatively, but at multiple speeds. Economic activity
in emerging and developing Asia is expected to contract by 1.0% in 2020, due to a sharper-than- expected downturn
in key emerging markets, and to grow by 8.6% in 2021 and 6.0% in 2022
Covid-19 impact on some key economies and resolutions announced

As the COVID-19 continued its spread, governments the world over announced economic packages to limit the
pandemic’s human and economic impact. These fiscal and monetary measures varied across countries depending
upon their financial position, extent of spread of the virus, nature of lockdown and prevailing healthcare infrastructure.
Following are a key details of the measures announced across key economies as per IMF database are as follows:
Brazil
COVID-19 The first confirmed case was reported on February 26, 2020. The pandemic reached a first peak
spread in mid-August and had steadily receded through early November. However, an acute second wave
led the number of daily cases and deaths to new highs in April 2021
Fiscal  The authorities announced a series of fiscal measures adding up to 12% of GDP, of which
measures the direct impact in the 2020 primary deficit is estimated at 8.4 percent of GDP.
 The measures include:
 temporary income support to vulnerable households (cash transfers to informal and
low-income workers, bringing forward the 13th pension payment to retirees,
expanding the Bolsa Familia program with the inclusion of over 1 million more
beneficiaries, and advance payments of salary bonuses to low income workers)
 employment support (partial compensation to workers which are temporarily
suspended or have a cut in working hours, as well as temporary tax breaks)
 lower taxes and import levies on essential medical supplies, and new transfers from
the federal to state governments to support higher health spending and as cushion
against the expected fall in revenues
 Financial assistance states and municipalities – with a temporary stay of debt payments–
was also announced
 Public banks are expanding credit lines for businesses and households, with a focus on
supporting working capital (credit lines add up to 4.5% of GDP), and the government will
back about 1% of GDP in credit lines to SMEs and micro-businesses to cover payroll
costs, working capital and investment
 Most measures have expired in end 2020, but the Emergency Aid and employment
support programs were renewed in the second quarter of 2021.
Monetary  The central bank lowered the policy rate (SELIC) by 225bps since mid-February 2020, to
and macro- the historical low of 2%
financial  Measures to increase liquidity in the financial system (reduction of reserve requirements
measures and capital conservation buffers, and a temporary relaxation of provisioning rules, among
others) have been implemented
 The reserve requirement has been reduced from 25 to 17, on top of a reduction of 6 bps
in early March, and the remuneration on reserve requirements on savings accounts was
lowered to encourage lending
10
 The central bank also opened a facility to provide loans to financial institutions backed by
private corporate bonds as collateral, changed capital requirements for small financial
institutions, and allowed banks to reduce provisions for contingent liabilities provided the
funds are lent to SMEs.
 In addition, the Fed has arranged to provide up to US$60 billion to the central bank through
a swap facility that remains in place. Most liquidity support measures were withdrawn in
2021, and the SELIC rate hiked to 3.5% by May.
Source: IMF, CRISIL Research
China
COVID-19 Early January 2020, Chinese authorities determined that a pneumonia outbreak in Wuhan was
spread caused by a novel coronavirus. The government imposed strict containment measures, including
the extension of the national Lunar New Year holiday, the lockdown of Hubei province, large-scale
mobility restrictions at the national level, social distancing, and a 14-day quarantine period for
returning migrant workers. Reflecting these containment measures, the economy contracted by
6.8% (Y-o-Y) in 2020 Q1. Following the early-2020 lockdown, the economy embarked on a V-
shaped recovery yielding positive annual growth of 2.3% in 2020. The 2021 Q1 saw lower
sequential growth more in line with China's pre-crisis pace, with the strong year-on-year growth
number of 18.3% mostly reflecting the base effect from the large contraction in 2020 Q1.
Fiscal  An estimated RMB 4.8 trillion (or 4.7% of GDP) of discretionary fiscal measures have been
measures announced.
 Key measures include:
 increased spending on epidemic prevention and control
 production of medical equipment
 accelerated disbursement of unemployment insurance and extension to migrant
workers,
 tax relief and waived social security contributions
 additional public investment
 The overall public sector support is expected to be higher. For example, support outside
the budget includes additional guarantees for SMEs of RMB 400 billion (0.4% of GDP)
and fee and tariff cuts of over RMB 900 billion (0.9% of GDP) for usage of such items as
roads, ports, and electricity.
Monetary  The PBC provided monetary policy support and acted to safeguard financial market
and macro- stability
financial  Key measures include:
measures  liquidity injection into the banking system via open market operations
 expansion of re-lending and re-discounting facilities by RMB 1.8 trillion to support
manufacturers of medical supplies and daily necessities, MSEs and the agricultural
sector (of which 0.8 trillion was phased out at end-June) and reduction of their interest
rates by 50 bps (re-lending facilities) and 25 bps (re-discounting facility)
 targeted RRR cuts by 50-100 bps for large- and medium-sized banks that meet
inclusive financing criteria which benefit MSEs, an additional 100 bps for eligible joint-
stock banks, and 100 bps for small- and medium-sized banks to support SMEs
 expansion of policy banks’ credit line to private firms and MSEs (RMB 350 billion)
 introduction of new instruments to support lending to MSEs, including a zero-interest
“funding-for-lending” scheme (RMB 400 billion) to finance 40% of local banks’ new
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unsecured loans and incentivizing them to further extend payment holidays for eligible
loans by subsidizing 1% of loan principles (RMB 40 billion).
 The government has also taken multiple steps to limit tightening in financial conditions,
including measured forbearance to provide financial relief to affected households,
corporates, and regions facing repayment difficulties
France
COVID-19 The first confirmed COVID-19 case was reported on January 24, 2020. The government has
spread introduced a range of containment measures since mid-March 2020, when the first nationwide
lockdown was instated to reduce the spread of COVID-19. The French economy contracted by
5.9% in Q1-2020, compared to the previous quarter, and by 13.7% in Q2-2020. Activity rebounded
strongly in Q3-2020, with GDP growing by 18.5% and fell again by 1.3% during the last quarter of
2020. Overall, France's GDP contracted by 8.3 percent in 2020. In 2021, the economy contracted
by 0.1% during the first quarter compared to the previous quarter. Covid-19 vaccinations
commenced on December 28, 2020, with over 26 million people vaccinated with at least one dose
as of end-April 2021
Fiscal  The authorities have introduced three amending budget laws between March and July
measures 2020, increasing the fiscal envelope devoted to addressing the crisis to about €135 billion
(nearly 6% of GDP, including liquidity measures)
 This adds to a package of public guarantees of €327 billion (close to 15% of GDP),
including €315 billion in guarantees for bank loans and credit reinsurance schemes
 Key fiscal support measures include:
 streamlining and boosting health insurance for the sick or their caregivers and
increasing spending on health supplies
 liquidity support through postponements of social security and tax payments for
companies and accelerated refund of tax credits (e.g. CIT and VAT)
 support for wages of workers under the reduced-hour scheme
 direct financial support for affected microenterprises, liberal professions, and
independent workers, as well as for low-income households
 postponement of rent and utility payments for affected microenterprises and SMEs
 additional allocation for equity investments or nationalizations of companies in
difficulty
 facilitating granting of exceptional bonuses exempt from social security contributions
 extension of expiring unemployment benefits until the end of the lockdown and
preservation of rights and benefits under the disability and active solidarity income
schemes
 support measures for the hardest-hit sectors (e.g. including incentives to purchase
greener vehicles and green investment support for the auto and aerospace sectors)
 The 2021 budget included additional funding for emergency programs which was
subsequently expanded amid ongoing containment measures (about 3% of GDP,
including measures in an amendment law currently under discussion).
 The 2021 budget also incorporated key elements of the fiscal package (“Plan de Relance”)
announced in September 2020 to support the recovery of the French economy. The
recovery plan includes measures amounting to about 100 billion euros over two years and
focuses on the ecological transformation of the economy, increasing t he competitiveness
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of French firms, and supporting social and territorial cohesion. About 40 billion of the plan
is expected to be covered by grants from the EU Recovery Fund.
Germany
COVID-19 Germany registered the first confirmed COVID-19 case on January 27, 2020. The government
spread responded with a range of measures to contain the spread of virus through border closures,
closure of schools and non-essential businesses, social distancing requirements, enforcement of
mask-wearing, and a ban on public gatherings.
Fiscal  The federal government adopted two supplementary budgets: €156 billion (4.9% of GDP)
measures in March and €130 billion (4% of GDP) in June
 The authorities plan to issue €218.5 billion in debt this year to finance the packages
 Early measures include:
 spending on healthcare equipment, hospital capacity and R&D (vaccine)
 expanded access to short-term work (“Kurzarbeit”) subsidy to preserve jobs and
workers’ incomes, expanded childcare benefits for low-income parents and easier
access to basic income support for the self-employed
 €50 billion in grants to small business owners and self-employed persons severely
affected by the Covid-19 outbreak in addition to interest-free tax deferrals until year-
end and €2bn of venture capital funding for start-ups
 temporarily expanded duration of unemployment insurance and parental leave
benefits
 The stimulus package in June 2020 comprises a temporary VAT reduction, income
support for families, grants for hart-hit SME’s, financial support for local governments,
expanded credit guarantees for exporters and export-financing banks, and
subsidies/investment in green energy and digitalization.
 In August 2020, the government extended the maximum duration of short-term work
benefits from 12 to 24 months.
 Through the newly created economic stabilization fund (WSF) and the public development
bank KfW, the government is expanding the volume of available guarantees and access
to public guarantees for firms of different sizes, credit insurers, and non-profit institutions,
some eligible for up to 100% guarantees, increasing the total volume by at least €757
billion (24% of GDP)
 The WSF and KfW also include facilities for public equity injection into firms with strategic
importance.
 In addition to the federal government’s fiscal package, many local governments (Länder
and municipalities) have announced own measures to support their economies,
amounting to €141 billion in direct support and roughly €70bn in state-level loan
guarantees
 Faced with new infection waves and corresponding lockdowns, the government
introduced additional fiscal measures to support families and young workers, and
enhanced existing ones to support affected businesses, including revenue compensation
for November-December 2020 (of up to 75 percent), as well as, extended access to
grants, apprenticeship subsidies ,public loan guarantees, and tax loss carryback. Some
of these measures have been extended well into 2021. The 2021 supplementary
budgetbacks these measures along with additional support for health spending.
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India
COVID-19 Background: The first case of COVID-19 in India was reported on January 30, 2020 and the
spread number of cases continues to rise, in particular, during the ongoing second wave of the pandemic.
For the first wave, the strict national lockdown was extended several times, and then followed by
a gradual re-opening, with restrictions implemented in select containment zones. For the second
wave, localized state-wide lockdowns have been implemented in most states in 2021Q2. The
economic impact of COVID-19 has been substantial and broad-based. GDP contracted sharply in
2020Q2 (-24.4% YoY) due to the unprecedented lockdowns to control the spread of COVID-19.
The contraction moderated to -7.4% YoY in 2020Q3, and growth returned to positive territory in
2020Q4 and 2021Q1, at 0.5% and 1.6%, respectively. The national statistical office revised up
FY2020/21 GDP growth to -7.3% in the latest provisional estimate.
Reopening of the economy: Following the first COVID-19 wave and initial nation-wide lockdown,
on April 15, 2020 with a view to supporting economic activities, the government announced several
relaxation measures in geographical areas designated as non-hotspot, with effect from April 20,
2020. On April 29, 2020 the government permitted inter-state movement of stranded people,
including migrant workers, managed by the nodal authorities who are designated by the states.
Some graded relaxations in economic activities have been allowed in geographic areas
designated as orange and green zones on May 4 and domestic air travel restarted on May 25. On
May 12, the PM announced a relief package of around 10 percent of GDP, including previously
announced monetary and fiscal measures. On July 29, the central government issued 'Unlock 3.0'
guidelines further paving the way for a phased re-opening of activities across the country and
limiting the lockdown only to containment zones till August 31. On August 29, the government
issued ('Unlock 4.0') to further re-open the economy in September, removing restrictions on metro
rail in a graded manner from 7 September, and allowing for social, academic, sports,
entertainment, and other congregations of up to 100 people. On September 30, the central
government issued "Unlock 5.0" guidelines to allow state/union territory governments to decide on
reopening schools and coaching institutions after October 15 in a graded manner.
Cinemas/theatres/multiplexes will be permitted to open with up to 50% of their seating capacity
and entertainment parks will be permitted to open from October 15, 2020. The ceiling on
congregations has been extended to 200 people. Following a second COVID-19 wave, most states
have announced additional lockdown measures in 2021Q2. On January 3, 2021, India's Central
Drugs Standard Control Organization (CDSCO) provided emergency use authoriz ation (EUA) to
the AstraZeneca vaccine and the Covaxin (developed by local firm Bharat Biotech). Both are
manufactured domestically in India. On January 11, 2021, the Prime Minister announced the start
of the world's biggest vaccination campaign from January 16th aiming to vaccinate about 300
million people in the coming months. From May 1, all persons above 18 are eligible for
vaccinations; vaccine manufacturers are now permitted to sell 50% in the open market.
Fiscal India's fiscal support measures can be divided into two broad categories:
measures  First are above-the-line measures which include government spending (about 3.1% of
GDP, of which about 2.2% of GDP is expected to fall in the current fiscal year), foregone
or deferred revenues (about 0.3% of GDP falling due within the current year) and
expedited spending (about 0.3% of GDP falling due within the current year)
 Second are below-the-line measures designed to support businesses and shore up credit
provision to several sectors (about 5.2% of GDP)
 In the early stages of the pandemic response, above-the-line expenditure measures
focused primarily on social protection and healthcare. These include:
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 in-kind (food; cooking gas) and cash transfers to lower-income households (1% of
GDP)
 wage support and employment provision to low-wage workers (0.5% of GDP)
 insurance coverage for workers in the healthcare sector
 healthcare infrastructure (0.1% of GDP)
 The more recent measures that were announced in October and November 2020 include
additional public investment (higher capital expenditure by the central government and
interest-free loans to states, of about 0.2% of GDP) and support schemes targeting certain
sectors
 The latter includes:
 a Production Linked Incentive scheme targeting 13 priority sectors and is expected to
cost about 0.8% of GDP over 5 years
 a higher fertilizer subsidy allocation benefiting the agriculture sector (0.3% of GDP)
 support for urban housing construction (0.1% of GDP)
 Several measures to ease the tax compliance burden across a range of sectors have also
been announced, including postponing some tax-filing and other compliance deadlines,
and a reduction in the penalty interest rate for overdue GST filings
 Measures without an immediate direct bearing on the government's deficit position aim to
provide credit support to businesses (1.9% of GDP), poor households, especially migrants
and farmers (1.6% of GDP), distressed electricity distribution companies (0.4% of GDP),
and targeted support for the agricultural sector (0.7% of GDP), as well as some
miscellaneous support measures (about 0.3% of GDP)
 Key elements of the business-support package are various financial sector measures for
micro, small, and medium-sized enterprises and non-bank financial companies, whereas
additional support to farmers will mainly be in the form of providing concessional credit to
farmers, as well as a credit facility for street vendors
 Agricultural sector support is mainly for infrastructure development
 On February 1, 2021 the central government budget for FY2021/22 was tabled in the
parliament. The budget expanded spending on health and wellbeing, including a provision
for the country's COVID-19 vaccination program (Rs 350 billion).
 In April 2021, in response to the recent surge in infections, the central government
announced that free food grains will be provided to 800 million individuals in May and June
(with a cost of about Rs 260 billion), similar to the additional food rations provided in 2020
(which had expired in November 2020).
 The central government also extended a scheme for providing interest-free loans to states
for capital expenditure to FY2021/22 (Rs 150 billion) and expedited the release of Disaster
Response Fund to state governments (from June to May). Finally, customs duties and
other taxes on vaccines, oxygen and oxygen-related equipment were waived to boost their
availability.
Monetary  The Reserve Bank of India (RBI) reduced the repo and reverse repo rates by 115 and 155
and macro- basis points (bps) to 4.0 and 3.35%, respectively
financial  It announced liquidity measures comprising Long Term Repo Operations (LTROs), a cash
measures reserve ratio (CRR) cut of 100 bps, and an increase in marginal standing facility (MSF) to
3% of the Statutory Liquidity Ratio (SLR), now extended till March 2021 and open market
operations (including simultaneous purchases and sales of government securities),
resulting in cumulative liquidity injections of 5.9% of GDP through September
 RBI, along with additional monetary easing, announced:
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 a TLTRO-2.0 (funds to be invested in investment grade bonds, commercial paper,
and non-convertible debentures of NBFCs)
 special refinance facilities for rural banks, housing finance companies, and small and
medium-sized enterprises
 a temporary reduction of the Liquidity Coverage Ratio (LCR) and restriction on banks
from making dividend pay-outs
 a standstill on asset classifications during the loan moratorium period with 10%
provisioning requirement, and an extension of the time period for resolution timeline
of large accounts under default by 90 days
 On June 4, the RBI extended the benefit under interest subvention and prompt repayment
incentive schemes for short-term agricultural loans until August 31, 2020
 On June 21, the RBI directed banks to assign zero percent risk weight on the credit
facilities extended under the emergency credit line guarantee scheme
 On August 6, the RBI permitted banks to restructure existing loans to MSMEs classified
as ‘standard” (as of March 1, 2020) without a downgrade in the asset classification
 The RBI also announced a resolution plan for corporate and personal loans that were
classified as ‘standard’ as of March 1, 2020 but were stressed due to COVID-19
 On May 13, the government announced measures targeting businesses:
 a collateral-free lending program with 100 percent guarantee
 subordinate debt for stressed MSMEs with partial guarantee
 partial credit guarantee scheme for public sector banks on borrowings of non-bank
financial companies, housing finance companies (HFCs), and micro finance
institutions
 The government also announced
 a Fund of Funds for equity infusion in MSMEs
 a special purpose vehicle (SPV) to purchase short-term debt of the eligible non-bank
financial companies and housing finance companies, fully guaranteed by the
government and managed by a public sector bank
 The Government extended the Emergency Credit Line Guarantee Scheme (ECLGS) for
MSMEs first till November 30th, 2020, and then till March 31, 2021, while at the same time
relaxing the eligibility criteria
 RBI has extended the Liquidity Adjustment Facility and the Marginal Standing Facility to
the regional rural banks to improve their liquidity management since December 2020.
 On January 8, 2021, the RBI announced a phased resumption of operations under the
revised liquidity management framework, including variable rate reverse repo auction. In
February 2021, the reductions in cash reserve requirements against MSME loans for
banks were extended until December 2021.
 On May 4, 2021, the RBI introduced a set of further measures aimed at easing liquidity
and financing conditions, including on-tap liquidity support to COVID-related healthcare
infrastructure and services and special Long-Term Repo Operations (SLTRO) for small
finance banks. The resolution scheme for COVID-related stressed retail and MSME loans
was re-introduced (extended for MSMEs)—with lenders allowed to invoke restructuring of
loans until end-September 2021.
 Furthermore, for loans restructured under the previous (August 2020) resolution scheme,
lenders can further extend moratoriums on repayments or the loan tenors up to a total of
2 years. Finally, banks were allowed to use the countercyclical provision buffers to make
specific provisions for non-performing loans until end-March 2022. In late May, the RBI
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extended the timeline prescribed for compliance with various payment system
requirements and the ECLGS scheme till September 30, 2021.
United Kingdom
COVID-19 The first confirmed case was reported on January 31, 2020. Cases initially peaked in April/May,
spread but after weeks of decline, a second wave has taken hold with the number of cases significantly
above those seen during the initial peak. Deaths associated with COVID-19 have remained below
the peak but have been on the rise. The relapse of infections led initially to localized restrictions in
months of November and December. On January 4, 2021, amidst rising contagions and the rapid
spread of a new string of the virus, PM Boris Johnson imposed a third coronavirus lockdown across
England, moving it up to tier 4, shutting schools, restaurants, bars, and non-essential shops and
ordering the public to stay at home.Northern Ireland, Scotland, and Wales also went into lockdown.
The full emergency lockdown is being lifted in phases, starting with the reopening of schools and
recreation in outdoor public spaces on March 8. Non-essential retail, shops, hairdressers, gyms,
and outdoor hospitality reopened on April 12 in England. On May 17, outdoors most social contact
rules were lifted and indoor hospitality and hotels reopen.
Fiscal  In addition, the government has put in place the Bounce Bank loan scheme for SMEs with
measures 100% guarantee for loan amounts up to £50,000
 Deferment of VAT payments for the second quarter of 2020 until the end of the financial
year and income tax payments of the self-employed by six months
 The government paid 80% of the earnings of self-employed workers (Self Employment
Income Support Scheme, SEISS) and furloughed (Coronavirus Job Retention Scheme,
CJRS) employees (to a maximum of £2,500 per employee per month) initially for the
period March-May. For furloughed employees, the scheme has been extended until end-
October. From July employers were allowed to furlough employees for part of the daily
working hours. Government coverage fell to 70% of wages in September (up to £2,187)
and 60% in October (up to £1,875) with employers required to contribute the difference to
80% of wages (up to £2,500). The scheme for the self-employed was extended for three
more months but at a reduced level of 70% of earnings.
 Trade credit insurance for business-to-business transactions received up to £10 billion of
government guarantees through the Trade Credit Reinsurance scheme, with the scheme
available for nine months. The government put in place a £1 billion package to support
firms driving innovation and development through grants and loans. To support the
international response, the government made available £150 million to the IMF’s
Catastrophe Containment and Relief Trust and provided a new £2.2 billion loan to the IMF
Poverty Reduction and Growth Trust (PRGT) to help low income countries respond to
COVID-19
 In July 2020, the government adopted a package of measures to protect and create jobs
and support the economic recovery. These include:
 providing firms £1,000 per furloughed employee retained until end-January
 paying the minimum wage for 25 hours per week for six months for young workers at
risk of long-term unemployment
 temporary reductions of the VAT rate for hospitality, accommodation and attractions
and the real estate transactions tax
 increased public spending on infrastructure (including on green projects such as
retrofitting houses to improve energy efficiency)
 a program to subsidize dining out during the month of August
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 Low-income people who need to self-isolate and are unable to work, as well as
members of their household, will receive £130 and £182, respectively.
 Businesses required to shut down due to localized lockdowns will receive up to £1,500
every three weeks.
 A package of measures announced on September 24 entailed the following:
 a 6-month Job Support Scheme whereby employers will pay the wages of staff for the
hours they work while for the hours not worked the government and the employer will
each pay one third of their equivalent salary, up to £697.92 per month each
 Extending the Self Employment Income Support Scheme for those continuing to
actively trade but face reduced demand due to coronavirus
 extending the temporary 15% VAT cut (from 20 to 5%) for the tourism and hospitality
sectors to the end of March next year
 allowing to pay VAT payments deferred until end-March to be paid in 11 instalments
and self-assessed income tax due in July 2020 and January 2021 to be paid in 12
instalments
 extending the maturity of loans under the CBILS and BBLs to up to 10 years
 extending the application period for loans under the CBILS, CLBILS, and BBLS until
end-November.
 In addition, the government launched a new program, Job Entry: Targeted Support
(JETS), to help the job search of people receiving unemployment benefits for at least
13 weeks.
 In view of the second lockdown, the government launched a new package of measures in
November, including the following: postponing the JSS, cancelling the Job Retention
Bonus, extending the CJRS until end-March with the replacement ratio back at 80%,
increasing the grant of the SEISS also to 80% of earnings, and prolonging the deadline to
apply for government guaranteed loans until end-January 2021. On December 17, the
government announced that it would extend the furlough scheme and the business
support program one more month, until April 2021.
 On November 25, the government published the 2020 Spending Review setting
expenditure limits for FY2021-22, while the OBR presented its revised fiscal outlook. For
FY2020-21, Covid-19 support measures were estimated at £280 billion. For FY2021-22,
the government allocated £55 billion for this purpose. Among other uses, these funds will
be allocated to Covid testing, PPE and vaccines, as well as the new 3-year Restart
scheme to help the long term unemployed find work.
 On January 5, 2021,a day after the government imposed its toughest Covid-19 restrictions
since last spring (expected now to last until at least March 8), Chancellor Sunak
announced a £4.6bn fresh financial support package for struggling UK companies. This
would be divided in two parts: £4bn of one-off “top-up grants” for an estimated 600,000
retail, hospitality, and leisure companies, which can each claim up to £9,000; and a new
£594m discretionary fund made available for councils to support other businesses that
were not eligible for those grants but were affected by the restrictions.
 On March 3, Chancellor Sunak announced an additional fiscal stimulus of £59bn (nearly
2.6% of GDP). This is split in virus-related support measures worth an extra £43 billion for
this year, complimented by additional £15.7 billion of measures to boost the recovery.
Support for households included a six-month extension to the furlough scheme (although
this will be tapered from July) worth around £20 billion (the self-employment part of this
was more generous than expected at £13 billion alone). Other measures included a six-
month extension to the uplift to universal credit benefit payments (£2.2 billion), an
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extension of the full cut in VAT for the hospitality sector (£5 billion) to the end of September
(as well as a phased return back to normal by April next year), a three-month extension
of the current stamp duty cut to the end of June (as well as a phased return to normal by
the end of September), and a freeze in alcohol and fuel duty (£1.1 billion). Additional
funding in the form of business grants was offered (£5 billion), discounted business rates
were extended to the end of this year (£6 billion), and this was accompanied by a generous
tax break for businesses that aims to encourage future investment to be brought forward
to this year and next (which the OBR estimates will cost £12 billion). Future tax increases
centered mostly on a 6% point rise in corporation tax (from 19 to 25%) in 2023, and a
freeze in income tax thresholds.
Monetary  Key measures include:
and macro-  reducing Bank Rate by 65 basis points to 0.1 percent
financial  expanding the central bank’s holding of UK government bonds and non-financial
measures corporate bonds by £450 billion (in three tranches announced in March, June and
November)
 introducing a new Term Funding Scheme to reinforce the transmission of the rate cut,
with additional incentives for lending to the real economy, and especially SMEs
 temporary extension of use of the government’s overdraft account at the BoE to
provide a short-term source of additional liquidity to the government if needed
 launching the Covid Corporate Financing Facility which, together with the Coronavirus
Business Interruption Schemes, makes £330bn of loans and guarantees available to
businesses (15 percent of GDP)
 activating a Contingent Term Repo Facility to complement the Bank's existing sterling
liquidity facilities; (vii) together with central banks from Canada, Japan, Euro Area,
U.S., and Switzerland, further enhancing the provision of liquidity via the standing US
dollar liquidity swap line arrangements
 maintaining banks' Systemic Risk Buffer (SRB) rates at the rate set in December
2019, until at least December 2022, with any decision on the rates taken in December
2022 taking effect from January 2024;
 reducing the UK countercyclical capital buffer (CCyB) rate to 0% from a pre-existing
path toward 2% by December 2020, with guidance that it will remain at 0 for at least
12 months.
 In December 2020, the Financial Policy Committee (FPC) updated its guidance on the
path for the CCyB rate, expecting this rate to remain at 0 percent until at least 2021 Q4.
Due to the usual 12-month implementation lag, any subsequent increase of the rate is not
expected to take effect until 2022 Q4 at the earliest.
 On February 3, 2021, the Bank of England finalized a technical review of the potential
impact of a negative policy rate, concluding that this could be of use with further
preparations.
 On March 3, 2021, the government announced the introduction of a new mortgage
guarantee scheme from April 2021 for borrowers with a deposit of just 5 percent on homes
with a value of up to £600,000, together with the extension of the stamp duty land tax
(SDLT) exemption until June 2021.
 On April 23, 2021, the central banks have decided to discontinue offering dollar liquidity
at the 84-day maturity, given improvements in U.S. dollar funding conditions (operational
change effective as of July 1, 2021). They will however continue to hold weekly operations
with a 7-day maturity.
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 On February 2021, the BoE reminded to the eight major UK banks of the importance of
the first RAF submissions (Resolvability Assessment Framework). Note in this respect
that the dates of these submissions, initially announced in May 2020 by the BoE and the
PRA had been extended by a year (from the first Friday in October 2020, to the first Friday
in October 2021), to alleviate operational burdens on banks during the COVID-19 crisis.
United Sates of America

COVID-19 The US confirmed the first case of COVID-19 in January. Following a widening outbreak in March
spread and April, the number of new cases declined after a range of containment measures were put in
place. Infections rose again in early summer as economic activity and traveling resumed, but
gradually declined over the summer following stricter prevention measures. However, new cases
picked up again in September and continued on an upward trend until early January. Since mid-
January, new cases began declining and Covid-19 vaccinations sped up. The U.S. economy
contracted by 31.4 percent in the second quarter of 2020, but have rebounded strongly since then.
The unemployment rate stayed at 5.8 percent in May 2021.
Fiscal  On August 8, executive orders were issued to address the expirations of certain
measures Coronavirus reliefs provided by previous legislations. These included
 using $44 billion from the Disaster Relief Fund to provide extra unemployment benefits
 continuing student loan payment relief
 deferring collections of employee social security payroll taxes
 identifying options to help renters and homeowners avoid evictions and foreclosures
 US$483 billion Paycheck Protection Program and Health Care Enhancement Act includes
 US$321 billion for additional forgivable Small Business Administration loans and
guarantees to help small businesses that retain workers
 US$62 billion for the Small Business Administration to provide grants and loans to
assist small businesses
 US$75 billion for hospitals
 US$25 billion for expanding virus testing
 An estimated US$2.3 trillion (around 11% of GDP) Coronavirus Aid, Relief and Economy
Security Act (“CARES Act”) includes
 US$293 billion to provide one-time tax rebates to individuals
 US$268 billion to expand unemployment benefits
 US$25 billion to provide a food safety net for the most vulnerable
 US$510 billion to prevent corporate bankruptcy by providing loans, guarantees, and
backstopping Federal Reserve 13(3) program
 US$349 billion in forgivable Small Business Administration loans and guarantees to
help small businesses that retain workers
 US$100 billion for hospitals
 US$150 billion in transfers to state and local governments
 US$8.3 billion Coronavirus Preparedness and Response Supplemental Appropriations
Act and US$192 billion (around 1% of GDP) for:
 Virus testing, transfers to states for Medicaid funding, development of vaccines,
therapeutics, and diagnostics; support for the Centers for Disease Control and
Prevention responses.
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 2 weeks paid sick leave; up to 3 months emergency leave for those infected (at 2/3
pay); food assistance; transfers to states to fund expanded unemployment insurance
 Expansion of Small Business Administration loan subsidies
Monetary  Federal funds rate were lowered by 150bp in March to 0-0.25bp
and macro-  Lowered cost of discount window lending
financial
 Reduced existing cost of swap lines with major central banks and extended the maturity
measures
of FX operations
 Broadened U.S. dollar swap lines to more central banks
 Offered temporary repo facility for foreign and international monetary authorities
 Federal Reserve also introduced facilities to support the flow of credit, in some cases
backed by the Treasury using funds appropriated under the CARES Act
o Commercial Paper Funding Facility to facilitate the issuance of commercial paper
by companies and municipal issuers;
o Primary Dealer Credit Facility to provide financing to the Fed’s 24 primary dealers
collateralized by a wide range of investment grade securities;
o Money Market Mutual Fund Liquidity Facility (MMLF) to provide loans to
depository institutions to purchase assets from prime money market funds
(covering highly rated asset backed commercial paper and municipal debt);
o Primary Market Corporate Credit Facility to purchase new bonds and loans from
companies;
o Secondary Market Corporate Credit Facility to provide liquidity for outstanding
corporate bonds;
o Term Asset-Backed Securities Loan Facility to enable the issuance of asset-
backed securities backed by student loans, auto loans, credit-card loans, loans
guaranteed by the Small Business Administration, and certain other assets;
o Paycheck Protection Program Liquidity Facility (PPPLF) to provide liquidity to
financial institutions that originate loans under the Small Business
Administration’s Paycheck Protection Program (PPP) which provides a direct
incentive to small businesses to keep their workers on the payroll;
o Main Street Lending Program to purchase new or expanded loans to small and
mid-sized businesses; and
o Municipal Liquidity Facility to purchases short term notes directly from state and
eligible local governments.
 Supervisory action. Federal banking supervisors encouraged depository institutions to
use their capital and liquidity buffers to lend, to work constructively with borrowers affected
by COVID-19, and indicated COVID-19 related loan modifications would not be classified
as troubled debt restructurings. Holdings of U.S. Treasury Securities and deposits at the
Federal Reserve Banks could be temporarily excluded from the calculation of the
supplementary leverage ratio for holding companies. Other actions include offering
regulatory reporting relief and adjusting supervisory approach to temporarily reduce scope
and frequency of examinations and give additional time to resolve non-critical, existing
supervisory findings.
 Regulatory action. Lower the community bank leverage ratio to 8%. Provide extension
transition for the Current Expected Credit Loss accounting standard. PPP covered loans
will receive a zero percent risk weight, and assets acquired and subsequently pledged as
collateral to the MMLF and PPPLF facilities will not lead to additional regulatory capital
requirements. Allow early adoption of "the standardized approach for measuring
21
counterparty credit risk". And there will be a gradual phase-in of restrictions on
distributions when a firm's capital buffer declines.
 Fannie Mae and Freddie Mac have announced assistance to borrowers, including
providing mortgage forbearance for 12 months and waiving related late fees, suspending
reporting to credit bureaus of delinquency related to the forbearance, suspending
foreclosure sales and evictions of borrowers for 60 days, and offering loan modification
options.
1.2 Review and outlook on inflation

Inflation is expected to remain moderate in the short run
Commodity prices (particularly for oil) are expected to firm up further in the months ahead. Given their record-low
levels of a year ago, firmer prices should mechanically lift consumer price indices, and headline inflation, in particular,
could turn volatile in coming months. The volatility should be short lived. Baseline projections show a return of inflation
to its long-term average as the remaining slack subsides only gradually and commodity-driven base effects fade
away.
The subdued outlook reflects developments in the labor market, where subdued wage growth and weak worker
bargaining power have been compounded recently by high unemployment, underemployment, and lower
participation rates. Moreover, various measures of underlying inflation remain low.
Figure 3: Trend and outlook on consumer prices
6
5 4.9 5.1 5.1 4.9

4.7
4.3 4.4 4.4
4
3.8
3
2 2 1.9
1.7 1.6 1.7
1.4
1
0.7 0.7
0.3
0
2015 2016 2017 2018 2019 2020 2021 2022P 2026P
Advanced economies Emerging market and developing economies
Note: P- Projection
In line with the subdued outlook for activity, inflation is expected to remain relatively low over the short run as per
estimates by International Monetary Fund (IMF). Inflation in the advanced economy group is projected at 1.7% in
2022, rising to 1.9% in 2026 as the recovery gains hold. In the emerging market and developing economy group,
inflation is projected at 4.4% this year, and moderating thereafter to 3.8% over the medium term.
22
1.3 Review and outlook on population
Global population projected to grow at a slower pace over the next three decades; low and
middle income countries to drive growth
The world’s population reached 7.8 billion in 2020, having added one billion people since 2007 and two billion since
1994. The growth rate of the world’s population peaked in 1965-1970, when it was increasing by 2.1% per year, on
average. Since then, the pace of global population growth has slowed by half, falling below 1.1% per year in 2015-
2020, and it is projected to continue to slow through the end of this century. The global population is expected to
reach 8.5 billion by 2030 and 9.7 billion by 2050 according to the medium-variant projection by the United Nations
(UN), which assumes a decline of fertility for countries where large families are still prevalent, a slight increase of
fertility in several countries where women have fewer than two live births on average over a lifetime, and continued
reductions in mortality at all ages. Asia is going to be the biggest contributor to the world population with 5.3 billion
people.
Figure 4:Trend and outlook on global population and its region-wise breakup
(million)
12000
10000 9,735
9,200
8,548
7,795
8000 6,957
6,143
6000 5,327
4,458
3,700
4000
2000
0
1970 1980 1990 2000 2010 2020 2030P 2040P 2050P
Africa Asia Europe Latin America and the Caribbean Northern America Oceania
P: Projection
Source: United Nations (Department of Economic and Social Affairs - Population Division), CRISIL Research
Of the additional 1.9 billion people which may be added to the global population between 2020 and 2050, 1.1 billion
(60%) could be added in countries of Africa. Another 37% of global population growth is expected to be concentrated
in Asia, which is projected to add 710 million people between 2020 and 2050. More than half of the projected increase
in the global population to 2050 will be concentrated in just nine countries. Ordered by the absolute increase in
population, they are: India, Nigeria, Pakistan, Democratic Republic of the Congo, Ethiopia, the United Republic of
Tanzania, Indonesia, Egypt and the United States of America. India is expected to add nearly 276 million people
between 2020 and 2050, while the population of Nigeria is projected to grow by 197 million. Together, these two
countries could account for 24% of the global population increase to 2050. Close to 1.5 billion of the 2.0 billion
projected to be added to the world’s population between 2020 and 2050 is expected to be concentrated in the 22
countries.
Current projections indicate that India will surpass China as the world’s most populous country around 2027. After
this re-ordering between 2020 and 2050, the ranking of the five largest countries is projected to be preserved through
the end of the century, when India could remain the world’s most populous country with nearly 1. 5 billion inhabitants,
followed by China with 1.1 billion, Nigeria with 741 million, the United States with 301 million, and Pakistan with 422
million inhabitants.
23
Table 1: Outlook on population of countries categorised as per income group (in million)
World Bank income groups 2020 2030P 2050P 2020-2050P
CAGR
High-income countries 1,263 1,272 1,228 -0.1%
Middle-income countries 5,753 6,280 7,016 0.7%
Low-income countries 776 993 1,488 2.2%

P: Projection
Source: United Nations (Department of Economic and Social Affairs - Population Division), CRISIL Research
Low and middle-income countries (as per World Bank definition) are projected to grow at a faster clip compared to
high-income countries. The population of low-income countries is projected to almost double over the next three
decades.
24
2 Macroeconomic overview of India
2.1 A review of India’s GDP growth
GDP grew at 6.6% CAGR from fiscals 2012-20
In 2015, the Ministry of Statistics and Programme Implementation (MoSPI) changed the base year for calculating
India’s GDP between fiscals 2005 and 2012. Based on this, the country’s GDP increased at an eight -year CAGR of
6.6% to Rs 146 trillion in fiscal 2020 from Rs 87 trillion in fiscal 2012.
Fiscal 2020 estimates show investment decline has added to the economy’s woes
In fiscal 2020, India’s GDP grew 4.0% as per advanced estimates. Private consumption declined to a decadal low of
5.3% from 7.2% in fiscal 2019, hurt by the slowdown in spending by central and state governments and a muted
private-sector appetite for fresh investments. Over the past four years, a sharp increase in government spending,
especially on infrastructure (roads, railways, highways), has kept the overall investment spending growth at 8% on
average. In fiscal 2020, though, government investment spending took a back seat. Meanwhile, weak consumption
demand and low capacity utilisation kept investments in the manufacturing sector tepid.
Figure 5: Real GDP growth in India (new GDP series)

(Rs trillion)
160 8.0% 8.3% 10%
7.4% 6.8%
6.4% 6.5% 8%
140 5.5%
4.0% 6%
120
4%
100 2%
80 0%
60 -2%
-7.3%
-4%
40
-6%
20 -8%
87 92 98 105 114 123 131 140 146 135
0 -10%
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21PE
GDP at constant prices (FY12) in Rs. billion Y-o-Y GDP growth rate
Note: PE- Provisional estimates
Source: Provisional Estimates of Annual National Income, 2019 -20, Central Statistics Office (CSO), MoSPI, CRISIL Research
India clocked a higher GDP growth compared to other large economies

India was one of the fastest-growing economies in 2018 and 2019. In 2020, the GDP of all countries – including that
of developed ones such as the US and the UK but except China’s – is expected to de-grow, primarily due to the
impact of the pandemic. India’s GDP is expected to decline 8.0% in 2020. Further, the GDP growth of all major
economies is expected to rebound in 2021 as economic activities resume and also due to the low base of 2020.
25
Figure 6: Trend and outlook on real GDP growth (% on-year)
8 6.9
6.8 6.7 6.5
5.8
6
4
4 3
2.3
2.2 2.2 2.3
1.2 1.3 1.4
2 0.3 0.3
0
2017 2018 2019 2020
-2 -3.5
-4 -4.8
-6
-8
-8
-9.9
-10
United States Japan United Kingdom China India
P: Projection as per IMF update

Source: IMF economic database, World Bank national accounts data and OECD national accounts data, CRISIL Research
2.2 Outlook on India’s GDP growth

Economy contracted 7.3% in fiscal 2021
Fiscal 2021 has been a challenging year for the Indian economy, which was already experiencing a slowdown before
the pandemic created the ‘perfect storm’. Though data suggests there has been some pick -up in recent months,
recovery is weak and uneven. GDP contracted 7.3% (in real terms) last fiscal, after growing 4.0% in fiscal 2020. At
Rs 135.1 lakh crore last fiscal, India’s GDP (in absolute terms) went even below the fiscal 2019 level of Rs 140.0
lakh crore. Also, after contracting in the first half because of the Covid-19 pandemic, the economy rebounded in the
second half, growing 0.5% and 1.6% on-year in the third and fourth quarters, respectively. While the economy shrank
as a whole in fiscal 2021, agriculture and allied activities, and electricity, gas, water supply and other utility services
were the outliers, logging positive growth. On the other hand, the contact-intensive trade, hotels, transport and
communication sectors, and services related to broadcasting were hit the most and continued to shrink in all the
quarters. Construction – a labour-intensive sector – was also severely hit in the first half but rebounded in the second
half.
India is getting back on its feet slowly, with divergent growth trends. Though data suggests there has been some
pick-up in recent months, recovery is weak and uneven. And indeed, the scars of the pandemic continue to run deep
for small businesses, the urban poor and most of the services sector. The gains made by the economy in the fourth
quarter of fiscal 2021 seem to have fizzled out in the first quarter of fiscal 2022 because of the fierce second wave
of Covid-19, leading to localised lockdowns in most states. At the same time, monetary policy has begun normalising,
and some tightness in domestic financial conditions is inevitable. Against this backdrop, policy support remains
critical, apart from action in the external environment. In fiscal 2021, the policy response to the pandemic focussed
more on damage control and measures to support the economy. This fiscal, though, the government is expected to
normalise some of the extraordinary or unconventional policy moves, while trying to ensure there is smooth revival
in growth. Some of its biggest challenges ahead will be broad-basing growth to the services and labour-intensive
manufacturing sectors and ensuring financial conditions stay supportive.
26
Figure 7: Trend and outlook on real GDP growth (% on-year)
FY24P 5.70%
FY23P 7.80%
FY22P 9.5%
FY21E -7.3%
FY20E 4.0%
FY19 6.5%
FY18 6.8%
FY17 8.3%
FY16 8.0%
FY15 7.4%
FY14 6.4%
FY13 5.5%
FY12 5.2%
-10.0% -8.0% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%
E: Estimated; P: Projected by CRISIL Research; GDP calls updated as of May 2021;

Source: Second advance estimates of national income 2020-21, CSO, MoSPI, CRISIL Research
Key fiscal measures announced by the Centre to deal with the pandemic impact
To mitigate the pandemic’s negative impact on the economy, the Central government has announced a Rs 20.9
trillion package, amounting to 10% of the country’s nominal GDP. The package is a mi x of fiscal and monetary
measures (to revive growth in the short term) and reforms (to boost long-term economic prospects). Liquidity support
has been a major part of India’s response so far. Globally, too, liquidity measures have played a lead role in pol icy
response. The immediate fiscal cost to be borne by the government would be ~Rs 2.6 trillion, or 1.2% of nominal
GDP. Further, execution of the government’s measures to revive the economy and pace of implementation of the
announced reforms are key monitorables.
Fiscal 2022 base case GDP growth to be 9.5%
CRISIL forecasts India’s GDP growth to rebound to 9.5% in fiscal 2022 as four drivers converge:
1. Weak base: A 7.3% contraction in GDP in fiscal 2021 will provide a statistical push to growth next fiscal.
2. Global upturns: Higher global growth in 2021, i.e., world GDP up by 5.0%, advanced economies 4.3%,
emerging economies 6.3%, should lift exports.
3. Covid-19 curve: India is witnessing the second wave of Covid-19 infections and at the same time learning
to live with the virus, with the rollout of vaccines. These should broaden growth this fiscal, especially in the
services and unorganised sectors.
4. Fiscal push: Stretch in the fiscal glide path and focus of Union Budget 2021-22 on capex are expected to
have a multiplier effect on growth.
Risks to GDP growth
1. A third wave this fiscal: This could bring further disruption to mobility and economic recovery .
2. Slower pace of vaccination: Insufficient pick-up in pace of vaccinations, accentuating risks of a third wave.
27
3. Elevated inflation: Significant cost-push pressures on account of surging international commodity prices
and supply disruptions has raised cost of production for manufacturing firms. Pass -through to consumer
prices could further pose as a headwind to recovery in demand.
4. Premature tightening of global monetary policies: Resurgence of inflation globally could lead major
central banks to unwind their extraordinary easy monetary policies sooner than expected. This could hit
sentiment, possibly leading to capital outflows from the Indian economy and some tightening in domestic
financial conditions.
Figure 8: In next three fiscals, India’s growth to be greater than the global GDP
GDP growth to rebound to 9.5% in this

(%, y-o-y)
fiscal on the back of a very weak base and
the rising-global-tide effect.
9.50%
7.80% CRISIL sees India’s GDP growth rebounding
5.70% to 9.5% this fiscal, due to a very weak base,
4% flattening of the Covid curve, rollout of
6%
vaccinations, investment-focused government
4.40%
3.40% spending, and benefit from the ‘rising global
2.80% -3.30% tide lifts all boats’ effect. Yet, the economy is
expected to reach pre-pandemic levels only by
the second quarter (Q2) of this fiscal. Services
will take longer to recover than manufacturing.
Over fiscals 2023-25, growth is seen averaging

-7.30%
at 6.0-6.5% annually. In this scenario, strong
FY20 FY21E FY22P FY23P FY24P growth in GDP is unlikely in the next three
fiscals. CRISIL Research estimates the
India World economy will see a permanent loss of ~12%
real GDP due to this. Real GDP will catch up
to the fiscal 2020 level only by fiscal 2022.
Beyond fiscal 2022, India is seen growing
faster than the world.
Note: Forecasts for World are for calendar year; FY20=2019; P: Projected; updated as of Jun 2021; India numbers ffor FY20 and FY21 are based
on MOSPI latest GDP estimates and FY22 onwards are CRISIL Research estimates while World GDP growth rates are from IMF world economic
outlook update as of April 2021
Fiscal 2022 is also seen emerging as a story of two halves. The first half will be characterised by a base effect -driven
recovery amid the challenge associated with resurgence in Covid-19 infections. But the second half should see a
more broad-based growth, as vaccine rollout and herd immunity support sectors that are lagging. These include most
of the services sectors, especially contact-based travel, tourism and entertainment. Also, stronger global growth
should support India’s exports to some extent. Revival will not be uniform across sectors, though. The rural economy
has been more resilient than the urban, and manufacturing leads services in recovery. But trade has rebounded
faster than the rest of the economy, with exports as well as imports scaling pre-pandemic levels.
28
The second wave suggests the pandemic remains an ongoing risk. India’s second wave has wreaked havoc, with
daily cases crossing a staggering 3 lakh in the week through April 25. India’s daily infections recorded the highest
number of cases in a single day among countries worldwide, and daily deaths crossed the peak of the first wave.
Worryingly, their steep trajectory seems to be following that of daily cases. The March 2020 nation-wide lockdown
led to a massive migrant exodus. This time, even though there have been no nationwide restrictions, the increasing
number of cases have prompted states to announce localised restrictions and curfews in different forms. There has
been no restriction on economic activity and the impact on GDP is expected to have limited downside risk. But with
increase in cases in May 2021 and depending upon the restrictions, there is downside risk to GDP growth if the
spread is not brought under control
Risks to the fiscal 2022 forecast
The base case of 9.5% GDP growth assumes that Covid-19 restrictions will continue and mobility will remain affected
in some form or other, at least till August. The pace of economic recovery will also be a function of what the pace of
vaccination is in the coming months. We find that countries with over 40% of their population vaccinated are seeing
a faster and more broad-based economic recovery. The government plans to vaccinate India’s entire adult population
(68% of total population) by this December – a tall order even if there are sufficient vaccines available. CRISIL’s base
case is 70% of the adult population vaccinated by December.
There is one other scenario affecting our GDP forecast.
 Scenario 1: Moderate downside of 8% GDP growth assumes a third and a slower-than-anticipated pace of
vaccination.
Figure 9:GDP growth in fiscal 2022%, y-o-y

9.5%
8.0%
Base Case Moderate Downside
Source: S&P Global ratings, CRISIL Research, Jun 2021
29
Agriculture grew at 3.6% on year in terms of GVA in fiscal 2021
According to the provisional estimates released by the National Statistical office, India’s real GDP growth last fiscal
stood at -7.3% versus the earlier estimate of -8.0%. Growth in gross value added (GVA) – the supply-side measure
of the economy – was revised to -6.2% from -6.5% earlier. Also, after contracting in the first half because of the
Covid-19 pandemic, the economy rebounded in the second half, growing 0.5% and 1.6% in the third and fourth
quarters, on-year, respectively.
 While the economy shrank as a whole in fiscal 2021, agriculture and allied activities and electricity, gas,
water supply and other utility services were the outliers, registering positive growth. On the other hand, the
contact-intensive trade, hotels, transport and communication sector, and services related to broadcasting
were hit the most and continued to shrink in all the quarters last fiscal. Construction – a labour-intensive
sector – was also severely hit in the first half but rebounded in the second half.
 Looked at from the supply side i.e., GVA, a much better measure of the economic performance for last fiscal,
the economy shrank a lesser 6.3% (compared with 4.1% growth in fiscal 2020). In absolute terms, real GVA
was Rs 124.5 lakh crore last fiscal, down from Rs 127.4 lakh crore in fiscal 2019.
 While agriculture (3.6%) and utilities (1.9%) registered positive growth, trade, hotels, transport,
communication and services related to the broadcasting sector declined the most (-18.2%), followed by
construction (-8.6%), mining (-8.5%), manufacturing (-7.2%) etc
 On the demand side, government final consumption expenditure (GFCE) was the only component to see
positive growth, indicating positive spillover of fiscal stimulus.
 As the economy witnessed a sharp contraction, imports declined faster than exports. Consequently, net
exports (exports less imports) took away much less from the GDP compared with the earlier years.
2.3 Review of global per capita GDP

India’s per capita GDP growing at ~3x global per capita GDP growth rate
As per the IMF estimates, global GDP per capita clocked a compound annual growth rate (CAGR) of 1. 3% between
2015 and 2020. During the period, the on-year per capita GDP growth rate consistently fell in the range of 1.4-2.1%.
India’s per capita GDP has clocked a CAGR of 4.1% during the corresponding period, growing ~3 times faster than
the global per capita GDP. Going ahead, over the next five years until 2025, IMF forecasts India’s GDP per capita to
continue to outpace the global average albeit at a slower pace; while GDP per capita at global level is expected to
grow at ~5.6% CAGR during the corresponding period, for India it is expected to grow at ~8.1% CAGR.
Table 2: Per-capita GDP – Global and India (current prices) (USD per capita)
CAGR CAGR
in USD 2015 2016 2017 2018 2019 2020P 2021P 2025P (2015- (2020-
20) 25)
Per capita GDP –

Global (current 10,346 10,394 10,908 11,467 11,539 11,058 12,157 12,837 1.3% 5.6%
prices)
Per capita GDP –

1,606 1,732 1,981 1,997 2,099 1,965 2,191 2,358 4.1% 8.1%
India (current prices)
30
P-Projected
2.4 Review of trend in inflation (CPI) in India

CPI has seen a steady decline until fiscal 2019; expected to be ~5% in fiscal 2022
Inflation has been a key economic issues – more so since the Reserve Bank of India (RBI) made inflation-targeting
a single-minded pursuit. India is one of the latest entrants to the Flexible Inflation Targeting (FIT) regime which refers
to publicly declared, explicit medium-term targets of inflation in an economy, and a commitment from monetary
authorities to achieve them. India adopted FIT regime in June 2016. The retail inflation based on the new combined
CPI series, with 2011-12 base, saw a consistent decline from 9.4% in fiscal 2014 to 3.4% in fiscal 2019 before rising
slightly to 4.8% in fiscal 2020. This decline was largely led by a secular decline in food inflation over the corresponding
period.
Figure 10: Trend and outlook on inflation (CPI)

7.0% 6.2%
5.9%
6.0%
4.9% 4.8% 5.0%
5.0% 4.5%
3.6% 3.4%
4.0%
3.0%
2.0%
1.0%
0.0%
FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22F
Note: P- Projected
Source: Provisional Estimates of Annual National Income, 2019 -20, CSO, MoSPI, CRISIL Research
While headline CPI inflation has managed to come within the RBI’s target range of 2-6% in 2021, it continues to face
pressures from rising input prices. Moreover, core CPI inflation, which was already above 5% in the pandemic-hit
2020, reached a 28-month high of 6% in February 2021. While high petrol and diesel prices have primarily contributed
to the rise, firms are also increasingly passing rising input costs to consumers since demand had picked up.
Consumer price index-linked inflation moderated to 4.3% in April from 5.5% in March largely on account of a high
base (inflation had risen to 7.2% on-year in April 2020). However, data collection was disrupted in April and May last
year; hence, the base may not reflect trends accurately. On a seasonally adjusted basis, CPI inflation rose 0.6% on-
month in April, with the rise broad-based across food, fuel and core inflation. Retail prices have started feeling the
heat of rising international commodity prices, in particular edible oils, metals and crude oil.
According to the April MPC meeting, inflation will face upside and downside pressures. It maintained rising commodity
prices and logistics costs will put input price pressures across manufacturing and services. However, it expects
bumper agriculture production to bring down food inflation. It suggested inflation can be capped by reducing taxes
on petrol and diesel, and duties on critical import items such as edible oil. With inflation back in the target range of 2-
6% at the moment, it may be a while before it is firmly down.
Going ahead, inflationary pressures do exist on account of (a) high commodity prices, including crude oil, which
would mean higher fuel inflation; and (b) stickiness in core inflation, which could firm up as the economy recovers
31
furthers. This calls for a careful watch on the inflation path. Accordingly, CRISIL pegs fiscal 2022 CPI inflation at
5.0%.
2.5 Fundamental growth drivers of GDP

India’s population is projected to touch 1.5 billion by 2030
India’s population clocked 1.6% CAGR from 2001 to 2011 to reach ~1.2 billion and comprised nearly 246 million
households, as per Census 2011.
According to the World Urbanization Prospects: The 2018 Revision by the United Nations, India and China, the top
two countries in terms of population, accounted for nearly 37% of the world’s population in 2015.The report projects
India’s population to increase at 1% CAGR to 1.5 billion by 2030, making it the world’s most populous country,
surpassing China (with 1.4 billion people by 2030).
Figure 11: India’s population growth

( in billions)
1.7
1.51
1.5 1.38
1.31
1.3 1.23
1.05
1.1
0.87
0.9
0.70
0.7 0.55
0.45
0.5
0.3
0.1
-0.1 1960 1970 1980 1990 2000 2010 2015 2020P 2030P
Note: P- Projected
Source: World Urbanization Prospects: The 2018 Revision, United Nations, CRISIL Research
Urbanisation likely to reach 40% by 2030

The share of India’s urban population in relation to its total population has been rising over the years and printed at
~31% in 2010. This trend is expected to continue, with the United Nat ions report projecting that nearly 40% of the
country’s population will live in urban areas by 2030.
32
Figure 12: India’s urban versus rural population
100%
80%
67% 65% 60%
74% 72% 69%
60% 82% 80% 77%
40%
20% 35% 40%

26% 28% 31% 33%
18% 20% 23%
0%
1960 1970 1980 1990 2000 2010 2015 2020P 2030P
Share of urban population (%) Share of rural population(%)
Note: P- Projected
Source: World Urbanization Prospects: The 2018 Revision, United Nations, CRISIL Research
People from rural areas move to cities for better job opportunities, education and quality of life. The entire family or
only a few individuals (generally an earning member or students) may migrate, while the rest of the family continues
to live in the native, rural house.
India’s youth to account for ~40% of its population by 2030

As per the United Nations Population Division Report 2017, India’s youth (population between the ages of 0 and 24
years) accounted for nearly half its population in 2010, slightly above the global average of ~44.4% and significantly
higher than some of its peers (Brazil at ~42.7%, China at ~35.0% and Russian Federation at ~29.8%) during the
corresponding period. Going forward, the share of youth in India is expected to reach ~39.7% of its total population
by 2030, and remain significantly higher than that of some of its peers (Brazil at ~31.3%, China at ~27.0% and
Russian Federation at ~29.6%), indicating a higher proportion of population entering the workforce bracket.
In terms of child dependent population (considered as population in the 0-14-year age bracket), India ranks highest
among its peers with nearly 31% of the population falling in that age group as of 2010. While the trend is expected
to decline in the forecast period, India is still expected to have a higher child dependent share of population (23.6%
in 2030) compared with China, Brazil and Russian Federation (forecast at 15.4%, 18.1% and 17.2%).
India’s dependency ratio (the ratio of population in the 0-14-year age bracket to population in the 15-69-year age
bracket) is expected to decline to ~33% in 2030 from ~47% in 2010, as the young population enters the working
population age bracket. India’s dependency ratio for 2010, at ~47%, was higher than the global average of ~39%,
and is expected to decline by 2030, to ~33%, below the global average of ~35% as the population ages.
33
Figure 13: Dependency ratio (0-14-year population as a percentage of 15-69-year population)
80% (in %)
70%
60%
50%
40%
30%
20%
76%
28%
42%
21%
47%
38%
25%
36%
27%
25%
31%
28%
39%
37%
57%
35%
25%
70%
23%
23%
71%
63%
38%
33%
33%
20%
25%
25%
26%
43%
27%
27%
63%
52%
35%
10%
0%
Brazil China India Russian UK USA World
Federation
1970 1990 2010 2020P 2030P

Source: UN population estimates, CRISIL Research
The United Nations Population Fund defines demographic dividend as economic growth potential that can occur as
a result of a shift in the age structure of a country’s population, namely when the share of working population is larger
than the share of non-working population. Thus, India’s share of working population (considered as population
between the ages of 15-69 years) in its total population is expected to increase from ~66% in 2010 to ~71% in 2030.
In contrast, the share of working population for countries such as China, the US, the UK and Russian Federation,
which were higher than India in 2010, is projected to reduce by 2030.
Figure 14: Trend in working population (15-69 years)

(in millions) (76%)
1,200 1,076(74%) (71%)
(77%) 1,063 (70%) 1,078
1,000 1,043 963
(66%)
813
800
600
(70%)
(73%)
400 (72%) (71%) 233
(71%)1,076 104 219 (67%)
1,043 (73%) (75%) 238
200 1,063 108 (70%) (71%)
98 (68%) (67%)
45 46 47
-
Brazil China India Russian UK USA
Federation
2010 2020P 2030P
Note: Values in % above the bar graph represents working population ratio as % of total population of the country
India’s median age to stay below key countries up to 2030

As per the United Nations, the median age of the global population rose to ~30 years in 2015 from ~22 years in 1970.
The more developed countries exhibited significantly higher median ages. While the median ages in the US and the
UK were 39.9 years and 42.4 years, respectively, that of India was significantly lower at 31.7 years, indicating a
favourable demographic dividend. Even among the BRIC (Brazil, Russia, India and China) countries, India's median
34
age is the lowest. Brazil, China and Russian have reported median ages of 31.4 years, 36.7 years and 38.6 years,
respectively, as of 2015.
This trend is expected to continue up to 2030, implying strong potential for increase in incomes and spending, as a
higher proportion of the population engages in employment activities.
Table 3: Trend in median ages across key countries

Country 1970 1990 2010 2015 2020P 2030P
Brazil 18.6 22.6 29.2 31.4 33.5 37.6
China 19.3 24.9 35.0 36.7 38.4 42.6

India 19.3 21.1 25.1 26.8 28.4 31.7
Russian Federation 30.8 33.4 38.0 38.6 39.6 42.7
UK 34.2 35.8 39.5 40.0 40.5 42.4
US 28.4 32.8 36.9 37.6 38.3 39.9
World 21.5 24.0 28.5 29.6 30.9 33.0
P: Projected
Decline in poverty levels indicate rise in middle and higher income groups in India
The World Bank, in its report ‘Global Economic Prospects, January 2019’, estimates the number of poor (defined as
those living at or below the international poverty line of purchasing power parity of $1.90 per day) in India declined
sharply from 405 million people in 1981 to 175 million people in 2015. In percentage terms, the share of poor in
India’s total population declined from 57.4% to ~13.4% over the period, and was estimated at 8.4% in 2018. The
decline in poverty has been attributed to improvement in macroeconomic parameters, such as growth of the
economy, employment rate, income equality, etc. and adoption of employment and other public welfare schemes by
the government.
Figure 15: Broad split of population into income groups

(Share in %)
100% 0.71 0.87 1.23 1.31 1.35 1.38
80% 42.6%
52.6%
72.1%
60% 86.6% 91.6% 94.5%
40%
57.4%
47.4%
20%
27.9%
13.4% 8.4%
0% 5.5%
1981 1990 2010 2015 2018E 2020P
Low income group Middle and high income group
E: Estimated P: Projected
Notes:
1) Values bar column indicates total population in billion for respective years as per UN population estimates
2) World Bank defines poor as those living at or below the international poverty li ne of purchasing power parity of $1.90 per day. Data of
2018 are estimates, and data for 2020 are projections and calculated using data from World Bank (2018l)
3) Low income group includes proportion of population earning less than or equal to $1.90 per day; Middle and high income group includes
proportion of population earning more than $1.90 per day
35
Source: World Bank, CRISIL Research
For 2020, the World Bank projects the absolute number of poor in India to reduce further to ~77 million people, thus
lowering the percentage share to ~5.5%.
The decline in the poor population indicates that the middle and high income groups in India have grown at a fast
clip, from 42.6% in 1981 to 86.6% in 2015, and are expected to reach 94.5% by 2020. A positive economic outlook
along with growth across key employment generating sectors, such as real estate, infrastructure, automobiles, etc.
is expected to have a cascading effect on overall per capita income levels of the population in the medium -to-long
term. This, in turn, is expected to drive consumption expenditure and discretionary spending.
Covid-19 though will have adverse effect on poverty as more and more people are expected to be under severe
poverty. As per world bank report The COVID-19 pandemic is estimated to push an additional 88 million to 115 million
people into extreme poverty this year, with the total rising to as many as 150 million by 2021, depending on the
severity of the economic contraction. Extreme poverty, defined as living on less than $1.90 a day, is likely to affect
between 9.1% and 9.4% of the world’s population in 2020.
India’s per capita income rose at healthy pace between fiscals 2012 and 2020
India’s per capita income, a broad indicator of living standards, clocked ~5% CAGR between fiscals 2012 and 2020,
rising from Rs 63,642 to Rs 94,954. The growth in per capita income was led by better job opportunities, propped up
by overall GDP growth. Moreover, population growth has remained fairly stable at ~1% CAGR.
Table 4: Per capita net national income at constant prices

FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21AE
Per capita net

63,462 65,538 68,572 72,805 77,659 82,931 87,828 92,241 94,556 85,929
national income (Rs)
On-year grow th (%) 2.1 3.3 4.6 6.2 6.7 6.8 5.9 5.0 2.5 -9.1
PE: Provisional estimates
Source: Provisional Estimates of Annual National Income, 20 20-21, CSO, MoSPI, CRISIL Research
Per capita NSDP distribution varies widely across key large states
Larger states like Haryana, Maharashtra, Gujarat, Karnataka, Kerala, Tamil Nadu and Telangana lead the other
states in terms of per capita Net State Domestic Product (NSDP) at constant prices over the last six years between
fiscals 2014 and 2020. Gujarat, Telangana, Haryana and Andhra Pradesh recorded higher growth during the
corresponding period compared to other states. These four states recorded an
Table 5: State-wise trend in per capita Net State Domestic Product (NSDP)
CAGR
(Rs) FY14 FY15 FY16 FY17 FY18 FY19 FY20
(FY14-20)
Andhra Pradesh 72,254 79,174 88,609 94,115 1,03,214 1,07,241 1,15,333 8.1%
Bihar 22,776 23,223 24,064 25,820 26,699 28,668 31,287 5.4%
Gujarat 1,02,589 1,11,370 1,20,683 1,29,738 1,42,068 1,53,495 NA 8.4%*
Haryana 1,19,791 1,25,032 1,37,818 1,50,241 1,59,892 1,69,409 1,80,026 7.0%
36
Karnataka 1,01,858 1,05,697 1,16,813 1,31,254 1,43,827 1,53,276 1,61,931 8.0%
Kerala 1,07,846 1,12,444 1,20,387 1,29,251 1,38,368 1,48,078 NA 6.5%*
Madhya Pradesh 42,548 44,027 47,351 52,782 54,264 56,498 59,929 5.9%
Maharashtra 1,09,597 1,15,058 1,22,889 1,33,691 1,40,724 1,47,450 NA 6.1%*
Odisha 54,762 55,123 58,838 67,821 72,760 76,417 80,330 6.9%
Punjab 93,238 95,807 1,00,141 1,05,848 1,10,802 1,15,882 1,20,569 4.4%
Rajasthan 61,053 64,496 68,565 71,394 74,441 78,570 81,355 4.9%
Tamil Nadu 1,02,191 1,07,117 1,15,875 1,23,206 1,33,029 1,42,941 1,53,853 7.1%
Telangana 96,039 1,01,424 1,12,267 1,21,512 1,32,293 1,43,618 1,53,927 8.2%
Uttar Pradesh 34,044 34,583 36,973 40,641 42,798 44,421 45,648 5.0%
West Bengal 53,811 54,520 57,255 60,618 64,007 67,300 71,757 4.9%
Note: NA- Not Available; FY20 – Advanced estimates

*Growth rate for FY14-19
Source: CSO, MoSPI, CRISIL Research
37
Figure 16: Review of growth in per capita NSDP for key states (FY14-20)
*Note: Growth rate for FY14-19

Source: CSO, MOSPI, CRISIL Research
2.6 Review of budgetary expenditure of key states on agriculture and rural

development
Budgetary expenditure on agriculture, irrigation and rural development is estimated to be
higher in fiscal 2021 compared to previous year across key states
The overall budgetary expenditure on key segments like agriculture & allied activities, irrigation and rural development
is expected to see a growth in fiscal 2021 due to increased focus by state governments on social expenditure as well
as support to rural economy in light of the COVID-19 pandemic. For most of the key states considered in the chart
below, both the budgetary allocation is estimated to be higher for both revenue as well as capital expenditure
indicating focus on continued asset creation in the rural segment. Bigger states like Maharashtra and Uttar Pradesh
are estimated to account for higher expenditure compared to the other states. Both states have also announced
higher allocation towards capital expenditure in fiscal 2021 as compared to earlier year.
38
Figure 17: Budgetary (Revenue and Capital) expenditure on Agriculture and allied activities, Irrigation and
Rural development by key states in fiscal 2020 and 2021
(Rs billion)
800
700
600
500
474 419
400 455 474
300 280
316 257 264
251
200 264 258 263 308
239 248 264.0
246 148 203.4
100 213
149 158 133 133 179 143 142
50 82 60 67 60 52 54 32.0
- 26.3
FY21(BE)
FY21(BE)
FY21(BE)
FY21(BE)
FY21(BE)
FY21(BE)
FY21(BE)
FY21(BE)
FY21(BE)
FY20(RE)
FY20(RE)
FY20(RE)
FY20(RE)
FY20(RE)
FY20(RE)
FY20(RE)
FY20(RE)
FY20(RE)
Maharashtra West Bengal Odisha Telangana
Uttar Andhra Karnataka Bihar Chhattisgarh
Pradesh Pradesh
Capital Expenditure Revenue Expenditure
RE: Revised estimates, BE: Budgeted estimates

Source: Reserve Bank of India (RBI), CRISIL Research
2.7 Review of private final consumption growth in India

Private final consumption expenditure to maintain dominant share in GDP
Private final consumption expenditure (PFCE) at constant prices clocked 6.8% CAGR between fiscals 2012 and
2020, maintaining its dominant share in the GDP pie, at ~57% or Rs 83.2 trillion. Factors contributing to the growth
included good monsoons, wage revisions due to the implementation of the Pay Commission’s recommendations,
benign interest rates, and low inflation. PFCE declined in fiscal 2021 to Rs 75.6 trillion on account of the pandemic,
where consumption demand was impacted on account of strict lockdown, employment loss, limited disposable
spending, and disruption in demand-supply dynamics.
Figure 18: PFCE (at constant prices)

(Rs.trillion)
90.0 57.5%
80.0
70.0 57.0%
57.1%
60.0
56.7% 56.5%
50.0
40.0 56.3%
56.2% 56.2% 56.2% 56.0%
30.0 56.1% 56.1%
56.0%
20.0 55.8%
55.5%
10.0
49.1 51.8 55.6 59.1 63.8 69.0 73.3 78.8 83.2 75.6
0.0 55.0%
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21PE
PFCE at constant Prices PFCE as % of GDP
PE: Provisional estimates

Source: Provisional Estimates of Annual National Income, 2020-2021, CSO, MoSPI, CRISIL Research
39
Consumption expenditure to be driven by discretionary items
According to CRISIL Research, basic items accounted for 40.4% of the total consumption expenditure of Indian
consumers in fiscal 2020, with discretionary items accounting for the remainder 59.6%. It is worth noting that the
share of discretionary items in consumption increased to 59.6% in fiscal 2020 from 53.4% in fiscal 2012. The
increased spending on discretionary items suggests rising disposable income of households.
Figure 19: Broad split of PFCE consumption into basic and discretionary items
100%
46.6% 46.8% 47.3% 45.2% 42.9% 43.0% 41.7% 40.7% 40.4%

75%
50%
53.4% 53.2% 52.7% 54.8% 57.1% 57.0% 58.3% 59.3% 59.6%

25%
0%
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
Discretionary spending Basic spending
Note: Basic items includes food, clothing, and housing. Discretionary items include education, health care, electricity, water supply, footwear,
personal care products, processed foods, alcoholic and non -alcoholic beverages, tobacco, narcotics, fuel & gas, furnishing and household
equipment, vehicle and personal transportation, spending o n recreation and culture, communication, restaurants and hotels, financial insurance
and other financial services, and other items not elsewhere classified (n.e.c.)
Source: MoSPI, CRISIL Research
India’s discretionary spend is low when compared to advanced economies like United States and United Kingdom
and is expected to grow with rise in per capita income. In 2012, discretionary items formed ~75% share of spending
for both US and UK, whereas for India the share of discretionary items was lower at ~53%. In 2017, the share of
discretionary, increased to ~76%, 77%, and 55% for US, UK and India respectively and it continues to be on the
same trend with share of discretionary items in overall spends at 73%, 74% and 58% in 2019 for US,UK and India
respectively. As the Indian economy advances and household disposable income rises, the share of discretionary
items in spending expenditure is expected to increase and drive growth in overall consumption expenditure.
40
Figure 20: Comparison of consumption pattern of India with US and UK
100%
90% 25% 25% 28% 27% 27% 26%
80% 45% 42%
47%
70%
60%
50%
40% 75% 75% 72% 73% 73% 74%
30% 55% 58%
53%
20%
10%
0%
US UK India US UK India US UK India
2012 2017 2019
Discretionary Basic
Notes:
1) CRISIL Research have used consumer / household spending data (US and UK) and private final consumption data (India) to arrive at
broad split into discretionary and basic items, as defined earlier
2) Data for US is for 2011, 2016 and 2018, and for UK and India it is for fiscals 2012, 2017 and 2019
Source: MoSPI, Office of National Statistics – UK, Bureau of Economic Analysis – US Department of Commerce, CRISIL Research
2.8 Overview of key recently announced fiscal measures to deal with COVID-
19 pandemic
The government announced a series of fiscal measures under the Atmanirbhar Bharat initiative to contain the human
and economic damage from the COVID-19 pandemic. Following are the details of key measures announced under
three packages announced in the months of May, October and November.
Fiscal stimulus 1.0:

The government announced measures worth Rs 11 trillion in five tranches. This was in addition to the earlier
announced measures worth Rs 9.9 trillion (RBI liquidity support and others), taking the total financial support amount
to Rs 20.9 trillion. It was announced by government of India with the aim to revive the economy by liquidity infusion
and income support. The actual committed fiscal outgo of Rs 1 trillion, translating to 9% of the Rs 11 trillion of
measures outlined over the five tranches. The bulk of this direct support was through the Pradhan Mantri Garib Kisan
Yojana. The government also ploughed in some earlier discussed structural reforms, especially in tranches 4 and 5,
to help drive India’s medium-term growth story. The announcements pertained especially to sectors such as mining,
aviation, urban infrastructure, power, and agriculture.
Further, the government increased the borrowing limit for state governments from 3% of their GDP to 5% of GDP.
However, of this additional 2 percentage points, 1.5 percentage point is conditional upon states achieving certain
targets.
For addressing near-term issues, apart from direct benefit transfers and additional spending through MNREGA, the
government mobilised credit to micro, small and medium enterprises (MSMEs), agriculture, and the affordable
housing sector. Like the 100% guarantee on Rs 3 trillion loans to MSMEs with one year moratorium to help these
units, which are typically strapped for working capital. It was also aimed at spurring credit growth for both banks and
non-banks this fiscal and contain delinquencies in the segment, which would have increased otherwise.
41
Also, relaxation of insolvency norms were announced to help companies in the near term to protect them from
liquidation arising out of Covid-19 environment.
 Measures for the NBFC sector:
 Rs 450 billion partial credit guarantee (PCG 2.0) scheme for nonbanking financial companies
(NBFCs) and Rs 300 billion special liquidity scheme for NBFCs, housing finance companies (HFCs)
and microfinance institutions (MFIs) with full guarantee by the government.
 Under PCG 2.0, the scope was widened to cover bonds and commercial papers in addition to the
securitised pools PCG 1.0 covered. Further, the guarantee of first loss was increased to 20% from
10% earlier. In addition, the government deemed borrowers with low credit ratings and unrated
borrowers as eligible for borrowing. PCG 2.0 was aimed at providing liquidity relief to the small and
mid-size non-banks that were facing liquidity issues.
 The Rs 300 billion special liquidity scheme was announced to cover both primary issuances and
secondary market transactions. Banks’ participation under the targeted long term repo operation
(TLTRO) 2.0 scheme, which was focused on NBFCs, remained limited because of higher credit risk
perception on mid- and small-size non-banks. The 100% government guarantee was announced to
address this concern.
 Measures for MSME sector:
 The Rs 3 trillion complete credit guarantee scheme was announced to provide immediate additional
20% support to all existing accounts subject to some criteria being met. This was aimed at providing
much-needed liquidity to MSMEs that are known to face severe working capital crunch during
downturns.
 The announcement of Rs 200 billion subordinate debt for stressed MSMEs includes Rs 40 billion
government support to the Credit Guarantee Trust Fund for Micro and Small Enterprises (CGTMSE).
 Rs 500 billion equity infusion for MSMEs through funds of funds
 Disallowing global tenders of value up to Rs 2 billion for government procurement
 Rs 25 billion additional support or Phase 2 of Employees’ Provident Fund (EPF) support for business
and workers for additional three months. This was an extension of earlier schemes for an additional
three months until through August 2020
 Rs 15 billion interest subvention for Mudra Sishu loans (2% interest subvention for 12 months)
 Rs 50 billion special facility announced for small vendors
 Measures for Power - discoms:
 Rs 900 billion liquidity infusion for discoms via PFC/REC against receivables, backed by state
government guarantees, against receivables of the distribution utilities
 It was proposed to improve the liquidity of distribution utilities in the short term, helping them clear a
significant proportion of overdues. The move was expected to provide interim relief to power
generators, which were facing stretched receivables due to delayed payments from discoms.
 Measures for Real estate sector:
 Extension of registration and completion of real estate projects under Real Estate Regulatory
Authority (RERA) for all projects in or after March 2020 for six months and allowed to be extended
for three more months if needed.
 This was announced to address developers’ concerns regarding stalled construction due to the
lockdown and unavailability of labour post it. This was expected to help developers extend project
completion date by 6-9 months without any delay penalty.
42
 Timeline for availing the Credit Linked Subsidy Scheme (CLSS) under the Pradhan Mantri Awas
Yojana Urban (PMAY-U) extended by a year till March 31, 2021 for those with an annual income
between Rs 6-18 Lakh (MIG-I & MIG-II).
 Measures for Construction sector:
 Six-month extension without cost escalations for milestone completion without penalty to government
contractors to benefit stuck projects and help players avoid penalties arising due to delays, especially
in roads segment.
 Measures for mining sector:
 Government announced expedition of policy formulation and auction process to promote commercial
coal mining (ordinance to remove captive end use restriction passed in January 2020).
 Allowed composite exploration/ auction of coal bed methane reserves for extraction
 Rebate offered on revenue sharing quantum to incentivise early operationalisation/ higher produce.
 Provision of Rs 500 billion for evacuation infrastructure
 Measures for agriculture sector:
 Rs 1 trillion agriculture infrastructure financing fund for devel opment of farm gate
infrastructure for farmers - While two-thirds of agriculture credit in India comprises short-term
cyclical loans for field operations, focus on term loans has been limited in the past. Effective
utilisation of funds for financing infrastructure development could lead to an on-year increase in term
loans. While the effects of this measure will not be immediate, however if executed well, it will build
much needed infrastructure at the farm gate.
 2.5 million new Kisan Credit Cards distributed with loan disbursement of Rs 250 billion - Credit
disbursement through Kisan Credit Cards (KCC) accounts for 65% of the overall short -term
agriculture credit. While disbursement of new KCCs are expected to increase loan disbursement by
4%, timely repayment of these loans remains a key monitorable. NPA levels from KCC loans have
been 5-6% higher compared with term loans in the past.
 Rs 1.87 trillion disbursed through PM KISAN scheme - The government disbursed only ~60% of
PM KISAN allocations in fiscal 2020 due to lack of registration of beneficiaries in few states like
Bihar, Tamil Nadu, West Bengal and Chhattisgarh. Although the first installment for fiscal 2021 has
been disbursed in April-May, benefitting a similar number of farm families, identification and
registration of the remaining beneficiaries is important for efficient fund disbursement across states.
 Rs 295 billion refinancing assistance provided through NABARD - The refinancing support
provided through NABARD only accounts for 2% of the overall agriculture credit. Therefore, it will
have limited impact on the overall increase in liquidity in the market.
 Working capital limit of Rs 6,700 crore sanctioned for procurement of foodgrains to state
government entities - The government had increased the target for wheat procurement in the
current rabi season to 40 million tonne (MT) in March compared with 36 MT procured last year.
Allocation of Rs 67 billion will facilitate the additional procurement of 4 MT on-year at Rs 1,925/
quintal (minimum support price).
 Rs 5 billion allocated under Operations Green for facilitation of sales of horticulture produce
through 50% subsidy on storage and transport - Operation Green, which provides subsidy for
storage and transportation was launched in fiscal 2019, however only 40% of funds were utilized.
Hence execution of the scheme remains an aspect to monitor for support to the horticulture crops.
 Announcements for Agri allied sectors - Additional allocation of Rs 400 billion for MGNREGA. Rs
200 billion for fishermen over the next five years under Pradhan Mantri Matasya Sampada Yojana.
Rs 13.3 billion for eradication of foot and mouth disease in Indian livestock population. Rs 150 billion
43
for Animal Husbandry Infrastructure Development Fund (AHIDF). Rs 40 billion for enhanced
cultivation of herbal and medicinal plants. Rs 5 billion for Indian Apiculture industry. Rs 100 billion
for formulation of micro food enterprises.

The government measures targeted increasing the demand in the economy. Government has proposed a scheme
where central government employees can spend their tax-exempt travel concessions on certain goods and services.
It also made provisions for them to receive a part of their wages in advance to spend on their choice of festival before
the end of March next year. The stimulus also includes infrastructure spending of Rs.250 billion and interest free loan
to states which stands at Rs.120 billion. The measures announced under this package amounted to Rs 0.7 trillion.
Target Demand infusion Scheme highlights

Leave Travel Concession (LTC) Cash Voucher Scheme
Rs 280.00 billion The government has decided to give cash payment in lieu of one LTC
during 2018-21. This amount must be spent on non-essentials.
Consumer Special Festive Advance Scheme
spending
As a one-time measure, the government will give Rs 10,000 salary
Rs 80.0 billion loan to all its officers and employees as festival advance. This will be
an interest-free advance. This would be recovered in maximum 10
installments.
Special assistance to states
Interest-free loan for 50 years to states, totaling Rs 120.0 billion. This
must be spent on capital projects by the end of fiscal 2021.
Part 1: Rs 16.00 billion to eight northeast states and Rs 4.5 billion
Rs 120.0 billion
each to Uttarakhand and Himachal Pradesh
Capital Part 2: Rs 75.0 billion to the remaining states
expenditure
(capex) Part 3: Rs 20.0 billion given to those states that fulfill three of four
reforms under ANBP vide expenditure letter
Enhanced budget provisions
Rs 250.0 billion Additional Rs 250.0 billion will be provided for capex on roads,
defence, water supply, urban development and domestically-produced
capital goods

This Rs 2.65 trillion stimulus package is aimed at job creation, access to credit and farm support with. The key
highlight of this stimulus is to provide production linked incentives to 10 sectors which is estimated at around 1.45
trillion. This is proposed to be spent over the next five years to encourage domestic manufacturing across 10 sectors
– namely, textiles, food, pharma, consumer durables, auto, telecom, specialty steel, solar, electronic, and battery.
The stimulus package also provides Rs.650 billion additional outlay for subsidy towards fertilisers sector. The
stimulus also includes outlay of Rs.180 billion for housing for all plan besides it also includes package of Rs.100
billion to support rural economy.
Some of the key announcements are as follows:
 Rs 650 billion additional subsidy allocated for the fertilizer industry. Cumulative allocation for fertilizer subsidy
from Budget 2020 and Aatmanirbhar package 3.0 is expected to be sufficient in order t o cater to subsidy
requirement for this fiscal and pay off the bulk of the rollover subsidy of the previous years.
44
 Rs 180 billion spend over and above the budgetary allocation of Rs 80 billion for fiscal 2021 under PMAY-U.
This measure was proposed to provide momentum to under-construction units sanctioned under the scheme.
 Rs 100 billion over and above the budgetary allocation of Rs 615 billion for the fiscal 2021 under the PMGKRY
as well as additional allocation of Rs 400 billion in Aatmanirbhar Bharat 1. 0 package in order to boost rural
employment.
 Emergency Credit Line Guarantee Scheme (ECLGS) has been extended to March 31 2021 from current
deadline of November 30 to help MSMEs meet their daily operational expenses, maintain working capital or
cash flow and invest in avenues to keep their business functioning.
MGNREGA hauls up rural wages

Average income per person per month under the Mahatma Gandhi National Rural Employment Guarantee Act, 2005
(MGNREGA) has increased in the first four months of the fiscal 2022. The April-July period typically sees ~25%
greater work execution (in terms of person-days) under the scheme compared with the rest of the fiscal, thereby
aiding rural income.
This fiscal, however, these four months also saw a growth of person-days, coupled with an increase of in average
wage under the scheme. The primary reason for the government’s thrust on MGNREGA is the Covid-19 pandemic,
which has pushed urban labourers back into their villages.
The scheme has the mandate of providing at least 100 days of wage employment in a financial year to every rural
household whose adult members volunteer for unskilled manual work, and has been a key mechanism of providing
employment to the rural labour force. The government allocated Rs 615 billion for this scheme under Union budget
2020-21, and later increased the allocation by Rs 400 billion amid the pandemic to support the rural economy. Of the
Rs 1,015 billion, Rs 115 billion has to be spent on clearing pending dues of fiscal 2020, thus leaving Rs 900 billion
for the fiscal 2021. Rs.730 billion has been allocated to the scheme in the budget for fiscal year 2022. MGNREGA
provides income support to 34% of rural households. Therefore, a 19% increase in allocation over 2020-21 to
positively impact rural income. However, the allocation is ~36% lower than 2020-21 due to one-time support provided
last fiscal to increase rural employment during the pandemic.
The push to the scheme has been higher in Haryana, Uttar Pradesh, Bihar, West Bengal, Odisha and Gujarat, where
work allocation increased more than 50% on-year in the first four months.
Figure 21: Trend in average monthly wage rates Figure 22: Trend in average monthly work allocation
220 700 millions persondays
210 600
200 500
190 400
180 300
170 200
160 100
150 0
FY 21 FY 22 FY 20 FY 19 FY19 FY20 FY21 FY22
Source: GoI, CRISIL Research
Tractor sales to remain lower in fiscal 2022 after growing at a robust pace in fiscal 2021
Tractor demand is expected to drop marginally in fiscal 2022 on account of a high base of fiscal 2021 and drop in
replacement demand. Healthy reservoir levels, high farm profitability, sustained government support in terms of
45
procurement of foodgrain, expected pick-up in commercial demand and normal monsoon prediction for the year to
prevent further drop in the fiscal 2022 on an already high base.
Domestic tractor demand rose by 27% in fiscal 2021 due to higher focus on rural development (allocation to rural
development budget increased by 59% last fiscal), higher replacement demand, positive farm sentiments on account
of better crop profitability, higher government support through income support schemes, higher procurement of field
crops and oilseeds and higher need of mechanisation for some regions amid reverse migration.
COVID-19 pandemic to have a severe impact on India’s poverty alle viation targets;
government has set in place a number of measures to mitigate this impact
Social and economic impacts of the COVID-19 crisis are likely to be quite significant. Estimates by World Bank
project, when compared with pre-crisis forecasts, COVID-19 could push 88 to 115 million people into extreme poverty
in 2020. As a result, the global extreme poverty rate would increase from 8.23% in 2019 to ~9%, representing the
first increase in global extreme poverty since 1998, effectively wiping out progress made since 2017. India is expected
to account for a significant share of population which would turn extremely poor in the aftermath of the pandemic.
According to IMF, the pandemic has had a disproportionate effect on low-income households in many countries
because they are concentrated in the informal sectors, are more vulnerable to job losses, have lower financial
savings, and have less access to healthcare.
India accounts for the largest share of the global population living under extreme poverty. The Global Hunger Index
2020 report ranked India at 94 (of 107 it mapped for the 2020 report), far below neighboring Sri Lanka, Bangladesh
and Pakistan. This index is based on four component indicators: (i) undernourishment (insufficient caloric intake) (ii)
child wasting (under 5 years) (iii) child stunting (under 5 years) and (iv) child mortality (under 5 years).
In order to tackle this crisis, the government announced slew of measures in the social sector though policy
intervention as well as through collaboration with multilateral agencies.
Some of the key measures include:
 One Nation One Card: Under this, it has made provision for the migrant workers to access the Public
Distribution System (Ration) from any Fair Price Shop in India until 31st March 2021. All states/union
territories are mandated to complete full automation of fair price shops by 31st March 2021 for achieving
100% national portability.
 Free food grain Supply to migrants: The government proposed to provide 5 kg of grains per person and 1 kg
of chana per family per month for two months to migrant workers who did not qualify under the National Food
Security Act ration card or state card. Rs 35 billion was proposed to be spent on this scheme, and 80 million
migrants were estimated to benefit under it.
 Affordable Rental Housing Complexes (ARHC) for Migrant Workers / Urban Poor: The migrant labour/ urban
poor is proposed to be provided living facilities at affordable rent under Pradhan Mantri Awas Yojana (PMAY).
 Allocation for MGNREGA: To help boost rural economy, an additional Rs 500 billion was allocated under
MGNREGA. This was in addition to the Union Budget allocation from Rs 615 billion.
 India was extended USD 1.15 billion credit in two tranches by World Bank's concessionary lending arm
International Development Association (IDA) in order to support the poor and vulnerable reeling under the
coronavirus crisis. This aid by the World Bank helped the government to scale up pre-existing programmes
46
for emergency relief. Second tranche is expected to complement the expansion of India's safety net
programmes to create a portable social protection platform ensuring food and cash support for poor
households, urban migrants, and unorganised sector workers across state boundaries.
47
3 Overview of global agriculture sector
Agriculture plays an important role in economic and social development across the globe. As of 2018, agriculture
constituted 4% of global gross domestic product (GDP). In some of the developing countries the share of agriculture
can be as much as 25% of their GDP. As per World Bank estimates, agriculture will feed approximately 9.7 billion
people across the world by 2050. A 2016 World Bank report also concluded that growth in the agriculture sector is
two to four times more effective in raising incomes among the poorest compared to other sectors with ~65% of poor
working adults making a living through agriculture.
3.1 Trend in global agriculture land

Land under cultivation has declined over the last few years on account of increased
urbanisation and industrialisation
As of 2018, at a global level, the land used for agricultural use was slightly higher compared to that almost five
decades ago. Through the last decades of the 20 th century, the agricultural land grew from ~4.6 billion hectares
(1970) to ~4.9 billion hectares by the end of the century. Over the last decade from 2008 to 2018, agriculture land
use has remained stagnant. However, it did see a slight dip from 2011 onwards before seeing a recovery in 2017
and 2018.
According to Food and Agriculture Organisation (FAO), as of 2018, more than half of all land (54%) in Asia is
agricultural land, compared with 45% in Oceania, 38% in Africa, 30% in the Americas and 21% in Europe. Oceania
has agricultural land converted to other land. Both Africa and the Americas converted forest land to agricultural land
and/or other land. Europe and Asia were the only regions to have forest land expansion coupled with agricultural
land reduction from 2000 to 2018.
Figure 23: Trend in global agriculture land (billion hectares)

(bn Ha)
0.1% CAGR
5.0
4.9
4.8 4.82 4.82 4.82 4.80 4.80 4.79 4.79 4.81 4.80
4.77 4.77
4.7
4.6
4.0
2010
2011
2014
2017
1970
1980
1990
2000
2008
2009
2012
2013
2015
2016
2018
Source: Food & Agriculture Organisation (FAO), CRISIL Research
Land use for agriculture has seen declining trend even as population and per capita food consumption has grown
steadily, largely because of the vast urbanisation that has led to increased human activities on arable land. Increased
industrialisation and urbanisation have resulted in a decline in land availability for agriculture. Also, one of the key
trends in land use has been the greater use of fertilizers and pesticides which in turn has resulted in farmers cultivating
less land for same output levels. Other factors such as better farming practices and the use of better quality seeds
and high-yield crops have also contributed to the cause.
48
Asia accounts for more than a third of the global agricultural land followed by Americas (~25%) and Africa (~23%).
The region-wise breakup of the agricultural land has remained constant over the last two decades.
Figure 24: Region-wise breakup of agricultural land
8%
10% 23%
2018
35% 25%
Africa Americas Asia Europe Oceania
As of 2018, at a global level, the arable land is estimated to be 1.39 billion hectares. Through the last decades of the
20th century, the arable land grew from ~1.30 billion hectares (1970) to ~1.39 billion hectares by 2018 growing at a
CAGR of 0.13%.
Top-10 countries account for more than half of global agriculture land
Top-10 countries in terms of land use account for more than half (~53%) of total agriculture land. China alone
constitutes ~11% of the land used followed by United States of America and Australia. India’s share is estimated to
be ~4% of the total land used for agriculture at global level. Such skewed agriculture land distribution has created a
need for higher fertiliser and pesticide usage, sowing of better quality seeds and adoption of higher mechanization
and improved farming techniques in order to address the food security concern across the world.
49
Figure 25: Top-10 countries in terms of share in agriculture land (2018)
% share 11.0% 8.5% 7.5% 4.9% 4.5% 4.5% 3.7% 3.6% 3.1% 2.4%
(bn Ha)
0.60
0.53
0.50
0.41
0.40 0.36
0.30
0.24
0.22 0.22
0.20 0.18 0.17
0.15
0.11
0.10
China USA Australia Brazil Kazakhstan Russia India Saudi Argentina Mongolia
Arabia
Developing countries to drive arable land growth over the next three decades
Figure 26: Trend in global arable land (billion hectares)
(bn ha)
1.50
1.40 1.39
1.40 1.38 1.39
1.37
1.36 1.36
1.32
1.31
1.30
1.20
1970 1980 1990 2000 2010 2015 2016 2017 2018
As per FAO Arable land is the land under temporary crops (Which have to sow after each year)and temporary
meadows. Arable land is the subset of agricultural land. Agriculture land consist of arable land, land under permanent
crops, permanent meadows and permanent pasture. According to Food and Agriculture Organisation (FAO), as of
2018, Asia accounts for almost 2/5th of the global arable land while Americas accounts for nearly a 1/4 th share. As
per FAO data, the share of Asia and Africa have grown significantly from 1970 to 2018. In 1970 Africa constituted
13% of the global arable land whereas Asia had a share of 33%. As of 2018, on account of growth in arable land in
50
the developing countries across these regions the share of these regions increased to 17% in Africa and 36% in Asia
respectively.
Figure 27: Region-wise breakup of global arable land Figure 28: Change in regional share in global arable
land
100% 2%
Oceania, 2% 2%
90% 20%
Europe, Africa, 17% 27%
80%
20%
70%
60% 36%
33%
50%
2018 40%
30% 25%
25%
20%
Americas, 10% 17%
13%
25% 0%
Asia, 36% 1970 2018
According to FAO estimates, the arable area in the world as a whole expanded between 1970 and 2018 by ~86
million ha, the result of two opposite trends: an increase in the developing countries in regions like Asia and Africa
and a decline in the developed countries in regions like Europe. The arable land area in the latter group of countries
peaked in the mid-1980s and declined ever since. This decline in the arable area has been accelerating over time.
The longer-term forces determining such declines are sustained yield growth combined with a continuing slowdown
in the growth of demand for their agricultural products. On average at the global level, 1.8 million hectares of arable
land were added annually over the period 1970 to 2018. The data show that expansion of arable land continued to
be an important source of agricultural growth in Africa and Asia.
The slowdown in the expansion of arable land (and its eventual decline) is a direct consequence of the projected
slowdown in the growth of crop production and the assumed continuing (albeit slower than in the past) increase in
crop yields. The bulk of arable land in use is concentrated in a small number of developing countries. An increasing
number of developing countries would witness a decline in the arable land area by 2050 and embark on a pattern
already seen for most developed countries (with production only increasing very slowly and increases in yield
permitting a reduction in harvested crop areas). The overall cropping intensity for developing countries could rise by
about 3 percentage points over the corresponding period. Cropping intensities continue to rise through shorter fallow
periods and more multiple cropping. An increasing share of irrigated land in total agricultural land also contributes to
more multiple cropping. As per FAO estimates, over one-third of the arable land in South and East Asia is irrigated
(land in use), a share which is projected to rise to over 36% in 2050. This high share of irrigation in total arable land
is one of the reasons why the average cropping intensities in these regions are considerably higher than in other
regions. Average cropping intensities in developing countries, excluding China and India (which together account for
well over half of the irrigated area in the developing countries) are and expected to continue to be much lower.
51
Developing countries to drive arable land growth over the next two decades
Figure 29: Outlook on change in agricultural land use, 2017-19 to 2029
(million Ha)
10.00 1.00%
5.48
0.72%
3.98
5.00 0.50%
0.57 0.90 1.50
0.17% 0.11
0.00 0.00%
-0.26% -0.09 -0.35% -0.42
-5.00 -0.54% -2.89 -2.90 -0.50%
-10.00 -6.29 -1.00%

-1.03%
-15.00 -11.50 -1.50%

Asia Pacific Sub-Saharan Near East and Europe and North America Latin America
Africa North Africa Central Asia and Caribbean
Pasture Cropland Total growth, 2017-19 to 2029 (right axis)
Agriculture currently uses 40% of the world’s land, 70% of which is pasture land. Globally, agricultural land use is
expected to remain at current levels during the coming decade as an increase in cropland offsets a decrease in
pasture, in line with historic trends. However, trends in land use, and their underlying determinants, differ around the
world.
As per FAO projections, in Latin America, cropland use is expected to expand by about 5.5 million hectares over the
next ten years until 2030 while pastureland will decline by only 0.4 million hectares, resulting in a total increase in
agricultural land of 5 million hectares (0.7%). Large-scale commercial farms in the region are expected to remain
profitable and invest in the clearing and cultivation of new land, including previous pasture land, for soybean and
maize production.
A significant increase in cropland is also expected in the Asia Pacific region (4 million hectares), but this is projected
to be more than counterbalanced by a decline in pasture land (more than 11 million hectares), which will be enabled
by further intensification of pasture and ruminant production. More limited land use changes are expected in other
world regions. Despite substantial land availability in Sub-Saharan Africa, for instance, total agricultural land use is
projected to slightly decline (-0.3%) over the next ten years. Farmland expansion will be mainly constrained by the
prevailing smallholder structure, the presence of conflict in land- abundant countries, and the loss of agricultural land
to other uses such as mining and urban sprawl.
India has the second largest arable land area in the world; however, it lags other countries
in terms of yield for key crops
India with 156 million hectares of arable land ranks close second behind the USA (158 million hectares) in terms of
arable land area. Overall, India accounts for almost 10% of the global arable land as of 2018. Among the countries
with large arable land, India has a much lower yield across key crop categories like cereals, pulses and fruits
compared to some of the peers and also compared to global average. Thus, there remains a significant room for
improvement of yield levels in order to match up to the other large agriculture commodity producers. Increased usage
of fertilisers, crop protection, seeds and adoption of modern farming techniques are key to improving this yield.
52
Figure 30: Key country-wise arable land (2018)
(mn hectares)
Ukraine 33
Canada 39
Argentina 39
Brazil 56
China 119
Russia 122
India 156
USA 158
Table 6: Yield for key crop categories for countries with large arable land (2018)
(Hectograms/
USA China Ukraine Brazil India Russia Argentina Canada World
Hectare)
Cereals 81,962 61,378 48,522 48,066 32,781 26,168 46,712 39,046 40,083
Fruits 2,19,498 1,59,180 1,16,773 1,89,433 1,47,043 89,483 1,72,953 1,14,931 1,35,732
Oilcrops 32,919 28,199 23,739 34,997 16,057 14,651 22,943 23,304 34,096
Pulses 19,579 18,258 17,175 10,195 7,391 13,036 13,224 19,500 9,744
Roots and
Tubers 4,61,699 1,99,607 1,70,498 1,59,809 2,36,141 1,70,499 2,48,014 3,89,119 1,34,345
Sugar Crops 7,61,685 7,35,671 5,08,471 7,46,057 8,01,984 3,80,571 4,03,263 7,56,429 7,02,305
Vegetables 3,39,426 2,33,060 2,14,717 2,47,450 1,54,530 2,44,969 1,80,022 2,52,387 1,89,294
Asia accounts for highest usage of fertilizer per hectare of crop land
According to FAO estimates, world agricultural use of chemical fertilizers per cropland area rose by 33% during the
2000–2018 period, to 121 kg of nutrients per hectare – expressed as the sum of nitrogen, phosphorus and potassium.
This corresponds to an additional 30 kg/ha compared with 2000. Of the total amount, 70 kg/ha correspond to nitrogen
(up 28%), 26 kg/ha to phosphorus (up 19%) and 25 kg/ha to potassium (up 68%). Fertilizer use per cropland area in
2018 was the highest in Asia, at 178 kg/ha, followed by the Americas (135 kg/ha), Oceania (83 kg/ha), Europe (77
kg/ha) and Africa (25 kg/ha).
53
Figure 31: Trend in region-wise fertilizer usage per hectare
kg/hectare
200.0 184 178

26
150.0 135 131 34
107 49
36 114 121
91 36
14
93 91 25
74 82
100.0 33 19
25 70 71 77 9
22 34 9 15 28 26
26 14 7 22
22 15 14 45 29
13
50.0 17 20 25 84
109 108
13 12 30
2 3 65 67 70
2 6 47 56 45 50 54
42 39 37 44
4 5
11 13 16
0.0 0 0 0 0 0
2000
2010
2018
2000
2010
2018
2000
2010
2018
2000
2010
2018
2000
2010
2018
2000
2010
2018
Africa Americas Asia Europe Oceania World
Nitrogen, as N Phosphorus, as P2O5 Potassium, as K2O
Note: Figures at the top of bar indicates total of each segment

3.2 Review and outlook for world cereal production

Cereal production and consumption has seen steady growth over the last decade
Wheat, rice paddy, barley, maize, popcorn, rye, oats, millets, sorghum, buckwheat, quinoa, fonio, triticale, canary
seed, mixed grain and cereals nes are all considered cereals. As per FAO estimates, during 2000 to 2018, cereals
accounted for more than half the world’s harvested area, even as their share declined to 51% by 2018. With about
one-third of the total, cereals were the main group of primary crops produced in 2018. Cereals are considered as one
of the staple foods worldwide and are the most important contributor to the dietary energy supply in all regions, with
shares in 2017 ranging from 25% in Oceania to around 50% in Asia and Africa.
In volume terms, cereals are also the most traded commodity. The Americas and Europe are the largest exporters
and Asia the largest importer. They are also the most traded commodity group with exports reaching a historical peak
at 481 million tonnes in 2018. Three crops accounted for 86% of all cereal exports in 2018: wheat (40%), maize
(36%) and rice (10%). As per FAO, for each of the main traded cereals, exports tend to originate from a few countries
while imports are more dispersed. In 2018, the top three exporters accounted for significant shares of the total
exports: 47% for wheat, 67% for maize and 61% for rice. In comparison, the top three importers accounted for 15-
25% of the total imports for these commodities.
54
Figure 32: Trend in global cereal production and consumption (in million tonnes)
(mn tonnes) CAGR - Production: 1.7%, Consumption: 1.9%
3,000 2,750 2,745
2,608 2,584 2,551 2,6612,614
2,6932,647 2,646 2,676 2,7072,693
2,557 2,508
2,450
2,500 2,358 2,321 2,318 2,332
2,000
1,500
1,000
500
0
2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20(E) 2020/21(F)
Production Consumption
Note: Production data refer to the calendar year of the first year shown .
E- Estimate; F- Forecast
Cereal production and consumption across globe has increased gradually and is estimated to be ~2.7 billion tonnes
in the year 2019/20. In the year 2020/21, FAO forecasts the cereal production and consumption to grow by 1.6% and
1.9%, respectively. Most of the increase in global cereal production is expected to come from Asia, Latin America,
Africa, and Eastern Europe, where national food self-sufficiency policies and investments in exporting countries will
sustain production increases. In the past, such policies – which included input subsidies, support prices, direct
payments, agricultural loans, insurance at preferential rates, access to improved seed varieties, and extension
services – had an impact in increasing production. For wheat and rice, food use will drive demand in the coming
decade. Since per capita demand of these cereals is stagnating at the global level, it is expected that increases of
wheat and rice in the diets of lower income regions will continue to be offset by decreases in higher income regions,
where these diet staples are losing importance. Therefore, the main driver for wheat and rice markets will remain
population growth.
Global cereal production expected to expand by 375 million tonnes over the next decade
In the last ten years, cereal production growth outpaced demand growth, leading to ample stocks and lower prices.
As per FAO estimates, over the outlook period of 2020 to 2029, prices are projected to decrease further in real terms,
while recovering slightly in nominal terms. Increased production and destocking will continue to exert downward
pressure on cereal prices despite increasing demand. Lower anticipated prices, however, could weigh on planting
decisions and reduce future supply.
55
Figure 33: Outlook on global cereal production and consumption (in million tonnes)
(million tonnes)
1.5% CAGR
3,500 3,054 3,040
2,754 2,753 2,880 2,884
3,000 2,679 2,683
2,500
2,000
1,500
1,000
500
-
Avg 2020P 2024P 2029P
2017-19E Production Consumption
Note: Production data refer to the calendar year of the first year shown .
E- Estimate; F- Forecast
Global cereal production is projected to expand by 375 million tonnes, to reach 3,054 million tonnes in 2029, mainly
driven by higher yields. Maize production is projected to increase the most (193 million tonnes), followed by wheat
(86 million tonnes), rice (67 million tonnes), and other coarse grains (29 million tonnes). Advances in biotechnology,
resulting in improved seed varieties together with increasing use of inputs and better agricultural practices, will
continue to drive increases in yields; however, these gains could be restrained by the impact of climate change and
related production constraints like lack of investment or land tenure problems in developing countries. The global
average cereal yield is projected to increase by 1.1% p.a. over the next ten years, markedly lower than the 1.9%
registered in the previous decade, while total crop area is expected to increase only modestly. These changes are
influenced by increasing profitability in the Black Sea region where production costs are lower compared to other
major exporters.
Over the medium term, growth in overall cereal demand should be more subdued than in the previous decade as
growth in feed demand is expected to continue to slow in China. The increase in the industrial use of cereals, notably
of starch and biofuels, is likely to be more modest than in the previous dec ade. On the food demand side, per capita
consumption of most cereals has reached saturation levels in many countries around the world. Overall food demand
is nevertheless expected to continue to rise, driven by rapid population growth in Africa and Asia where cereals
remain a major component of the diet. Wheat consumption is projected to increase by 86 million tonnes compared
to the base period, largely destined for food. The use of maize is projected to increase by 172 million tonnes, largely
driven by expanding livestock sectors in Asia and the Americas. Maize for human consumption is projected to
increase by 23 million tonnes, especially in Sub-Saharan Africa where white maize is an important food staple and
population growth remains high. Global consumption of rice is projected to increase by 69 million tonnes by 2029,
with Asia and Africa accounting for most of the projected increase and direct human consumption remaining the main
end-use of this commodity. The use of other coarse grains is projected to increase by 30 million tonnes, with higher
food use expected in Africa.
Global cereal supply dominated by a few players

The global supply of cereal is dominated by a few major players. Production, consumption and exports are
concentrated in these producing countries or regions, while imports are generally more widespread, except for wheat.
Exports are particularly concentrated for the four commodities, with the five top exporters accounting for between
72% and 89% as per FAO estimates. Over the years, however, the concentration of cereal markets has declined
56
markedly, both for production and even more so for exports. Relative to other commodities, such as soybeans, the
cereals market is less concentrated.
Future cereal supplies will largely depend on the ability to increase yields. This in turn will depend on investments in
improved cultivation practices, seed breeding, advances in biotechnology, structural changes towards larger farms,
improved cultivation practices, and the ability to adapt technologies and enhance knowledge transfer across regions.
Growth in harvested areas will play a minor role for cereals as the competitiveness of cereals relative to alternative
crops does not improve.
Total cropland expansions are expected to remain limited by constraints to converting forest or pasture into arable
land or because of ongoing urbanisation. Despite the existing challenges arising from environmental restrictions and
sustainability considerations, productivity growth for cereals is expected to remain ahead of demand growth and lead
to real declining prices. Producers’ support policies will continue to shape cereal markets. FAO projects that most of
the increase in global cereal production will occur in Asia, Latin America, Africa, and Eastern Europe, where national
food self-sufficiency policies and investments in exporting countries will sustain production increases. In the past,
such policies – which included input subsidies, support prices, direct payments, agricultural loans, insurance at
preferential rates, access to improved seed varieties, and extension services – had an impact in increasing
production. However, success was largely dependent on the timing and implementation of the policy itself.
Figure 34: Regional contribution of growth in cereal production projections, 2017-19 to 2029
(million tonnes)
200
150 61
4
100
79
2 0
8
50 3
1
18
45 4
10 35
34 31 17 0
2
0 5 2 6 8
Asia Latin America and Europe Africa North America Oceania

Caribbean
Wheat Maize Other coarse grains Rice
3.3 Region wise production and consumption of major crops

Rice
Rice is widely cultivated around the world, mainly as an annual crop even though it may survive as a perennial. It is
grown predominantly under flooded conditions as this facilitates fertilisation and reduces the incidence of weeds and
pests. Most of the global rice production is located in Asia, with many countries in the region growing more than one
crop per season. More than half of global rice production is concentrated in China and India. The path of production
systems in developing Asian countries largely influences global markets, i.e. increasing yields in Asian countries,
significantly impacts increases in global availability and trade.
57
Asia dominates rice production globally; China and India contribute more than half of
Asia’s production
Rice is among the four crops that account for half of global primary crop production; the other three being sugar cane,
maize and wheat. At 782 million tonnes, rice accounted for 9% share of the primary global crop production in 2018
as per FAO estimates. Top three producers of rice combined account for a significant share of the world total: around
61% in 2018. Asia accounts for a dominant share (~90%) of the global rice (paddy) production; it produced ~705
million tonnes of the782 million tonnes rice produced globally. Within Asia region, China (214 million tonnes) and
India (173 million tonnes) accounted for ~30% and ~25% of the rice produced in 2018, respectively.
Global rice (paddy) production touched 780 million tonnes in 2018 clocking a growth of 1.5% CAGR in the preceding
decade. More than 90% of the global rice production is concentrated in Asia alone. China and India are the major
rice producing countries in the world.
Figure 35: Region-wise breakup of global rice (paddy) production

Europe, 0.5% Africa, 4.2%
Oceania, 0.1% Americas, 5.0%
2018
782 m n tonnes
Asia, 90.2%
Direct human consumption continues to be the main end-use of rice and is expected to continue to be a major food
staple in Asia, Africa, Latin America and the Caribbean. A major driver for global rice consumption is growing demand
from developing countries in Asia and African countries. As of 2019, as in the case of paddy, milled rice production
was dominated by Asia which accounted for almost 90% of the global production. Asia also accounted for the largest
share of the consumption pie; although Asia also exports part of its production to Africa and Europe.
58
Figure 36: Region-wise breakup of rice production Figure 37: Region-wise breakup of rice consumption
(milled eq.) (milled eq.)
South America, 3.1% North America, 1.2% North America, 1.0%

South America, 2.8%
Europe, 0.5% Europe, 1.0%
Central America &
The Caribbean, 0.4% Central America & The Oceania, 0.2%
Oceania, 0.0%
Caribbean, 0.9%
Af rica, 4.8%
Af rica, 7.9%
2019 2019/20
501.2 mn tonnes 502.5 mn tonnes
Asia, 90.0% Asia, 86.3%
According to FAO and OECD estimates, global rice (milled) production is projected to reach 582 million tonnes in
2029. Asia is projected to contribute the majority of additional global production, accounting for 61 million tonnes of
the increase during this period. The highest growth is expected in India, the world’s second largest rice producer.
Production gains here are expected to be sustained through yield improvements supported by policy measures that
promote the use of new seed varieties and the expansion and maintenance of irrigation facilities. The maintenance
of the minimum support price over the outlook period should support plantings in India that are similar to those in
China. In China, however, production is projected to grow at a slower pace than the previous decade amid
expectations that efforts to move the least productive lands out of cultivation will continue as part of a broader effort
to improve the quality of rice production.
In addition to infrastructure and input-related impacts, future production of rice will largely depend on the varietal
structure of plantings and the adoption of improved seed strains. In developed markets, production is expected to fall
in Korea and Japan below the base period’s level, but to increase in the United States and European Union, although
not to exceed the 2010 peak for the United States nor the 2009 peak for European Union. Least Developed Asia –
comprised of Myanmar, Cambodia, the Lao People's Democratic Republic, and Bangladesh – is expected to continue
to increase its productivity levels as higher-yield varieties and implement better agricultural practices. While rice
production is expected to increase in many African countries, rice production in Africa is expected to be constrained
by rain-fed water systems, limited use of inputs, and inadequate farm infrastructure.
Figure 38: Outlook on global rice production

(million tonnes)
600
582
580
560 551
540 533
515
520
500
480
Avg 2020P 2024P 2029P
2017-19E
59
P: Projected
In some Asian countries, where most of the production is consumed domestically, demand is expected to decrease.
In India, however, an additional 4 kg to the annual per capita consumption is projected over the next ten years, partly
driven by the government’s social policy to improve food security of vulnerable households through the public
distribution of food grains. In Africa, where rice is gaining in importance as a major food staple, per capita rice
consumption is projected to grow by about 4 kg over the outlook period. With rice utilization projected to grow at a
slightly faster pace than world supply, the global stocks -to-use ratio is projected decrease marginally, from 35% in
the base period to 31% by 2029.
Asia-Pacific region recorded a per capita consumption of ~80 kgs which is far higher compared to other regions.
Figure 39: Region wise per capita rice consumption (kg per capita)
90
77.6 78.1
80
70
60
50
40
26.9 30.8 28.2 28.3
30
20 13.1 13.1
10 6.4 6.7
0
Africa Asia pacific North america Latin America and Europe
the Caribbean
2017-2019 2029P
P: Projected
Wheat
Wheat is the most important source of vegetable protein and food calories at the global level, and is part of many
food products, such as bread, pasta, pastries, noodles, semolina, bulgur or couscous. It is also the food crop that
covers the largest share of the global crop area (about 14%) and has the largest share in global food trade. However,
since its yields are much lower than for maize, wheat is only the second most produced cereal after maize (752
million tonnes). Global production of wheat is dominated by the European Union, China, and India.
Asia and Europe dominate wheat production globally; China and India contribute more
than 70% of Asia’s production
Wheat is among the four crops that account for half of global primary crop production; the other three being sugar
cane, maize and rice. At 762 million tonnes, wheat accounted for ~8% share of the primary global crop production in
2019 as per FAO estimates. Asia accounts for a major share (~44%) of the global wheat production followed by
Europe which accounts for more than a third of the global production. Within Asia region, China (134 million tonnes)
and India (104 million tonnes) accounted for ~40% and ~30% of the wheat produced in 2019, respectively.
60
Figure 40: Region-wise breakup of global wheat production (in million tonnes)
Oceania, 2.0%
Europe, 34.9%
Asia, 44.2%
2019
761.9 m n tonnes
North America,
11.1% Africa, 3.5%
Central America &

South America,
The Caribbean,
3.8%
0.4%
Figure 41: Region-wise breakup of wheat consumption
Oceania, 1.3%
Europe, 24.4%
2019/20
North America, 750 m n tonnes
5.2% Asia, 53.2%
South America,
3.9%
Central America
& The
Caribbean, 1.6%
Africa, 10.3%
Wheat covers the largest share of the global crop area (about 14%). As per FAO and OECD estimates, global wheat
productions levels are expected to reach 839 million tonnes by 2029. While developed countries are projected to
increase production by 50 million tonnes by 2029, developing countries are expected to add 36 million tonnes to
global output, equivalent to a marginal increase of their share of global production. India, the world’s third largest
wheat producer, is expected to increase its wheat production, largely sustained by its minimum support price policy
that guarantees farmers a stable income. Production increases in the Russian Federation and Ukraine result from
their domestically-produced hybrid seeds and fertilisers, low energy costs, large commercial farms, and soil quality.
Growth in global wheat consumption is mainly expected in the five largest wheat consuming regions – China, India,
the European Union, the Russian Federation, and the United States – accounting together for 55% of global wheat
use. Food use, which is expected to remain stable at about two-thirds of total consumption, is projected to represent
60% of the total increase in demand, while global per capita consumption will stagnate. As global livestock production
slows and maize feed becomes more competitive, feed use of wheat is projected to increase more slowly than in the
61
past decade. Global production of wheat-based ethanol is projected to increase by only 0.6 million tonnes, supported
by efforts in China to boost ethanol production. In the European Union (a major user of wheat in ethanol processing
in the past decade), biofuel policies are assumed to no longer support further growth of first generation biofuels. With
global wheat production consistently higher than consumption throughout the projection period, the global stocks-to-
use ratio is expected to reach 37% in 2029, up 3.5 percentage points from the base period.
Figure 42: Outlook on global wheat production

(million tonnes)
860
839
840
820
800
800
780 765
760 753
740
720
700
Avg 2020P 2024P 2029P
2017-19E
Growth in global wheat consumption is mainly expected in the five largest wheat consuming regions – China, India,
the European Union, the Russian Federation, and the United States – accounting together for 55% of global wheat
use.
Coarse grain
Asia and North America dominate coarse grain production with more than 55% of total
production
The coarse grain market has grown over the years following a strong demand from Americas and Asia. World coarse
grain production in 2019 stood at estimated 1444 million tonnes and is forecasted to be at levels of 1478 million
tonnes recording on year growth of 2.3% in 2020. Asia accounts for majority share (28.3%) in global coarse grain
overall production closely followed by North America which constitutes 26.9% of the total coarse grain production.
62
Figure 43: Region-wise breakup of global coarse grain production (in million tonnes)
Oceania, 0.8%
Europe, 18.9%
Asia, 28.3%
2019
1,444 m n tonnes
Africa, 9.7%
North America,
26.9%
Central America
& The Caribbean,
South America, 2.6%
12.8%
World total coarse grain consumption stood at 1,440 million tonnes in 2019/20. Consumption is expected to increase
by 2.5% on year to 1,476 million tonnes in 2020/21.The demand is expected to rise on account of increased use of
coarse grains in feed and non-feed use. Region wise Asia accounts for 35.2% of total coarse grain consumption,
most by any region. Asia is followed by North America with consumption of 23.9% of total coarse grains.
Figure 44: Region-wise breakup of coarse grain consumption
Oceania, 0.5%
Europe, 16.1%
Asia, 35.2%
2019/20
1439.6 m n tonnes
North America,
23.9%
Africa, 11.6%
South America, Central America
8.3% & The Caribbean,
4.4%
As per FAO-OECD estimates, global maize production is projected to grow by 193 million tonnes to 1,315 million
tonnes over the next decade, with the largest increases in China, the United States, Brazil, Argentina, and Ukraine.
Maize production in China is projected to grow more slowly (2.1% p.a.) than over the previous decade (3.1% p.a.) as
policy changes in 2016 eliminated maize price support and its associated stockpiling programme; these were
replaced with direct farm subsidies and market-oriented purchasing. As a result, in the near term, planting areas in
China will shift from maize to other commodities, such as soybeans and wheat, although may shift back to maize in
a few years as stocks decline to more sustainable levels. In the United States, the maize planted area will remain
63
stable and production increases will be due mainly to higher yields. Increased production in Brazil and Argentina will
be sustained by slightly larger planted areas and productivity increases, motivated by favourable domestic policies
(e.g. loans at preferential rates) and the depreciation of the respective currencies. Ukraine’s production will be
sustained by the cultivation of high yielding domestic varieties grown in rain-fed systems.
Global maize consumption is projected to increase at slower rates than in the past decade, in line with production.
This is a result of a combination of factors including feed demand, biofuel policies, and human consumption. Feed
use is projected to account for the largest share (68%) of the increase in maize consumption. Over the next decade,
gains in feed-use efficiency and slower growth in livestock production have dampened feed demand. In addition,
growth of maize for biofuel production is expected to be limited as current biofuel policies will not likely support further
expansion in major producing countries. Maize for human consumption is projected to increase by 23 million tonnes,
driven by both population growth and increasing global per capita consumption. Sub-Saharan Africa, where white
maize is an important dietary staple and population is growing rapidly, is projected to have the strongest food
consumption growth (14 million tonnes).
As per FAO-OECD estimates, global production of other coarse grains will reach 319 million tonnes by 2029. With
global planting area expected to decrease, production growth will be sustained by yield gains; these are projected to
increase by about 0.9% p.a. Africa is projected to account for almost one-third of global growth (+10 million tonnes),
with yields increasing at 1.7% p.a. The absolute yields remain low compared to other regions, mainly because Africa
produces its own indigenous varieties of millet and sorghum. In Europe, the largest production gains will originate
from the European Union Member countries, Ukraine, and the Russian Federation. Overall, the planted area in
Europe is expected to decline, reflecting the lower profitability of barley against other crops such as maize and wheat.
Production gains are sustained by yield gains; Ukraine is projected to increase yields by 1.5% p.a., assuming
increasing crops rotation in combination with better agricultural practices and abandonment of non-productive land.
In Asia, the largest expansion of production is projected to occur in China. Production in India is expected to contract
due to decreased harvested area without compensating yield gains. Although millets were included in the country’s
National Food Security Act in 2013 for distribution through the public procurement system, the support effect has
been limited in part because small farmers were not included, as well as to poor soils and limited water availability.
Total demand for other coarse grains is projected to increase by 30 million tonnes by 2029, with feed demand
accounting for nearly half of that increase (+14 million tonnes), followed by food (+10 million tonnes) and industrial
use (+6 million tonnes). Feed demand is expected to remain relevant in Europe, although contracting, as barley is a
reliable source of protein and energy in feeding livestock. Specifically, for dairy production, barley is expected to
remain an important feed ingredient. Globally, the expected intensification in the dairy and meat production systems
favours the use of industrial feed for which maize and soybeans are the prominent ingredients, thus slowing feed
demand growth for other coarse grains. China is expected to increase feed demand, driven by the meat sector,
similar to North Africa, Iran, Turkey and Saudi Arabia. In the latter three countries, albeit the intensification of their
production systems, barley is expected to remain as a high quality feed, in particular for ruminants such as camels,
sheep and goats. Global food demand of other coarse grains is expected to increase only in Africa, although
decreasing on a per capita basis as already observed during the past decade.
64
Figure 45: Outlook on global coarse grains production
(million tonnes)
1,700
1,650 1,634
1,600
1,550 1,530
1,500 1,457
1,450 1,412
1,400
1,350
1,300
Avg 2020P 2024P 2029P
2017-19E
3.4 Review and outlook for world horticulture production

Horticulture production has grown at ~1.8% CAGR over the last decade
Global horticulture production grew at ~1.8% CAGR over the last decade from 5,528 million tonnes in 2008 to 6,623
million tonnes in fiscal 2018. Growth over the corresponding period was largely driven by vegetables (2.2% CAGR),
fruits (2.1% CAGR) and oil crops (2.8% CAGR) segments. Sugar crops form the single largest component of the
horticulture segment accounting for almost a third of the overall global production. Vegetables and fruits account for
another third of the global production, while Roots & tuber account for ~12% of the production.
Figure 46: Trend in global horticulture production (in million tonnes)

(mn tonnes)
8,000
6,423 6,431 6,461 6,584 6,624
6,004 6,058 6,268
6,000 5,529 5,511 5,669
4,000
2,000
-
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
65
3.5 Global and regional food consumption
Per capita food consumption to continue to see improvement over the next decade
The global level of the prevalence of undernourishment (PoU) has been increasing since 2014, after a decades-long
decline. Nearly 9% of the world population suffered from hunger in 2019. As per estimates by FAO, world average
dietary energy supply (DES), measured as calories per capita per day, has been increasing steadily, to around 2,870
kcal per person per day over the period from 2017 to 2019, up 7% compared with 2000 to 2002. It is highes t in
Northern America and Europe, at about 3,500 kcal per person per day; the gap with Oceania and Latin America and
the Caribbean, slightly above 3,000 kcal per person per day, is substantial. While the lowest among all regions, Africa
has also witnessed a steady increase in DES followed by a slight decline in recent years, probably due to the drought
in 2016 and political conflicts in some countries that adversely affected agricultural production.
However, over the long term, world average food consumption has increased from 2,358 Kcal per capita per day in
1964-66 to 2,940 Kcal per capita per day in 2015. The global food consumption is expected to cross 3,000 Kcal per
capita per day by 2030. According to FAO, fats and staples will account for about 50% of the additional calories. By
far, the highest growth rate is projected for fats at 9% over the coming decade. Staples remain the most significant
food group across all income groups. With the exception of high-income countries, consumers in all other countries
are projected to consume more energy from staples. Nevertheless, on the account of the ongoing transition in global
diets towards higher shares of animal products, fats, sugar and other foods, the share of staples in the food basket
is projected to decline by 2029 for all income groups though at different rates.
Per capita food consumption is expected to remain high in developed regions such as North America and Europe.
Food consumption in developed regions has been above the world average at least by 400 Kcal. Developing
countries have also witnessed rise in food consumption levels owing to increased income levels and better food
security.
Ongoing income growth and changing consumer preferences will further the substitution of staples, sweeteners and
fats for higher-value foods, most importantly foods dense in micronutrient content such as fruits, vegetables, seeds
and nuts and, to a lesser extent, animal products. Growth in the consumption of animal products will be limited by
near saturation levels of consumption of meat and dairy products as well as increasing health and environmental
concerns. In upper-middle income countries, total food consumption is expected to expand by about 4% by 2029.
Based on the strong preferences for meat in many of these countries, 38% of the additional calories will be provided
by animal products and 26% by fats and other foods. Consumers in lower-middle income countries are projected to
increase their food consumption by 7% (173 kcal) over the coming decade, the largest gain of all four income groups.
However, due to limited disposable income, fats and staples will still account for half of the increase, while the growth
in the consumption of relatively more expensive options such as fruits, vegetables and animal products will remain
limited.
Average diets in low-income countries remain heavily based on staples, which will continue to provide 70% of daily
calories. Almost 40% of additional calories over the coming decade are still expected to come from cereals, and roots
and tubers. The second most important source of calorie growth will be sweeteners, accounting for 30% of the total
increase. Growth in the consumption of animal products and other high value foods (e.g. fruits and vegetables) will,
however, remain limited due to income constraints. Given the higher cost of these food items, consumers in lower-
middle and low-income countries will only be able to take a small step towards more diversity in their diets.
66
Figure 47: Region-wise and category-wise trend in energy consumption (kcal per capita per day)
(Kcal per capita per day)
4,000
3,000
2,000
1,000
Transition countries
World
South Asia
Sub-Saharan Africaa
Near East and North
East Asia
Latin America and the
Developing countries
Industrialized countries
Caribbean
Africa
1964 - 1966 1974 - 1976 1984 - 1986 1997 - 1999 2015 2030(P)
Note: P- Projected
Rise in per capita income and dietary shifts drives the increased food consumption
Increased per capita income

Per capita income has seen steady rise not only in developed economies but also in developing economies. As more
people come out of poverty, there would be better food security and consequently more people will have access to
nutrition. The effect is especially pronounced in the developing countries where rapid economic growth over the last
few years has resulted in strong growth in income levels. As a result of global economic development, per capita
food expenditures across all income groups are expected to increase in absolute terms with an increasing proportion
devoted to higher value items such as vegetable oils, livestock products and fish. However, as incomes rise, people’s
propensity to spend their extra income on food declines and consequently the food expenditure share in total
disposable income falls. The continuing urbanisation and rising female participation in the workforce especially in
high-income and emerging economies is expected to contribute to a higher consumption of processed and
convenience food, and an increasing tendency to eat outside the home.
Dietary changes
Due to globally rising per capita incomes and declining real food prices, the demand for animal products has risen
over the last decade. This increase has also been sustained by urbanisation, which facilitates large-scale meat and
dairy processing. Moreover, the retail sector has invested in improving cold chains, allowing perishable food,
including animal products, to travel longer distances at lower costs from producers to consumers, preserving its
nutrients and organoleptic features. Income-related differences in the composition of protein sources will persist, with
lower middle- and low-income countries expected to remain heavily dependent on proteins from crop sources, given
lower average household incomes and a lower availability of protein from animal sources due to the lack of adequate
supply chains to trade and preserve fresh meat.
67
Protein from animal sources
nutrients and organoleptic features. In line with these past developments, total per capita availability of protein is
expected to rise at the global level to 85 g per day in 2029, from 83 g per day in the base period. Income-related
differences in the composition of protein sources will persist, with lower middle- and low-income countries expected
to remain heavily dependent on proteins from crop sources, given lower average household incomes and a lower
availability of protein from animal sources due to the lack of adequate supply chains to trade and preserve fresh
meat. Protein from animal sources, meanwhile, will continue to account for the bulk of protein consumption in the
high-income regions of North America, and Europe and Central Asia.
Growth in animal protein consumption is expected to be particularly pronounced in upper middle- and lower middle-
income countries, where daily per capita meat and fish availability is expected to rise. Although consumers in lower
middle-income countries increase their consumption of animal protein faster than consumers in any other income
group, their per capita intake remains significantly below consumption levels in upper middle- and high-income
groups. India’s traditionally low consumption of animal protein, especially meat, considerably influences the lower-
middle income group trend.
Overall, protein from animal sources are expected to account for a greater share of total daily per capita availability.
Growth in animal protein consumption will be particularly pronounced in upper middle- and lower middle-income
countries, where daily per capita meat and fish availability is expected to rise by 8% and 16%, respectively. Income-
driven growth in demand for meat and fish in China, which is expected to see an 11% increase in daily per capita
availability, will be the main contributor to the upper middle-income country group. Although consumers in lower
middle-income countries increase their consumption of animal protein faster than consumers in any other income
group, their per capita intake remains significantly below consumption levels in upper middle- and high-income
groups. India’s traditionally low consumption of animal protein, especially meat, considerably infl uences the lower-
middle income group trend.
Figure 48: Per capita consumption of main food groups (protein equivalent), by income group
(g/day/person)
120
100 13 13
18 19
80 12 13
8 9
60 59 60 38 40 7 8
31 32 18 21 13
13
40
20 39 40 38 38 42 43 44 45
31 31
0
2017-19 2029 2017-19 2029 2017-19 2029 2017-19 2029 2017-19 2029
World High Income Upper Middle Income Lower Middle Income Low Income
Staples Animal products Other
Note: P- Projected
68
3.6 Overview of global agriculture trade scenario
Trade plays a critical key role in enabling a more efficient and sustainable global food system, as product moves from
countries/regions where resources are comparatively well endowed to those that are less well endowed. This is
particularly true for agriculture, where land and water resources, climatic conditions, and population densities vary
considerably among countries and regions.
As trade barriers, both technical/economic and policy in nature, have been lowered or removed, trade has increased
considerably over the last decades, particularly with the signing of numerous trade agreements. As reductions in
these barriers have occurred, growth in trade has contributed to a more efficient allocation of agricultural production
across countries and regions. In the next decade, trade will increasingly reflect diverging demand and supply
developments among trading partners. Some regions are projected to experience the largest population or income-
driven increases in food demand but do not necessarily have the resources for a corresponding increase in
agricultural output. Moreover, changing nutritional preferences and requirements are changing the profile of demand
in most regions.
Global agriculture trade more than tripled in the last few years; Asia region remains
highest net importer
FAO estimates that the monetary value of global food exports multiplied by 3.6 in nominal terms between 2000 and
2018, from about USD 380 billion in 2000 to slightly less than USD 1.4 trillion in 2018, with strong increases in all
food commodity groups. Fruit and vegetables accounted for 23% of the total value of food exports in 2018, followed
by cereals and preparations (14%). Fish and meat each had a share of 11%. The United States of Ameri ca was the
largest food exporter in 2018 with 9% of the total, followed by the Netherlands and China (6%). India, with USD 27.7
billion in exports, accounted for a mere ~2% of the global agriculture exports.
Looking at the food net trade, defined as the nominal value of exports minus that of imports, two regions stand out:
the Americas as the largest net exporter with a USD 104 billion surplus in 2018, and Asia as the largest net importer,
posting a USD 181 billion deficit in 2018. Oceania remained a net exporter of food during the 2000–2018 period and
Africa a net importer. Europe was a net importer of food during most of the period, but became a net exporter in
2013.
The largest individual flows are observed for fruit and vegetables, with Europe importing USD 140 billion and the
Americas exporting USD 132 billion in 2018. Asia was the top importing region for cereals and preparations, fats and
oils, and sugar and honey; for beverages, dairy and eggs, fish, fruit and vegetables, and meat, the main importer
was Europe. For all commodity groups but three, Europe was the main exporter; the Americas led for fruit and
vegetables, and Asia for fats and oils and fish. Fruit and vegetables are the commodity group with the largest net
trade amounts: Asia’s trade deficit was USD 58 billion, while the Americas’ surplus was USD 67 billion. In 2018,
Africa and Asia were net importers of all commodity groups but two (fish and fruit and vegetables for Africa, fish and
fats and oils for Asia). Oceania was a net exporter of all commodity groups in 2018. The Americas and Europe were
net exporters of most groups, but each had significant net imports in one category: the Americas had a deficit of USD
17 billion for beverages and Europe had one of USD 41 billion for fruit and vegetables. Looking at the quantities
instead of the values traded gives a vastly different picture. In that case, cereals are by a wide margin the most traded
commodity group, with exports reaching a historical peak at 481 million tonnes in 2018. This is 207 million tonnes, or
76% more than in 2000. Three crops accounted for 86 percent of all exports in 2018: wheat (40%), maize (36%) and
rice (10%). The relative shares of wheat and rice have barely changed between 2000 and 2017, and that of maize
increased by 6 percentage points.
Trade is going to be increasingly important for food security in resource-constrained countries, where imports account
for a large share of their total calorie and protein consumption. International trade was hampered by Covid-19 as
there were supply and demand side constraints. Agricultural trade is anticipated to continue to grow over the next
69
decade supported by strong economic growth in emerging and developing countries, particularly in China, but also
in other countries in South East Asia and Africa.
Figure 49: Trend in global agriculture export (USD billion)

(USD bn)
1,600
1,416 1,410 1,449
1,397
1,400 1,320 1,338
1,270 1,282
1,200 1,068 1,085
1,000 951
800
600
400
200
-
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Global Agriculture trade projected to grow at ~1.2% over the next decade
Agricultural trade is anticipated to continue to grow over the next decade, albeit at significantly slower pace than over
the previous decade. Trade had grown rapidly since the early 2000s, supported by a lowering of agro-food tariffs and
trade-distorting producer support in the wake of the Uruguay Round. Agricultural trade has also been supported by
strong economic growth in emerging and developing countries, particularly in China, but also in other countries in
South East Asia and Africa, and by the rapid growth of the biofuel sector, particularly the growth of biodiesel
production in the European Union. Excess demand spurred higher real prices and was met by higher additional
supplies largely from Latin America, North America and Eastern Europe. Over the next decade, slower global demand
growth triggered by a slowdown in demand growth in China and other emerging economies, and lower global demand
growth for biofuels given developments in the energy sector and in biofuels policies is expected to result in a slower
growth in trade.
As per FAO-OECD estimates, aggregate trade for the commodities covered in the chart below is projected to grow
at 1.2% p.a. over the next decade, compared to 2.8% p.a. over the previous decade. In general, there is expected to
be a broad decline in commodity trade across all commodities, except for sugar and cotton, with considerable slowing
in trade anticipated for maize, soybeans and biofuel products. New digital technologies have the potential to enhance
agro-food trade, and improve food security and safety over the coming decade by enabling more efficient and
transparent agricultural value chains.
70
Figure 50: Growth in trade volumes, by commodity
%
7.50 6.5 6.4
5.9
6.00 4.9
4.2
4.50 3.0 3.3 3.4 3.5
2.9 2.7 2.7 3.0 2.7
3.00 2.2 2.4 1.9 2.4 2.4 2.0 2.2
1.5 1.7 1.5 1.3 1.6 1.8 1.6 1.5
0.9 1.11.2 1.21.21.0
1.50 0.9 0.7 1.1 1.4 0.3 0.1
0.1
0.00
-1.50 -0.2
-3.00 -1.5
Cheese
Biodiesel
Pork
Protein meals
Skim milk powder

Vegetable oils
Wheat
Other oilseeds
Whole milk powder

Poultry
Other coarse grains
Maize
Raw sugar
Soybean
Butter
Fish
Sheep
Beef
Cotton
Rice
Ethanol
White sugar
Cereals Oilseeds Sugar Meat Dairy Biofuels
2010-19 2020-29
Trade relative to output is stabilizing

Global trade relative to production for the commodities covered has been gradually increasing over time, rising from
15% in 2000, to 21% in 2019, and reflects a trade sector that has been growing at a faster pace than overall
agricultural production. Assuming a diminishing impact of previous trade liberalisation that boosted global agricultural
trade, the commodity projections in the upcoming decade indicate that trade relative to production will increase only
marginally over the next decade as growth in trade will be more closely aligned with growth in output. For imports,
rising trade relative to output is being driven largely by the Asia and Pacific region, where it will rise to 20% of
production value, by countries in the Middle East and North Africa region where it will rise to 94%, and by Sub-
Saharan Africa where it will rise to 33% by 2029. From an export perspective, Latin America and the Caribbean,
North America, and Eastern Europe and Central Asia have been the key supplying regions, and exports relative to
net domestic agriculture and fish production is projected to rise to 36%, 34% and 32% respectively in 2029.
Figure 51: Value of agriculture and fish exports relative to production by region
(%)
40.0 36.0
33.5 34.2 33.7
35.0 31.3
28.2
30.0 25.827.5
25.0 21.2 21.3
19.2 18.6
20.0 13.9 15.5
13.1 13.5 13.0 12.7
15.0 9.9 9.9
7.8
10.0
5.0
-
Asia Pacific Sub-Saharan Near East and Europe and North America Latin America World
Africa North Africa Central Asia and Caribbean
2007-09 2017-19 2029

71
Specialisation among the regions is increasing
Over the coming decade, world trade in agricultural commodities is expected to continue to develop according to
comparative advantage, given the relative availability of natural resources. Widening trade balances reflect per capita
availability of agricultural land. For example, the Americas have the most land available (1 ha/capita) and the Asia
and Pacific region has the lowest availability of land on a per capita basis (0.3 ha/capita). Net exports continue to
increase from the Americas while net imports increase by the Asia and Pacific region.
Other regions range between these two extremes, with the exception of Near East and North Africa, where extreme
water resource constraints exist which limit local production response. Accordingly, established net exporters of
agricultural commodities are expected to increase their trade surpluses while regions with important population
growth or land or other natural resources constraints, are expected to see their trade deficit widening. Amidst this
continuing differentiation between net importing and net exporting regions, the number of exporters is expected to
remain relatively small, while the number of importers is expected to grow. While this paradigm of comparative
advantage given resource availability applies, relative productivity given available resources is also a critical
determinant of trade patterns and will also affect developments in the longer term. For example, reducing the yield
gap in Sub-Saharan Africa would improve the region’s self-sufficiency and reduce its trade deficit.
Latin America and the Caribbean is expected to reinforce its position as the world’s prime supplier of agricultural
commodities, with an average growth in net exports of 1.7% p.a. over the next decade. Increased production of
maize, soybeans, beef, poultry and sugar will facilitate this expansion. Net exports from North America, the second
leading supplier of agricultural commodities to world markets, are expected to expand at slower pace (1.3% p.a.)
over the outlook period, due to a more limited expansion in agricultural output. Exports of maize and soybeans, in
particular, will significantly slowdown from a rate of 5% p.a. in the last decade to about 2% p.a. Over the coming
decade, net exports from Eastern Europe and Central Asia are projected to increase by 47% from base period levels,
largely due to higher exports from the Russian Federation and Ukraine. As a result of this significant expansion in
agricultural export, the region will emerge as the third main net-exporting region in the world. Rising productivity in
combination with slow domestic demand due to low population growth will be the primary reason behind this trend.
In contrast, net imports by the largest net importing region, Asia and the Pacific, are projected to increase by a further
21% from the base period, largely due to increasing imports by China. Net imports by Sub-Saharan Africa will rise
by over 70% by 2029 compared to the base period due to higher imports of wheat, maize and soybeans. Net imports
by Near East and North Africa, the second largest importing region, are expected to rise to over 32% by 2029, further
deepening the region’s dependence on international markets. Near East and North Africa will remain the largest
importer of basic foods on a per capita basis.
72
Figure 52: Value of agriculture and fish exports relative to production by region
(bn USD)
100.00
50.00
(50.00)
(100.00)
2006
2007
2008
2009
2016
2017
2018
2019
2029
2000
2001
2002
2003
2004
2005
2010
2011
2012
2013
2014
2015
2020
2024
Asia Pacific Sub Saharan Africa Near East and North Africa
Europe and Central Asia North America Latin America and the Caribbean
3.7 Key growth drivers of global agriculture industry

The demand for agricultural commodities is influenced by a set of common elements, such as population dynamics,
urbanisation, disposable income, consumer preferences, prices, policies and various social factors. These elements
will determine the structure of agricultural commodity demand in the future as well. Population is the key determinant
of total food use. Income, relative prices, other demographic factors, consumer preferences and lifestyles,
meanwhile, determine a person’s desired food basket.
On account of an expected 11% expansion in the global population (an increase of 842 million people between 2017-
19 and 2029) as well as notable gains in per capita income in all regions, FAO-OECD estimates total consumption
of the food commodities is expected to rise by 15% by 2029, as measured on a calorie basis. Asia Pacific, the world’s
most populous region, will continue to play the most significant role in shaping global demand for food over the
outlook period as it is projected to account for 53% of the global population in 2029 (i.e. 4.5 billion people). Given the
significant regional differences in demographic developments, income distribut ion as well as culture-derived
consumer preferences, the relative impact of these factors on food demand differs by country and region.
Rising population
Globally, population growth is expected to remain the dominant driver of total agricultural commodity demand over,
in particular for commodities that have high levels of per-capita consumption in regions with fast expanding
populations. For food grains, the importance of population as a driving factor tends to remain high across regions as
per capita food demand is stagnant or even decreasing in several high-income countries. For vegetable oils, sugar,
meat and dairy products, the impact of population dynamics is lower as income and individual preferences play a
greater role. World population is expected to reach around 9 billion by the year 2050. Total agriculture production
and consumption is also expected to rise along the same lines.
73
Figure 53: Annual growth in demand for key commodity groups
(%)
5.00
4.00
3.00
3.19
2.00
1.17
1.07 1.03
0.52 1.07
0.63 0.35 0.18 0.55 0.53
1.00 0.28
1.00 0.81 0.99 1.12 0.91 1.01 0.83 1.07 0.86 1.06 0.87
0.76
-
2010-19 2020-29 2010-19 2020-29 2010-19 2020-29 2010-19 2020-29 2010-19 2020-29 2010-19 2020-29
Cereals Meat Fish Fresh dairy Sugar Vegetable oil
Due to population growth Due to per capita demand growth (food & other uses)
Increased per capita food consumption

According to FAO, food is the primary use of agricultural commodities, currently accounting for 52% of calories
produced by global agriculture. Feed is taking up about 31% of calories produced, while the remaining 17% are
used as either biofuel, seed, or raw products in industrial applications.
Globally, aggregated food consumption (measured in calories) is projected to grow by about 3% over the projections
period, reaching just over 3 000 kcal in 2029, fats and staples accounting for about 50% of the additional calories.
By far the highest growth rate is projected for fats at 9% over the coming decade. Staples remain the most significant
are projected to consume more energy from staples.
The per capita food energy consumed in high-income countries will remain at current levels. Increased domestic and
foreign investments in producing regions (e.g. Sub-Saharan Africa) are expected to develop new market
opportunities. In upper-middle income countries, total food consumption is expected to expand by about 4% by 2029.
Consumers in lower-middle income countries are projected to increase their food consumption by 7% (173 kcal) over
the coming decade, the largest gain of all four income groups. However, due to limited disposable income, fats and
staples will still account for half of the increase, while the growth in the consumption of relatively more expensive
options such as fruits, vegetables and animal products will remain limited.
74
Figure 54: Share of different food segments in food consumption
(kcal/day/person)
4000
3500
568 588
3000 524 551
407 421 303
2500 278
236 250
343 282 310
314 580 585 270 331 205
2000 627 284
188
165 167
439 456 588 245
1500 758 776
1000 1,671 1,698 1,758 1,796
1,535 1,561 1,514 1,518
500 1,099 1,091
0
2017-19 2029 2017-19 2029 2017-19 2029 2017-19 2029 2017-19 2029
World High Income Upper Middle Income Lower Middle Income Low Income
Staples Animal products Fats Sweeteners Other
Rise in per capita income

Per capita income has seen steady rise not only in developed economies but also in developing economies. As more
people come out of poverty, there would be better food security and consequently more people will have access to
nutrition. The effect is especially pronounced in the developing countries where rapid economic growth over the last
few years has resulted in strong growth in income levels. As a result of global economic development, per capita
food expenditures across all income groups are expected to increase in absolute terms with an increasing proportion
devoted to higher value items such as vegetable oils, livestock products and fish. However, as incomes rise, people’s
propensity to spend their extra income on food declines and consequently the food expenditure share in total
disposable income falls.
Figure 55: Food as a share of household expenditures, by income group

(%)
50 45 43
40
30
19 21
20 17
14
8 6
10
0
High income Upper middle income Lower middle income Low income
2017-19 2029
The continuing urbanisation and rising female participation in the workforce especially in high-income and emerging
economies is expected to contribute to a higher consumption of processed and convenience food, and an increasing
tendency to eat outside the home.
Shift in lifestyle habits and dietary consumption

Over the last few years, consumer awareness of the links between diets and health has been on a rise. This is
expected to boost the consumption of poultry and fish and reduce the cons umption of red meat and sugar. Policies
75
seeking to promote healthy dietary choices and curb the consumption of items that may cause overweight, obesity
and diet-related non-communicable diseases such as diabetes have been implemented or are being considered in
numerous countries, including Chile, France, Mexico, Norway, South Africa, and the United Kingdom. The
introduction of food product labels that provide nutrition information as well as regulations limiting the youth-targeted
advertising of ultra-processed products are additional measures that have been incorporated into the assessment of
future consumer preferences.
Share of fruits & vegetables and animal products to increase in total food consumption;
this shift is also expected to drive demand for complex fertilisers and crop protection
Over the period from 2012-2030, fruits and vegetable are expected to record highest growth in terms of share in food
consumption driven by larger area harvested and use of efficient inputs such as complex fertilisers and pesticides.
Similarly, consumption share of vegetable oil and other fruits is also expected to grow at a higher pace compared to
cereals. Growth in these crop augurs well for complex fertilizer segment which is critical to their yields. Share of
animal products is also expected to rise amid increasing affordability and adequate processing facilities.
Figure 56: Commodity wise projected dietary energy consumption

kcal/capita/day
13.0%
1400 1245 1298 14.0%
1200 12.0%
1000 9.0% 10.0%
800 715 8.0%
656
4.6%
600 4.3% 452 473 4.7% 6.0%
400 256 268 4.0%
177 200
200 2.0%
0 0.0%
Cereals and Fruit and vegetables Animal products Vegetable oil Other food
products
2012 2030 Percenatge growth
As per OECD, the expectation of a growing awareness of the impact of consumption choices on the environment is
moderating the demand growth projections for items such as palm oil, beef, and non-organic cotton. Such concerns
are, at the same time, supporting the growing demand for renewable raw products for non-food uses, such as biofuels
and industrial applications in packaging, cosmetics or the pharmaceutical industry.
nutrients and organoleptic features. Income-related differences in the composition of protein sources will persist, with
lower middle- and low-income countries expected to remain heavily dependent on proteins from crop sources, given
lower average household incomes and a lower availability of protein from animal sources due to the lack of adequate
supply chains to trade and preserve fresh meat.
Protein from animal sources, meanwhile, is expected continue to account for the bulk of protein consumption in the
high-income regions of North America, and Europe and Central Asia. Going ahead, protein from animal sources are
expected to account for a greater share of total daily per capita availability. Growth in animal protein consumption is
76
expected to be particularly pronounced in upper middle- and lower middle-income countries, where daily per capita
meat and fish availability is expected to rise. Although consumers in lower middle-income countries increase their
consumption of animal protein faster than consumers in any other income group, their per capita intake remains
significantly below consumption levels in upper middle- and high-income groups. India’s traditionally low consumption
of animal protein, especially meat, considerably influences the lower-middle income group trend.
77
4 Overview of agriculture sector in India
4.1 Introduction to Indian agriculture scenario
Agriculture and its allied sectors still remain an important sector because of its continued role in employment, income
and most importantly in national food security. As per estimates released by Ministry of Finance, the sector’s
contribution to national income has gradually declined from 18.2% in fiscal 2015 to 16.5% in fiscal 2020, reflecting
the development process and the structural transformation taking place in the economy. However, economic
transformation of a developing country like India crucially depends on the performance of its agriculture and allied
sector. This sector plays a significant role in rural livelihood, employment and national food security. It happens to be
the largest source of livelihoods in India. Proportion of Indian population depending directly or indirectly on agriculture
for employment opportunities is more than that of any other sector in India.
India accounts for less than 4% share of the global agriculture land
As per FAO estimates, India accounts for less than 4% of the total world agricultural land with total area of
approximately 180 million hectare as of 2018. The agriculture land in India has remained stagnant over the past five
decades even as production and yield improved significantly during the corresponding period.
However, India’s share is much lesser compared to other big agriculture producing countries. China has 20% share
of the total agricultural land followed by USA with a 15% share. Agriculture land use in India has remained particularly
stable in the period 2007 to 2018. This trend in land use can be attributed to farmers producing same levels of output
on same or even lesser land by using inputs such as fertilizers and pesticides.
Figure 57: Trend in Indian agriculture land (million hectares)

(mn Ha)
185 0.02% CAGR
180
175
170
165
160
1970
1980
2000
2008
2009
2013
2014
2017
2018
1990
2010
2011
2012
2015
2016
78
Figure 58: India’s share in global agriculture land (2018)
India, 4%
Rest of the
world, 96%
India has the second largest arable land area in the world; however, it lags other countries
in terms of yield for key crops
India with 156 million hectares of arable land ranks close second behind the USA (158 million hectares) in terms of
arable land area. Overall, India accounts for almost 10% of the global arable land as of 2018. Among the countries
with large arable land, India has a much lower yield across key crop categories like cereals, pulses and fruits
compared to some of the peers and also compared to global average. Thus, there remains a significant room for
improvement of yield levels in order to match up to the other large agriculture commodity producers. Increased usage
of fertilisers, crop protection, seeds and adoption of modern farming techniques are key to improving this yield.
Figure 59: Key country-wise arable land (2018)

(mn hectares)
Ukraine 33
Canada 39
Argentina 39
Brazil 56
China 119
Russia 122
India 156
USA 158
Table 7: Yield for key crop categories for countries with large arable land (2018)
(Hectograms/
USA China Ukraine Brazil India Russia Argentina Canada World
Hectare)
Cereals 81,962 61,378 48,522 48,066 32,781 26,168 46,712 39,046 40,083
79
Fruits 2,19,498 1,59,180 1,16,773 1,89,433 1,47,043 89,483 1,72,953 1,14,931 1,35,732
Oilcrops 32,919 28,199 23,739 34,997 16,057 14,651 22,943 23,304 34,096
Pulses 19,579 18,258 17,175 10,195 7,391 13,036 13,224 19,500 9,744
Roots and
Tubers 4,61,699 1,99,607 1,70,498 1,59,809 2,36,141 1,70,499 2,48,014 3,89,119 1,34,345
Sugar Crops 7,61,685 7,35,671 5,08,471 7,46,057 8,01,984 3,80,571 4,03,263 7,56,429 7,02,305
Vegetables 3,39,426 2,33,060 2,14,717 2,47,450 1,54,530 2,44,969 1,80,022 2,52,387 1,89,294
Yield for major crops in India to remain on lower side compared to other major countries
As per FAO estimates, despite the significant growth in yields projected in emerging and low-income regions over
the coming decade, large disparities in yield levels between countries and regions are expected to persist. This is
partly due to differences in agro-ecological conditions but it also reflects differences in access to agronomic inputs
including fertiliser and improved crop varieties as well as differences in access to technologies and human capital.
Inter-regional variation in yields also tend to differ widely between crop types.
Overall, the strongest yield growth in low income and emerging regions will translate into relatively small absolute
increases in yields, given their low base levels. By 2029, average crop yields in bot h India and Sub-Saharan Africa
are projected to remain well below yield levels in all high yielding countries, including countries/regions with
comparable natural conditions (e.g. South East Asia, Latin America). This indicates that many countries, including
India, will still be far from their yields potential and therefore from their potential output during the next decade.
Figure 60: Projected crop yields for selected countries and regions (2029)
Yields (tonnes/hectare)
14
12
10
8
6
4
2
0
EU
Sub-Saharan Africa
Russia
Brazil
India
Australia
World average
China
United-States
Maize Wheat Other coarse grains Rice Other oilseeds Soybean Pulses
Number of Source: Food & Agriculture Organisation (FAO), CRISIL Research
People dependent on agriculture sector continues to remain high; however, its share in
overall workforce is on a decline
India’s population has steadily increased rapidly over the years and as per 2011 census the number stands at 1.21
billion. Around 68% of the population lives in rural areas and is heavily dependent on agriculture for livelihood. Total
agricultural workers have increased in tandem with the overall population. As high as 70% of India’s rural households
still depend primarily on agriculture for their livelihood, with 82% of farmers being small and marginal. According to
80
census 2011 there are 263 million agricultural workers compared to 185 million in 1991 which corresponds to 40%
growth over 1991 levels. However, their share in total workforce has come down from 70% in 1951 to 54% in 2011
mainly due to technological advancements and sectoral shift in the economy over the last few decades.
Figure 61: Trend in agricultural workers in India

(million)
600 80%
70% 70%
70% 61% 481.9 70%
500 59% 58% 60%
400 402.2 55%
314.1 50%
300 244.6 263.1 40%
234.1
188.4 180.4 185.3 30%
200 139.5 148
131.5 125.7 20%
97.2
100
10%
0 0%
1951 1961 1971 1981 1991 2001 2011
Total Workers Total Agricultural workers Percentage of agricultural workers
Source: Census data released by Government of India (GoI), CRISIL Research
Agricultural land in India is highly fragmented

Agriculture continues to be the prime activity in India though land-use patterns have changed dramatically since
independence. Small and marginal farmers with plots smaller than 2 hectares (ha) are the dominant cultivators in
India. While 67% of the landholding was classified as marginal, 18% was classified as small and only 14% were
medium holdings while share of large holdings was as low as 0.7%. As land parcels got redistributed - either under
ceiling regulations or distribution among multiple heirs - landholdings became increasingly fragmented. As a result,
the average size of landholdings declined to 1.08 ha in 2015-16 from 2.28 ha in 1970-71, consequently, total number
of operational landholdings increased by 5% to 145.7 million in 2015-16 from 138.3 million in 2011-12. CRISIL
Research expects fragmentation to continue over the next 2-3 years as traditional distribution patterns continue,
resulting in small and marginal land parcels accounting for 87-88% of total number of landholdings; the two categories
are expected to account for 45-47% of the country's total agricultural area. These trends in landholdings will have a
twin impact: smaller farms with a higher cropping intensity will boost sales of farm inputs such as seeds, fertilisers
and pesticides while dampening the demand for heavy machinery including tractors.
Table 8: Size classes and size holdings of agriculture land in India

Group Classes (in ha.)
Below 0.5 ha.
Marginal
0.5 < 1.0 ha.
1.0 < 2.0 ha.
Small
2.0 < 3.0 ha.
Semi-medium 3.0 < 4.0 ha.
4.0 < 5.0 ha.
Medium 5.0 < 7.5 ha.
7.5 < 10.0 ha.
81
10.0 < 20.0 ha.
Large
20.0 ha. and above
Source: Ministry of Agriculture & Farmers' Welfare, CRISIL Research
Figure 62: Trend in avg. size of landholding (in ha.) Figure 63: Trend in category-wise landholding
distribution
2.50 2.28
2.00
1.84 30%
2.00 1.69 44%
1.55
1.41 1.33
1.50 1.23 1.15 23%
1.10 1.09
23%
1.00
46%
0.50 32%
-
FY1991 FY2019
Marginal+Small Semi medium Medium+Large
4.2 Trend in Agri-GDP in India

Share of Agriculture & allied sectors in GDP has declined over last few years but registered
slight increase in FY21
The share of agriculture and allied sectors in the Gross Value Added (GVA) of the country at current prices has
remained around ~17.5-18.5% from fiscal FY15 to FY20.However the share of agriculture rose to ~20% in fiscal
2021. Agriculture was few of the sectors which were least impacted due to nation-wide lockdown. The share of
agriculture and allied sectors in the total GVA of the country has been declining on account of relatively higher growth
performance of non-agricultural sectors. This is a natural outcome of development process that leads to faster growth
of non-agricultural sectors owing to structural changes taking place in the economy. Agriculture has seen an increase
in value added mainly because of the high productivity achieved compared to previous decades.
Figure 64: Trend in Gross Value Added (GVA) of agriculture and allied sectors (Rs billion)
82
(Rs.triilion) (Rs.triilion )
40.0 20.2% 25.0%
18.4% 25.0 17.8% 17.8% 14.8%16.4% 20.0%
35.0 18.2%18.6%18.2% 16.5% 15.3%
17.7%18.0%18.3%17.6% 20.0% 15.4%15.2% 14.8%
30.0 20.0
15.0%
25.0 15.0% 15.0
20.0 10.0%
15.0 10.0% 10.0
10.0 5.0%
5.0% 5.0
16.8
19.3
20.9
22.3
25.2
28.3
30.2
33.9
36.2
15.2
16.1
16.1
18.9
19.7
20.4
16.2
17.3
18.4
5.0
0.0 0.0% 0.0 0.0%
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21*
Agri GVA at current Prices Rs Tn Share of agri GVA in economy Agri GVA at constant Prices Share of agri GVA in economy
*Note: First Advance Estimate FY21

Figure 65: Trend in segment-wise breakup of Gross Value Added (GVA) of agriculture & allied activities

The growth of GVA of agriculture and allied sectors has witnessed a fluctuating trend over the last nine years from
fiscal 2012 to fiscal 2020. On the other hand, at current prices, the share of GVA of agriculture and allied sectors in
the GVA of total economy has been shrinking over the corresponding period on account of relatively higher growth
performance of non-agricultural sectors. Further breaking down GVA of agriculture and allied sectors into its
components viz. crops, livestock, forestry & logging and fishing, we observe that the share of crops has seen a
declining trend while that of livestock and fishing & aquaculture has witnessed a slight increase.
83
Figure 66: Growth trend in GVA of agri vs. economy Figure 67: Share of agri GVA in GVA of total economy
10.0% 8.0% 22.0%
6.1% 8.0% 6.6%
7.2% 6.8% 20.0%
5.6% 5.9% 5.5% 4.3%
5.0% 5.4% 18.2% 18.2% 17.6% 20.0%
4.1% 17.7% 17.2%
3.2% 18.0%
3.6% 18.6%
1.5% 17.9%
0.0% 0.6%
-0.2% 16.0% 18.4%
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
14.0%
-5.0%
-6.2% 12.0%
-10.0% 10.0%
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21*
Growth of GVA of total economy (constant terms)
Growth of GVA of agri & allied sectors (constant terms)

4.3 Impact of monsoon on agri-input consumption

Agriculture in India is still heavily dependent on natural rainfall. It also faces challenge of power shortage. Also,
compared to developed economies, there is low usage of high quality s eeds and crop protection products. Farm
mechanization levels are low. Hence, these provide significant opportunities for development in the market.
Monsoon performance remains critical factor for agriculture sector growth; fiscal 2020 and
fiscal 2021 have seen good rainfall, fiscal 2022 to see normal monsoon
In the year 2020, rains not only arrived on time, but also covered the entire country at least 12 days ahead of the
normal date. No major Kharif-growing state faced rain deficiency, though there were a few that suffered excess rains.
This benefited sowing activity and has helped shore up water reserves.
In the year 2021 monsoon is expected to be normal with IMD forecasting 101% of LPA. As per IMD southwest
monsoon has set in over Kerala on 3rd June 2021 and rainfall is expected to be normal in the year 2021 as per IMD
forecast. As per regional forecasts by IMD, Northwest region and southern region in India are expected to see normal
monsoon with ~100% of LPA. Central Indian is expected to witness above normal monsoon with ~106% of LPA. East
India is expected to see below normal monsoon with ~95% of LPA
Last year had also seen abundant rains, making 2020 the second consecutive year with above-normal monsoon
rainfall. Although a mild deficiency in rains was recorded in some parts (mainly in the northwestern region, such as
West Uttar Pradesh), these regions have a good irrigation cover, which helped cushion the loss in farm output.
In the Indian context a good monsoon season also augurs well for the agri input consumption since abundant rainfalls
result in higher demand for fertilisers, seeds, pesticides, farm equipment, etc.
84
Figure 68 :Trend in Rainfall in percentage of Long Period Average (LPA)
120% 110%
106% 109%
102% 101% 101%
97% 95%
100% 92% 91%
88% 86%
80%
60%
40%
20%
0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021P
Source: Indian metrological department (IMD), Department of agriculture, cooperation & farmers welfare
Figure 69:State-wise Rainfall Distribution (percentage departure from normal rainfall)
110
85
90
70 63
50 43
35
30
9 4
10
-10 -2
-5
-12
-30 -20
-34 -47
-50 -41 -37 -39
AP
MP
Telangana
Maharashtra
Punjab
Karnataka
Hayana
Bihar
WB
Rajasthan
UP
Odisha
Kerala
Gujarat
TN
Note:1)Rainfall includes cumulative rainfall from1st June 2021 to 11th July 2021
Source: Indian metrological department (IMD)
4.4 State-wise arable land distribution and production

As of 2017, the Ministry of Agriculture and Farmers’ Welfare (MoAFW) estimates arable land in India to be ~156
million hectare. Rajasthan tops the list as the state with highest amount of arable land with 25.5 million hectare.
Rajasthan is followed by Maharashtra and Uttar Pradesh with arable land of 21 million hectare and 18.8 million
hectare, respectively.
85
Figure 70: Key state-wise arable land (fiscal 2016)
Note: Arable land in million hectare, percentage share to India’s total arable land (2016)
Source: MoAFW, CRISIL Research
86
Crop production in India has seen ~2% growth over the last decade; yield has also
improved during this period
India produces variety of crops across two crop seasons viz. Kharif and Rabi. Many of the crops are cultivated and
harvested through the year. Major crops include rice, wheat, nutri cereals, pulses, food grains, oilseeds, sugarcane,
cotton and jute. Volume wise food grains and sugarcane contribute major share to India’s crop production. While
foodgrain production has increased at the 3% CAGR from fiscal 2010 to fiscal 2019, Sugarcane production has
increased at the CAGR of 3.5% during the corresponding period. In fiscal 2020, foodgrain production witnessed a
4% on-year growth while Sugarcane production declined by 12.3%. During July and August 2019, key cane growing
areas of Maharashtra and Karnataka experienced excessive rainfall leading to submergence of the standing crop for
days. This also led to crop damage pulling cane production down for 2020.
Table 9: Trend in production of major crops (million tonnes)

Crop type FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20* FY21^
Rice 96 105 105 107 105 104 110 113 116 118 102
Wheat 87 95 94 96 87 92 99 100 104 108
Nutri
43 42 40 43 43 39 44 47 43 47 33
cereals
Pulses 18 17 18 19 17 16 23 25 22 23 9
Food grains 244 259 257 265 252 252 275 285 285 297 145
Oilseeds 325 298 309 327 275 253 313 315 315 334 257
Sugarcane 3,424 3,610 3,412 3,521 3,623 3,484 3,061 3,799 4,054 3,557 3,998
Cotton 330 352 342 359 348 300 326 328 280 355 371
Jute 106 114 109 117 111 105 110 100 98 99 97

th
Note: FY20 numbers are 4 advance estimates and FY21 numbers are first advance estimates
Source: Ministry of Agriculture
Food grains are one of the largest produced crops in India. They are widely used for domestic consumption as well
for export. Food grains mainly constitute rice, wheat, nutri cereals and pulses. As of fiscal 2020, total food grain
production stood at 297 million tonnes – an increase of 5% over fiscal 2019. Yield for food grains have also increased
over the last five decades, increasing from around 800 kg/ hectare in fiscal 1970 to around 2,300 kg/ hectare in fiscal
2019. Improvement in yield can be largely attributed to increased usage of various inputs such as fertilisers,
pesticides, better seed quality as well as adoption of better farming techniques . However, production and yield are
also dependent on monsoon to a large extent; the levels of production fell drastically in 2014-15 owing to very weak
monsoon in the respective years.
87
Figure 71: Trend in production and yield for food grains in India
(mn tonnes) (kg/ ha.)
Production: 2.0% CAGR
2,299
300 2,129 2,235 2,500
2,078 2,129 2,120 2,028
1,930 2,041
250 2,000
200
1,500
150
1,000
100
50 500
245 259 257 265 252 252 275 285 285
- -
2011-12
2013-14
2014-15
2016-17
2010-11
2012-13
2015-16
2017-18
2018-19
Production Yield
At state level, Uttar Pradesh with 54 million tonnes of food grain production (~20% of the all India production) accounts
for the highest share of production. Uttar Pradesh is followed by Madhya Pradesh, Punjab and Rajasthan, constituting
11.5%, 11.0% and 6.7% of the all India Food grain production, respectively.
Figure 72: Key state-wise food grain production (fiscal 2019)
Note: Food grain production in million tonnes, Percentage share refers to India’s total food grain production
88
Rice is the largest crop among food grains produced in India; India tops global exports
Asia accounts for 90% of global rice production while India is the second largest producer. Rice is one of the most
important food crops in India. India is the largest exporter of rice in the world. Rice is also consumed domestically on
a large scale. Among rice growing countries, India has the largest area under cultivation at 26% of global acreage.
However, in terms of output volume, it comes with only ~22% share. The reason for this is lower yields. Rice
production in India has grown steadily at 3% CAGR over the past 10 years and reached its highest level in RY 2018-
19 (March 2018- April 2019).However, in RY 2019-20 (March 2019- April 2020) production is expected to decline
following erratic weather conditions. In RY 2020-21 (March 2020- April 2021) the production is expected to increase
if the weather conditions did not play truant.
Although paddy is grown across the country, West Bengal, Uttar Pradesh, Andhra Pradesh, Tamil Nadu, Bihar and
Odisha together account for 53% of total acreage. As of 2018-19, 116 million tonnes of rice was produced in India
with the yield of 2659 kg/hectare. West Bengal, Uttar Pradesh and Punjab are top-3 rice producing states in India. In
fiscal 2019, West Bengal produced 16.05 million tonnes of rice contributing almost 14.0% share of the all India
production. Uttar Pradesh and Punjab contributed 13.3% and 11.0% respectively to all India Production of rice.
Figure 73: Trend in production and yield for rice in India

140 3,000
120 2,576 2,659
2,461 2,416 2,400 2,494 2,500
2,393 2,391
100 2,125 2,239
2,000
80
1,500
60
1,000
40
20 500
89 96 105 105 107 105 104 110 113 116
- -
2010-11
2011-12
2013-14
2014-15
2016-17
2009-10
2012-13
2015-16
2017-18
2018-19
Production Yield
Figure 74: Top-3 states in terms of production (fiscal 2019)

West Bengal Uttar Pradesh Punjab
16.1 million tonnes (14.0% share) 15.5 million tonnes (13.3% share) 12.8 million tonnes (11.0% share)
Three states viz. UP, Punjab and MP account for almost 2/3 rd share of India’s wheat
production
Wheat is also one of the highest produced food grains in India. Along with domestic consumption wheat is also
exported in large quantities by India. In fiscal 2019, 102 million tonnes of wheat was produced in India with the yield
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of ~3,500 kg/hectare. Uttar Pradesh, Punjab and Madhya Pradesh were the top-3 states in terms of production. Uttar
Pradesh produced 32.7 million tonnes of wheat contributing to almost 32.0% of the all India production. Punjab and
Madhya Pradesh contributed 18.2% and 15.5% to all India Production of wheat, respectively.
Figure 75: Trend in production and yield for wheat in India

Production: 2.6% CAGR
120 4,000
3,200 3,368 3,507
100 2,988 3,177 3,117 3,034
2,839 3,146 2,750 3,000
80
60 2,000
40
1,000
20
81 87 95 94 96 87 92 99 100 102
- -
2009-10
2012-13
2014-15
2016-17
2018-19
2010-11
2011-12
2013-14
2015-16
2017-18
Production Yield

Uttar Pradesh Punjab Madhya Pradesh
Sugarcane is the largest produced crop in India; three states account for almost 3/4 th share
of production
The sugarcane crop grows for 8-14 months, depending on the climate and the seeds used. Factors that determine
the yield and quality of sugarcane are temperature, rainfall and soil. Sugarcane is usually grown in a frost -free, warm
and humid climate (high temperatures of 20 to 40 degrees centigrade for at least 8 months). In India, sugarcane is
usually sown during October, February, March and July every year. Once planted, a farmer can theoretically produce
sugarcane for a period of 3-6 years. The first year crop is known as plant crop and subsequent growth after harvesting
from the stem is known as ratoon. Although the ratoon crop has a lower sugarcane yield as compared to the plant
cane (first crop), the savings on planting labour make the ratoon crop profitable. Sugarcane is one of largest
producing crops in India which is also one of the highest consumer of sugar in the world. Yield for sugarcane is much
higher than yield for some major crops like rice and wheat.
India has ideal conditions for growing sugarcane at a low cost, such as tropical climate, easy availability and low cost
of labour, and low cost of irrigation facilities (through subsidised water and power). In India, the major sugar cane
producing areas are Uttar Pradesh, Maharashtra, Andhra Pradesh, Gujarat, Karnataka, and Tamil Nadu. These
states together account for 85-90% of the sugarcane produced in India. In India, around 90% of the sugarcane
cultivation happens in irrigated land.
90
In fiscal 2019, 400 million tonnes of sugarcane was produced in India with the yield of 78,250 kg/hectare. Uttar
Pradesh, Maharashtra and Karnataka are the top-3 producing states in India. Uttar Pradesh produced 179.7 million
tonnes of sugarcane contributing to almost 44.0% of the all India production. Maharashtra and Karnataka contributed
23.1% and 10.0% to all India production, respectively.
Figure 77: Trend in production and yield for sugarcane in India

450 1,00,000
80,198 78,248
400
70,522 71,511 70,720
350 70,091 71,668 68,254 80,000
70,020 69,001
300
60,000
250
200
40,000
150
100 20,000
50
292 342 361 341 352 362 348 306 380 400
- -
2009-10
2010-11
2011-12
2016-17
2017-18
2018-19
2012-13
2013-14
2014-15
2015-16
Production Yield

Uttar Pradesh Maharashtra Karnataka
Cultivation area for horticulture witnessed significant increase during the last decade
India has witnessed increase in horticulture production over the last few years. Significant progress has been made
in area expansion resulting in higher production levels. Over the last decade, area under cultivation for horticulture
has increased by ~18% from ~21.8 million hectares in fiscal 2011 to ~25.6 million hectares in fiscal 2019. During the
corresponding period, production has seen increased at 3.2% CAGR on account of improved yield and increase in
area under cultivation. In fiscal 2019, production of horticulture crops was estimated at 320 million tonnes from an
area of 25.6 million hectares.
91
Figure 79: Trend in production and area under cultivation for horticulture in India
("000 ha.) (mn tonnes)
30,000 Production: 3.2% CAGR 320 350
269 312 311 300

25,000 257 301
277 281 286
241
250
20,000
200
15,000
150
10,000
100
5,000 50
21,825 23,243 23,694 24,198 23,410 24,472 24,851 25,431 25,433 25,661
- -
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20E
Area under cultivation Production
Vegetables have a higher yield compared to fruits

Fruits and vegetables constitute major share of horticulture production. Production of vegetables has increased from
146.5 million tonnes in fiscal 2011 to 191.7 million tonnes in fiscal 2020 while production of fruits has increased from
74.8 million tonnes to 99 million tonnes during the corresponding period. Vegetables had the highest yield among
the major crops with yield of 18.5 million tonnes / hectare as of fiscal 2020 since they are short duration crops that
are grown in every small plots compared to other crops. Overall yield for horticulture in fiscal 2020 was 12.2 million
tonnes / hectare. Fruits showcased a moderate yield of 14.9 million tonnes /hectare during the year.
Figure 80: Trend in horticulture production in India
(mn tonnes)
350 312 311 320
301
277 281 286
300 257 269
241
250
178 184 183 192
200 162 163 169 169
147 156
150
89 87 90 93 97 98 99
100 75 76 81
50
-
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20E
Fruits Vegetables Total
92
Figure 81: Trend in yield for horticulture crops
(mn tonnes/ ha)
20.0 18.0 18.2
17.3 17.4 17.6 17.3 17.8 17.4
16.7 18.5
14.3 14.9
15.0 14.2 14.6 15.0
11.4 14.9
11.7 11.6 12.3
12.5
10.0 11.4 11.5 12.0 11.7 12.1 12.3 12.2
11.0 11.1
5.0
-
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20E
Fruits Vegetables Total horticulture
In fiscal 2019, the total horticulture production was highest in case of Uttar Pradesh which produced 38.5 million
tonnes followed by West Bengal with 34.2 million tonnes. The total production of fruits is highest in case of Andhra
Pradesh with production of 18 million tonnes followed by Uttar Pradesh which produced 10.8 million tonnes.
Figure 82: Key state-wise breakup of horticulture production
Note: Production in million tonnes, percentage share to India’s total Production (fiscal 2020E)
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WB, UP and MP together account for almost 40% of the vegetable produced in India
In fiscal 2020, 192 million tonnes of vegetables were produced in India with the yield of 18.5 million tonnes/ hectare.
West Bengal, Uttar Pradesh and Madhya Pradesh are the top-3 producing states in India. West Bengal produced
29.3 million tonnes of vegetables contributing to almost 15.30% of the all India production. Uttar Pradesh and Madhya
Pradesh contributed 14.2% and 10.0% to all India production, respectively.
Figure 83: Top-3 states in terms of vegetable production (fiscal 2019)

West Bengal Uttar Pradesh Madhya Pradesh
29.3 million tonnes (15.30% share) 27.2 million tonnes (14.2% share) 19..2million tonnes (10.0% share)
AP, UP and Maharashtra together account for almost 40% of the fruits produced in India
In fiscal 2020, 99 million tonnes of vegetables were produced in India with the yield of 14.9 million tonnes/ hectare.
Andhra Pradesh, Uttar Pradesh and Maharashtra are the top-3 producing states in India. Andhra Pradesh produced
18.0 million tonnes of fruits contributing to almost 18.7% of the all India production. Uttar Pradesh and Maharashtra
contributed 10.9% and 10.0% to all India production, respectively.
Figure 84: Top-3 states in terms of fruits production (fiscal 2019)

Andhra Pradesh Uttar Pradesh Maharashtra
18 million tonnes (18.7% share) 10.8 million tonnes (10.9% share) 9.9 million tonnes (10.0% share)
Summary of state-wise yield for some of the key crops in India(Fiscal 2019)
Food grains Rice Wheat
Yield % to India Yield % to India Yield % to India

State Nam e
(Kg/Hectare) production (Kg/Hectare) production (Kg/Hectare) production
Andhra Pradesh 2729 3.86 3733 7.08 NA NA

Bihar 2423 5.51 1902 5.19 2922 6.02
Chhattisgarh 1614 NA 1810 NA 1373 NA
Gujarat 2104 NA 2248 NA 3010 2.35
Haryana 3979 6.36 3121 3.88 4925 12.3
Jharkhand 1629 NA 1889 NA 1831 NA
94
Karnataka 1433 3.81 3011 NA 1300 NA
Kerala 2885 NA 2915 NA NA NA
Madhya Pradesh 1999 11.51 2270 3.86 2802 15.14
Maharashtra 1136 3.46 2204 NA 1666 0.93
Odisha 1716 NA 1972 6.28 1774 NA
Punjab 4656 11.06 4132 11.01 5183 17.85
Rajasthan 1451 7.61 2291 NA 3501 10.27
Tam il Nadu 3007 3.65 3748 5.54 NA NA
Telangana 2997 3.24 3436 5.76 1596 NA
Uttarakhand 2214 NA 2354 NA 2880 0.92
Uttar Pradesh 2803 19.17 2704 13.34 3432 32.04
West Bengal 2856 6.42 2906 13.79 2859 NA
All India 2299 100 2659 100 3507 100
Note:NA-Not Available, Highlighted cells represent states with higher than India average yield for the respective crops.
A number of key states are facing challenge in terms of soil fertility

As per estimates by the Ministry of Chemicals and Fertilisers (MoCF) a large number of states face deficiency in
terms of key nutrients especially Nitrogen and Phosphorus. These states are expected to see strong consumption of
fertiliser demand in order to help improve yield levels across crop categories.
Table 10: Nutrient-wise deficiency for key States/UTs (FY2019) (Based on Soil Health Card Portal data
provided by NIC)
Nutrients Major States/UTs found deficient
Andhra Pradesh, Chhattisgarh, Gujarat, Madhya Pradesh, Maharashtra, Tamil Nadu,
Nitrogen Telangana, Uttar Pradesh, Puducherry, Andaman & Nicobar Island, Dadra & Nagar
Haveli
Arunachal Pradesh, Assam, Haryana, Meghalaya, Mizoram, Daman & Diu, Delhi,
Phosphorous
Puducherry, Nagaland, Uttar Pradesh, Dadra & Nagar Haveli, Goa, Odisha
Potassium Arunachal Pradesh, Assam, Andaman & Nicobar Island, Meghalaya, Tripura
Iron Karnataka, Maharashtra, Manipur, Rajasthan
Zinc Arunachal Pradesh, Gujarat, Karnataka, Maharashtra
Copper Nagaland
Sulphur Andaman & Nicobar Island, Maharashtra, West Bengal
Boron Assam, Gujarat, Karnataka, Maharashtra, Tamil Nadu, West Bengal, Puducherry
Source: Ministry of Chemicals and Fertilisers (MoCF), CRISIL Research
4.5 Review of India’s agriculture trade scenario

India has continued to maintain its status as a net exporter of agri commodities
India occupies a significant position in global trade of agricultural products. However, its total agricultural export
basket accounts for only ~2% of the world agricultural trade. The major export destinations are USA, Saudi Arabia,
Iran, Nepal and Bangladesh. Since economic reforms were introduced in 1991, India has remained consistently a
95
net exporter of agri-products, touching Rs 2.5 trillion exports and imports at Rs 1.47 trillion in 2019-20. Over the
decade between fiscals 2009 and 2020, both imports (~16% CAGR) and exports (10.9% CAGR) have witnessed a
strong growth. The gap between imports and exports started to widen from fiscal 2011 onwards till fiscal 2014, but
started narrowing again until fiscal 2017. In the last two years i.e. fiscal 2018 and fiscal 2019, the gap has widened
again as exports growth overtook import growth.
Figure 85: Trend in agricultural commodity import-export scenario

(Rs billion)
3,000
2,746
2,500 2,628 2,530
2,516
2,397
2,272 2,267
2,154
2,000
1,828
1,647
1,500 1,521 1,474
1,403 1,370
1,130 1,213
1,000 957
811 844 857
702
500 544 511
287
-
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
Imports Exports
Rice (basmati and Non-Basmati), Spices and Cotton are some of the key commodities exported from India. However,
India’s export basket is fragmented across a range of commodities and not dependent to any particular commodity/
group.
96
Figure 86: Key commodity-wise breakup of agricultural exports scenario (fiscal 2020)
Rice -Basmati,
12%
Spices, 10%
Total agri exports Rice (Other

Rs.2529 billion than Basmati),
6%
Cotton Raw Including
Others , 61% Waste, 3%
Oil Meals, 2%
Sugar, 6%
4.6 Review and outlook on factors impacting farmer’s income

Field crop profitability
Kharif crop profitability to rise 5-6% on-year

As more than 80% of the country’s gross sown area is under field crops, it is important to understand what boosts
and constrains their profitability. Crop profitability is not only subjected to vagaries of nature but also the demand-
supply dynamics in the domestic market and both have a direct impact on prices of the produce.
CRISIL research expects Kharif crop profitability to register a 5-6% growth on-year in marketing year 2021. The
growth in per hectare Kharif profitability is expected to be primarily driven by an increase in mandi prices of oilseeds,
pulses and anticipated rise in govt. procurement at MSP.
Overall Kharif acreage is expected to increase by 0-1% and likely to reach highest levels in last five years, following
good commencement of monsoon rains. For MY 2021 productivity is expected to increase by 1-2% following increase
in hybridization, higher seed replacement rate and expected recovery in cotton, tur and urad productivity, as in MY20
productivity of these crops declined significantly following heavy rains during harvesting. (Normally harvesting of
these crops commences in September and in MY20 country received 13% above normal rains in that month). Overall
Kharif output is expected to increase by 1-2% on-year in MY 2021. For MY 2021, Kharif profitability is expected to
be ~Rs. 8,800 per hectare at C2 cost (cost inclusive of land and depreciation).
Majority of crops to see higher MSP in marketing year 2021

In marketing year 2021, CRISIL research expects profitability per hectare for paddy to decline 4-5% on year. Despite
higher MSP, ~45% of paddy procurement, and expected rise in mandi price by ~1% per hectare profit for paddy is
expected to decline because of increase in C2 cost by ~ 4% (driven by rise in labor charges, pesticide and fuel prices)
in MY21. Despite expected rise in mandi prices following better demand from poultry industry, Maize continues to
remain unprofitable for second consecutive year in MY’21. Profit per hectare for Jowar and Bajra is expected to
decline following anticipated sharp decline in mandi prices in MY21. Groundnut and soybean profit is expected to
increase following rise in prices. Domestic edible oilseed prices are expected to rise following increase in global
edible oil complex. Per hectare profitability for cotton is expected to increase by 14-15% on year in MY21, following
expected rise in mandi prices. In MY21, per ha profit for jute is expected to increase by 39-40% following demand
97
driven rise in prices while sugarcane profitability is expected to decline following expected decline in productivity due
to major share of low productive ratoon cane in Maharashtra and Karnataka.
At a regional level for MY 2021, increase in paddy MSP, continued government procurement and expected growth
in productivity will lead to growth in per hectare profitability for the northern region. Profitability is expected to increase
in Punjab, Uttar Pradesh and Uttarakhand, driven by higher procurement of paddy and sugarcane profits. In contrast,
per hectare profitability in Rajasthan and Haryana is expected to decline following decline in bajra profits due to
expected decline in mandi prices and these states have 70% and 20% area under this crop in Kharif. Expected
increase in cotton, soybean and tur prices, coupled with procurement support for paddy to increase per ha profit for
West. Western states to show healthy growth in profitability by 11-12% following expected rise in Cotton, oilseed and
pulse prices. Southern states are projected to witness 6-7% higher profit per hectare in MY21. Expected rise in
groundnut, tur and cotton prices coupled with expected rise in procurement at MSP in MY21 to support profit per ha
in southern region.
Figure 87: Trend in per hectare profitability from field crops
10,000 40% 16,000 60%
56%
8,000 28% 40%
12,000 32%
20%
6,000 15% 5-6% 20%
8,000 -2-0%
4,000 7% 4%
4% 0%
0% -3%
2,000 4,000
-20% -20%
- -17% -20% - -40%
Kharif profit per hectare Rabi profit per hectare

% growth in per profit per hectare % growth in per profit per hectare
Note: E- Estimated; P- Projected

MY: MY denotes marketing year: January to December Eg. MY 2021 includes Rabi sow n in November 2020 and harvested in March-April
2021 and Kharif sow n in June 2021 and harvested in October 2021
Profitability analysis has been done at C2 cost which involves land cost, depreciation cost and opportunity costs
Source: CRISIL Research
Horticulture crop profitability

Kharif horticulture profitability to increase marginally on year in MY2021
In Kharif MY 2021, crop profitability from horticulture crops is expected to improve marginally on-year for key crops
on account of expected increase in banana, brinjal and chilli prices. Area under horticulture crops is expected to
increase marginally on-year in the upcoming Kharif season and productivity is expected to inch upwards by ~1% on
year. Excess rains in key pockets of horticulture production like Andhra Pradesh, Karnataka, Maharashtra, and
Madhya Pradesh resulted in decline in yields by ~1% in kharif MY20. Profits from chilli, brinjal, okra and banana is
expected to be offset by lower profits in onion and apple. As horticulture accounts for less than 10% share in gross
sown area, weighted average profitability to increase 3-5% on-year. While crop profitability from horticulture crops is
expected to improve marginally on-year attributable to decline in onion and apple profits, per hectare profitability from
field crops is expected to increase by 5-6% on-year in Kharif MY 2021. .
98
MNREGA allocation
Expenditure on MNREGA saw a drastic increase in fiscal 2021 to tackle the rural
unemployment resulting from lockdown and reverse migration
Figure 88: Trend in allocation under MNREGA (Rs billion)
(Rs.billion)
1200
1015
1000
800 710 730

618
600
400
200
0
FY19 FY20 FY21 FY22
Note: FY21 number includes additional allocations under Atmanirbhar Bharat package s
MNREGA plays an important role in employment generation in rural areas. Significant portion of work done under
MNREGA also comes under agriculture and allied sector. MNREGA allocation for agriculture and allied activities has
risen over the years. In fiscal 2014 percentage of expenditure allotted to agriculture and allied activities was around
49%, this has increased to almost 71% in fiscal 2020-21. This rise can be attributed to shift due to covid-19, as more
people have migrated back to the rural areas during Covid-19. The rise in expenditure allocation is expected to aid
growth in agriculture sector.
Dairy profitability
Procurement prices to be up by 5% on lower milk availability

Stringent lockdown in 6 of the top 10 milk producing states is expected to affect artificial insemination services in
FY22 leading to slower rise in milk production in fiscal 2022. However, monsoon of 2022 remains a key monitorable.
Assuming a normal monsoon and abundant fodder availability, milk production is not expected to decline. Lower milk
production, especially in the northern and central regions is expected to result in increased milk procurement prices
in H1 FY22. Assuming a normal monsoon, production to rise marginally in H2. However, a faster pick up in demand
in H2 FY22, would keep procurement prices high
Figure 89: Trend in milk procurement prices
99
(Rs/ litre)
35
30.3
30 28.4
26.5
25
25.4 26 30-31
23.8 24.6
20 21.9
20.3
18.9
15
10
0
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22P
Note: P- Projected
4.7 Overview of agriculture reforms announced in fiscal 2021 to support

farmers
Agriculture credit: Increased budgetary spends, interest subvention schemes by govt to
boost growth
Government policies play a key role in agriculture lending. A look at these policies reiterates the importance of
government’s focus on the sector. However, while policies floated by the government have improved farmer’s access
to agri-lending, higher non-performing assets (NPAs) and banks' drive to clean their balance sheets have restricted
overall lending growth. Growth in agri-credit has been aided significantly by government policies over the past few
years. However, significant increase in NPAs is estimated to have slowed down agri-credit in fiscal 2020 and
expected to further slowdown in fiscal 2021.
Priority sector lending norms, deeper penetration of financial institutions, focus of micro-finance institutions (MFIs)
on rural segment and growing number of co-operatives have given a boost to agriculture credit growth in India over
the past few years. Growth of credit in ancillary activities such as food processing, commodity trading, warehouse
receipts, tractor financing, and purchase of agri-inputs such as fertilisers and pesticides have also supported some
growth in agricultural credit. MFIs' renewed focus on the rural segment provided support with lending in agricultural
and allied activities accounting for more than 50% of the portfolio.
Additionally, in the Union Budget 2020-21, allocation for the agriculture sector has been raised to ~Rs 1,344 billion
from ~Rs 1,304 billion (revised) in fiscal 2020 (up 3%). Key highlights of the budget are as follows:
 For the flagship Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme, the allocation for fiscal 2021 is
Rs 750 billion similar to fiscal 2020. Under the scheme, 14.5 crore farmers would be provided with an assured
yearly income of Rs 6,000. However, the support received is minimal compared with the cost of cultivation
and as such, this will have minimal impact on the agriculture credit.
 Expenditure for the Market Intervention Scheme and Price Support Scheme in fiscal 2020 was ~Rs. 20 bn,
as per revised estimates. The allocation for fiscal 2021 is also ~Rs 200 billion
100
Table 11: Agriculture credit scenario
Note: Penetration of institutional credit implies penetration of credit in a particular category of farmers
PSBs - public sector banks, PVBs - private banks, RRBs - regional rural banks
Currently, private sector banks are lending an estimated ~6% of ANBC or credit equivalent amount of off-balance
sheet exposure to small and marginal farmers, thereby increasing pressure on them to lend more towards small and
marginal farmers. Banks can also purchase or sell PSL certificates (PSLCs) in the event of a shortfall or surplus in
achieving the PSL targets. It is a short-term accounting instrument with a fiscal-end expiry. PSLCs were introduced
in April 2016 to enable over-achievers sell excess obligations to underachievers. During fiscal 2019, trading volume
of PSLCs increased by 78% to ~Rs 3,274 billion from ~Rs 1,842 billion in the previous year. The move is expected
to promote surplus lending done by some public sector banks.
Agricultural loans to grow at a healthy ~8.5-9% in fiscal 2022
Notwithstanding the impact of the pandemic, agriculture and allied sectors (on the back of normal monsoon)
supported the robust revival of credit to agriculture. Agri-credit grew at an estimated ~11% in fiscal 2021, and is
expected to grow 8.5-9% in fiscal 2022 on expectations of normal monsoon, according to CRISIL Research. Priority
sector lending (PSL) targets, higher food-grain and horticulture production support agri-credit growth of 8.5-9% on-
year in fiscal 2022. Overall, NPAs have been estimated to decline in fiscal 2021, due to moratorium on loan
repayments for six months till August 30, 2020. However, post-moratorium, the repayments started and most of the
recoveries have been done. In fiscal 2022, NPA level would remain unchanged, owing to higher profitability on year.
However, expected profitability growth of ~4% on-year in MY21 would keep NPA levels under check.
Growth of credit in food processing (13% share in agri credit),warehouse receipts (3% share in agri-credit) expected
to support some growth in agriculture credit in FY22.Tractor financing (2% share in agri -credit) due to subdued
demand will register a slow growth of ~1% on a high base of FY22.
Bulk of budget for farmers allocated to the PM-Kisan scheme

For the flagship Pradhan Mantri Kisan Samman Nidhi (PM-Kisan) scheme, the revised estimates for FY21 were
allocation is Rs 650 billion. For FY 22 also the budgeted amount is Rs 650 billon. So far, Rs190 billion has been
disbursed in one installment to 9.5 crore farmers. Under PMFBY, out of 576 farmer application, only 220 benefitted
(38%) in FY19. Under Pradhan Mantri Krishi Sinchayee Yojana (PMKSY), 4592137 (3%) farmers have benefitted
since 2015-16 till date.
Irrigation: Despite high investments in the sector, acute drought conditions prevail in parts
of the country
The central government introduced three legislations in order to bring critical reforms to the agriculture sector in India.
Irrigation penetration in India is low, but efforts are on to improve it. As per CRISIL projections, 52% of the net sown
area is expected to irrigated as of fiscal 2020. With 48% of the net sown area still rain-fed, Indian farmers are forced
to keep an eye on the sky for a good crop. The government has been making significant investments in developing
irrigation infrastructure; while it spent ~Rs 7.0 trillion during the past 10 years, large parts of southern and western
101
India are reeling under drought conditions. It has been observed that the southern and western states are major
contributors to irrigation investment; however, results have not been as fruitful as expected. With only 52% of land
irrigated, the country has huge potential to develop irrigation. There is a need for the government to focus on
sophisticated technology like pressurised irrigation, pipelines, drip and sprinkler irrigation, which will improve irrigation
penetration.
Figure 90: Trend in irrigation penetration level
(%)
60%
51% 52% 52%
49% 49% 50% 50%
47% 47% 48%
50% 45%
39%
40% 34%
28%
30%
22%
18% 19%
20%
10%
0%
Note: E-Estimated
Irrigation penetration is not uniform across the country. States in the Ganges belt enjoy high irrigation penetration.
Punjab, Uttar Pradesh and Haryana have taken the lead, with more than 80% of the net sown area under irrigation.
They collectively produce 36% of total agricultural produce. In Jharkhand and Maharashtra, irrigation penetration is
around 20% despite high irrigation investments.
Price support: Strong growth in MSP across key crops

The prices of agricultural commodities are inherently unstable, primarily due to the variation in their supply, lack of
market integration and information asymmetry - a very good harvest in any year results in a sharp fall in the price of
that commodity during that year which in turn will have an adverse impact on the future supply as farmers withdraw
from sowing that crop in the next / following years. This then causes paucity of supply next year and hence, major
price increase for consumers. To counter this, MSP for major agricultural products is fixed by the Government, each
year.
102
Figure 91: Trend in Minimum Support Price (MSP) for key crops
(Rs per quintal)
CAGR: Cotton:7.8%, Rice:6.2%, Wheat:5.8, Maize:7.1%
7000
6000
5000
4000
3000
2000
1000
0
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
Cotton Rice Wheat* Maize
Note: Wheat MSP is not yeat released for FY21, so FY 20 has been considered as proxy
Source: MoAFW, CRISIL Research Source: MoAFW, CRISIL Research
MSP is a tool which gives guarantee to the farmers, prior to the sowing season, that a fair amount of price is fixed to
their upcoming crop to encourage higher investment and production of agricultural commodities. The MSP is in the
nature of an assured market at a minimum guaranteed price offered by the Government. MSP for key crops has seen
steady growth in the last decade indicating strong government support to protect farm incomes.
Figure 92: Comparison of mandi prices and MSP for key crops
(Rs per quintal)
8,000 80%
7,000 60%
6,000 40%
5,000 20%
4,000
3,000 0%
2,000 -20%
1,000 -40%
- -60%
Mandi prices May 2021 MSP 2020-21 % change in mandiprices October 2020 over MSP
Agri Insurance: Government schemes targeted to increase coverage which is lower

compared to other countries
Currently, there are two key agriculture insurance schemes: yield-based Pradhan Mantri Fasal Bima Yojana
(PMFBY) and weather-based Restructured Weather Based Crop Insurance Scheme (RWBCIS). PMFBY is a
103
comprehensive crop insurance scheme for all farmers, loanee as well as non-loanee, including sharecroppers and
tenant farmers, providing coverage to notified crops in notified areas from pre-sowing to post harvest against
natural calamities, pests and diseases. The premium for insurance coverage has been kept low for farmers with
high dependence on government subsidy - at 2% for Kharif, 1.5% for Rabi, and 5% for commercial and horticultural
crops. Rest of the premium (98.5% for Rabi crops to 95% for commercial crops) is shared by the Centre and state
governments equally.
Under PMFBY and RWBCIS, 54.7 million hectares of gross cropped area was covered in fiscal 2019; ~27% of the
gross cropped area. The government had a target coverage of 50% of gross sown area by fiscal 2019. However,
we estimate the coverage to have reached ~27% in fiscal 2019 and to reach ~30% by fiscal 2020. To support the
scheme, budgetary allocation for PMFBY was increased by 15% from Rs 136 billion for fiscal 2020 to Rs 157 bi llion
for fiscal 2021.
Crop insurance remains significantly underpenetrated, covering only 25-30% of India’s gross sown area. Moreover,
with weather-related risks on the rise (uneven distribution of rainfall, unseasonal hailstorms, etc.), we expect
awareness about crop insurance among farmers to increase. As per revised guidelines, insurance companies have
to spend 0.5% of the total gross premium for publicity expenses at the field level each season to create awareness
among farmers.
Under PMFBY, the government is pushing for the use of new technology, including remote sensing and drones, to
measure crop yields and in claim estimation. Currently crop-cutting experiments (CCEs) are manually carried out
by states to estimate yield. States implementing the PMFBY scheme at village/ panchayat level are entitled for 50%
reimbursement of the incremental expenses of CCEs and cost of smart phones/ improved technology from the
government.
Legislative support: New legislations introduced to reform agriculture sector

The central government introduced three legislations in order to bring critical reforms to the agriculture sector in India.
The Essential Commodities (Amendment) Act, 2020

Essential commodities act was amended to remove cereals, pulses, oilseeds, edible oils, onion and potatoes from
the list of essential commodities. This means that government will no longer regulate the demand and supply of these
commodities. This is aimed at increasing farmer income as farmers will be able to sell their produce anywhere and
not just to the local mandi. This amendment has also been aimed at increasing private sector investment. The
amendment can have adverse effects too. For instance it can lead to hoarding by big procurement players and may
lead to increased prices.
The Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act, 2020
This reform aims to provide for free trade of agriculture produce outside the physical premises of the Agriculture
Produce Market committee (APMC). This ordinance is issued to allow barrier free intra-state and interstate trade of
agriculture produce. The reform will benefit farmers in a sense that it will allow farmers to sell their produce anywhere
by their choice. However, barring a few states, significant transactions have been taking place outside the APMC.
Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm

Services Act, 2020
This Act provides legal basis to the existing practice of contract farming in India’s agriculture and allied sectors.
Before this Act, there was no legal basis for contract farming in India and disputes were resolved mainly in APMCs.
All contracts will now be registered at state level which will safeguard farmers’ interests. This will also provide Indian
farmer an opportunity to commercially scale their production and increase profitability.
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4.8 Overview of industry crop protection and seeds industry in India
Crop protection market
Insecticides dominate the domestic pesticides market

Crop protection can be broadly defined as the science and practice of managing pests, plant diseases, weeds, and
other pest organisms that damage agricultural crops and forests. Pesticides, which are chemical or biological agents
that deter, incapacitate, kill, or otherwise discourage these pests, play a critical role in protecting crops. Pesticides
range from complex chemicals and disinfectants to viruses, bacteria and antimicrobials.
Pesticides can be classified on the basis of the target pest – i.e., insecticides (targeting insect pests), herbicides
(targeting weeds), fungicides (targeting fungal pests), and others (including rodenticides and nematicides). Globally,
herbicides constitute the highest share of pesticide usage. Pesticides can also be classified as generic products (non-
patented) and specialty products (patented).
Figure 93: Crop protection market snapshot share in value terms(Consumption) (fiscal 2020)
Low pesticides penetration in India versus other countries, depicts long-term growth
potential
India is one of the largest agricultural producers in the world, accounting for ~10-12% of crop output value and 15-
20% of total fertiliser consumption. It is the fourth largest pesticide producer in the world after the US, Japan and
China. However, the country accounts for only 5-6% of total pesticides consumption globally.
Further, even with rapid growth in recent years, India’s pesticides usage is well below the global norms. Pesticides
penetration has been rising in recent years, driven by an increase in per-hectare penetration and usage. Despite this,
India’s pesticides usage is very low at ~0.6 kg per hectare against ~5 kg/ha in the UK and around ~13 kg/ha in China.
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Pesticide consumption in India skewed towards insecticides
India’s consumption mix of pesticides has traditionally been skewed in favour of insecticides, due to:
 The higher incidence of insects, given the tropical climate;
 The labour-intensive nature of agriculture. The availability of cheap labour in rural areas implies that several
agricultural tasks are performed manually, with manual weed-pulling being a pertinent example. Therefore,
the consumption of herbicides (weed-treatment chemicals) has been lower than the global average.
Indian pesticides market marked by a large number of standalone formulators

The industry is fragmented with the presence of global players, domestic players, and several standalone pesticides
formulators.
Demand for crop-protection products is closely linked to rainfall patterns, as pesticides are typically applied during
the later stages of the crop cycle. Therefore, players are able to increase prices only during favourable monsoons,
and demand for their products is robust. Unfavourable weather patterns usually prevent players from significantly
hiking prices and also deter farmers from investing in higher-value pesticides. This skews the mix further in favour of
low-value generics, exerting further pressure on prices.
Seeds market
Variety seed sales is estimated over 32 lakh tonnes in crop year 2020
In India, seeds can be broadly classified into varieties, hybrids, and genetically modified (GM) seeds. This
categorization is based on the method used to develop the seed and its genetic characteristic and specialty products
(patented).
Figure 94: Seeds market snapshot (fiscal 2020)
106
Private sector dominates seed industry
There has been significant improvement in the seed replacement rate over the past decade, from ~32-34% in 2008
to over 44% in crop year 2020. This was because of increased availability of high yielding varieties and hybrid seeds
across crops, as well as growing awareness among farmers about the benefits of commercially bought seeds. In
India, 15 state seed and two national seed corporations are involved in the development and processing of seeds.
Besides, there are around 500 private players. CRISIL Research estimates the share of private players at over 65%
of the total seeds market, which is estimated at Rs 236 billion in crop year 2020; a crop year is from July to June.
The share of public sector units is low as they are present mostly in low-value seeds such as wheat and pulses,
whereas private sector units have higher share in GM seeds such as cotton, and in high-value hybrid cereal and
vegetable seeds which fetch much higher realisation. The rationale behind this is that hybrids provide an effective
means of protecting a company’s investments because the genetic improvements embodied in hybrids typically last
for only one generation; hence, farmers must purchase fresh seeds every year to continuously achieve the yield
gains associated with hybrid seeds. This allows breeders to recover their investments.
Private companies in the industry can be classified into multinational companies (MNCs) and domestic companies.
The latter can be further classified into companies engaged in research and development (R&D) of hybrid seeds and
companies that are only into making varieties.
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5 Assessment of global fertiliser industry
5.1 Review and outlook on global demand
Global fertilizer demand expected to increase in 2020/21 despite COVID-19 pandemic;
phosphatic segment to lead growth
Global fertiliser demand has been increasing at a good pace since 2000, barring the years of financial crisis (2008-
09).
As per International Fertilizer Association (IFA) and our industry interactions, after declining by 1.7% in 2018/19 to
186.8 million tonnes, the global fertiliser demand is estimated to grow by 1.6% to 189.8 million tonnes in 2019/20.
The contraction in 2018/19 to some extent was on account of drop in consumption in USA due to poor weather. India,
which saw a strong monsoon performance, and USA, where weather conditions improved considerably during the
year, led demand growth during the corresponding period. Additionally, fertiliser use increased in most regions but
remained almost stable in West and Central Europe (WCE) and Oceania and was estimated to be down in Africa
and East Asia.
Figure 95: Trend and outlook on global fertiliser demand

(mn tonnes nutrients)
250 1.9% 1.0%
0.5% CAGR
190 194 196

200 186
150
106 107 106 104 107 108.4 110
100
45 45 47 46 47 48.6 49
50
35 36 38 37 36 36.6 37
-
2015/16 2016/17 2017/18 2018/19 2019/20 2020/21P 2021/22P
K P2O5 K2O
Source :International Fertilizer Association (IFA), CRISIL Research
Going ahead, as per IFA estimates and our industry interactions, global fertiliser demand is expected to grow by 2%
on-year to 193.5 million tonnes in 2020/21. In relative terms, the expected increase in 2020/21 would be more
significant for P2O5 (3.0%) than for N (1.6%) and K2O (1.4%). Several factors like supportive government measures,
resilient crop prices, a more attractive relationship between crop and fert iliser prices, weakening of domestic
currencies in large agricultural exporting countries, and favorable weather in key consuming countries are expected
to aid fertiliser demand in 2020. The containment and mitigation measures adopted by governments worldwide to
support the agriculture sector ensured limited impact on the farm logistics and allowed farmer access to fertilisers. In
addition, some farmers may have purchased fertilisers earlier than usual as a precaution against potential delivery
delays or financing difficulties. Despite the overall growth in global fertilizer use, some countries are experiencing
difficulties and may see their fertilizer use decline. Moreover, the pandemic has also affected some specific sectors
such as biofuel crops and fruits and vegetables.
South Asia is expected lead demand for global fertiliser use in 2020/21, followed by Latin America and North America.
Four regions could gain around 0.1 million tonnes of nutrients each: EECA, Africa, Oceania and WCE. In contrast,
East Asia and West Asia face reduced use. In relative terms, South Asia, followed by Latin America, Oceania, Africa
and North America are expected to be the fastest growing markets.
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Further, as per IFA estimates and our industry interactions, global fertiliser demand is expected to grow by 1% in
2021/22, slower than in 2020/21. Consumption of N, P2O5 and K2O each is expected to grow by around 1%. South
Asia would continue to drive the expansion of global fertilizer use, followed by EECA, Latin America and Africa. In
relative terms the fastest growing markets would be EECA and Africa, followed by South Asia. This decline is largely
expected due to regulations under deliberation in Western Europe, China, New Zealand, etc. to limit use of mineral
fertilisers.
The lingering COVID-19 pandemic will probably not affect fertilizer logistics significantly, as already demonstrated in
2020. However, the uneven nature of global economic recovery could affect consumer food demand, government
budgets, farmers’ input purchasing behavior and their financing conditions. Significant uncertainty remains regarding
the duration of the pandemic and the pace of vaccine development and distribution. In addition, advance fertiliser
purchases made in 2020/21 could lessen sales in 2021/22 although its extent remains uncertain. On the positive
side, crop prices have mostly recovered from their drop in early 2020 and are supported by rebuilding of the Chinese
swine herd and governments’ concerns about food security.
China’s share in global fertiliser demand is also contracting due to changing application pattern, unsupportive crop
market fundamentals and increasing farm size. China, the world’s largest producer and consumer of fertilisers, was
the first country to be affected with the global pandemic. During the lockdown, the country underwent various
disruptions such as shortage of labour, temporarily plant closures, piling inventories with manufacturers, overstocking
of exports at ports, reduced supply of inputs and liquidity crunch. However, the Chinese government extended aid to
fertiliser manufacturers in numerous forms. They were offered inputs at lower prices (temporary reduction in natural
gas and electricity costs) and also granted loans to farmers. Besides, fertiliser transportation was prioritised over
other goods and fertiliser credit support was provided for the upcoming spring season.
Figure 96: Review and outlook on region-wise segmentation of global fertiliser demand
(mn tonnes)
250
3 4 4 4 4 4 4
200
7 7 7 7
6 6 7
25 26 26 27 27 28
26
150
45 48 49 48 50 51 52
100
50 108 104 104 103 103 105 106
-
2015/16 2016/17 2017/18 2018/19 2019/20 2020/21P 2021/22P
Asia Americas Europe Africa Oceania
P: Projected
Source: IFA, CRISIL Research
5.2 Review of global capacity and supply of fertilisers

Global ammonia capacity increasing, mostly driven by urea expansions
Globally, Asia accounts for more than half of the installed capacities of Nitrogen. As per IFA estimates and our
industry interactions, global ammonia production in 2020 is estimated to have increased moderately by 1.1% to 179.4
million tonnes NH3, mostly driven by higher production in Russia, the US and Saudi Arabia. It is anticipated that
109
ammonia production in China would grow by a modest 1% despite tighter environmental controls and feedstock
supply shortfalls. China would account for 27% of global output in 2020, a level equivalent to the one registered for
2019. Reductions in ammonia production were observed in Latin America, South Asia and Oceania whereas output
is expected to grow in North America and, to a lesser extent, West Asia. Excluding China, world ammonia production
increased by a net 1% compared with 2019, to 130.9 Mt NH3.
Figure 97: Review and outlook on region-wise segmentation of global Nitrogen capacities
(mn tonnes N)
200 1.8 1.8 1.8 1.8 1.8 1.8

1.8
180
160 42 42.2 43.1 43.2 43.5 43.5
40.9
140
120
100
102.1 103.4 104.1 105.4 102.9 103.3 104.7
80
60
40
20 26 27.8 28.7 28.4 28.4 28.4 28.4
0 9.4 9.4 10 10.6 10.8 11.7 11.7
2016 2017 2018 2019 2020P 2021P 2022P
P: Projected
Source: FAO, CRISIL Research
As per IFA estimates and our industry interactions, global ammonia capacity is projected to expand by 1.3%, from
179 million tonnes N in 2019 to 181 million tonnes N in 2020. New ammonia capacity are expected to be
commissioned in 2020/21 in Brunei, the EECA (Russia and Uzbekistan), Egypt, India, Iran, Nigeria and Oman.
Capacity shutdowns and idling occurred in Bolivia, Brazil, Trinidad and North Korea. The global nitrogen
supply/demand balance in 2020 indicates an increase in the potential surplus due to a substantial supply increment
(+2.3 Mt N). The global supply of Nitrogen is expected to expand by ~2.3 million tonnes N during the year 2020 and
further by ~3.1 million tonnes during the year 2021 leading to surplus supply.
Figure 98: Trend and outlook on global Nitrogen supply

(mn tonnes N)
180
154 153 155 158
160 144 144
140
120
100
80
60
40
20
-
2016 2017 2018 2019 2020 2021P
Source: International fertilizer association (IFA), CRISIL Research
110
As per IFA estimates and our industry interactions, global urea production is expected to increase by 2.8% to 182
million tonnes product. Excluding China, which accounted for 31% of global production, world urea output rose by
2.8% to 125 million tonnes led by higher production levels in South Asia, Africa and North America. Chinese urea
production is expected to grow by 2.9% compared with 2019 to reach 57 million tonnes in 2020. Globally, Latin
America will be the only region to register lower urea output levels in 2020 than in 2019 due to the shutdown and
temporary idling of capacity and feedstock issues in Bolivia, Brazil and Venezuela. Global urea capacity is projected
to be 209 million tonnes in 2019, 212 million tonnes in 2020 and 223 million tonnes in 2021. New urea capa city
additions between 2019 and 2021 are seen in India, Nigeria, the EECA, Brunei and Iran.
Supply of rock phosphate continues to rise driven by expansion in Africa, albeit at a slower
pace
As per IFA estimates and our industry interactions, global phosphoric acid capacity is expected to reach 59.1 million
tonnes P2O5 (a growth of 1.3%) in 2021 from 57.8 million tonnes P2O5 in 2019. Incremental phosphoric acid
capacity during 2019-2021 would mainly occur in Morocco, Brazil, Tunisia and India. Restructuring of phosphate
capacity is still ongoing in China due to rationalization and environmental pressures.
Figure 99: Review and outlook on region-wise segmentation of global P2O5 capacities
(mn tonnes)
70 0.6 0.6 0.6
0.6 0.6 0.6
60 0.6 6.4 6.4 6.4
6.4 6.5 6.4
6
50
40 31.7 31.8 32 32.2
31.3 31.3
29.4
30
20 11.5 11.8 11.8 11.8
11.5 11.5 11.5
10
9.6 10.3 11.3 12 12.5 13 13
0
2016 2017 2018 2019 2020P 2021P 2022P
P: Projected
No additional capacity is foreseen there in the short term. The COVID-19 pandemic and weaker macroeconomic
conditions have slightly shifted forward the timeline of some of these capacity changes. Global processed phosphates
capacity is projected at 46.1 million tonnes P2O5 in 2020 and 47.3 million tonnes P2O5 in 2021. Global phosphoric
acid supply in 2021 is expected to increase to 51.2 million tonnes P2O5, representing 2.4% overall growth compared
with 2019 (50.0 million tonnes P2O5).
As per IFA estimates and our industry interactions, global production of phosphate rock in 2020 is expected to slightly
rise, by 1% year-on-year, to 207.7 million tonnes following two years of contraction in 2018 and 2019. Exports of
phosphate rock in 2020 would remain steady at around 30 Mt based on preliminary estimates. Globally, the largest
capacities of rock phosphate are situated in Africa and Asia (especially East Asia) . OCP group is one the leading
producer of the rock phosphate globally and operates largely in the Morocco and Western Sahara region which has
approximately 70% of the global rock phosphate reserves.
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Figure 100: Trend in global rock phosphate capacities Figure 101: Region-wise share of rock phosphate
capacities (2019)
(million tonnes) 2% 9%
300.0
230.1 236.6 238.9 25%

250.0 220.5 227.0
200.0
150.0
100.0 47%
17%
50.0
-
Europe Asia Americas Africa Oceania
2015 2016 2017 2018 2019
P: Projected
Many of the manufacturers usually enter into an agreement with raw material suppliers, since the raw materials
sources are concentrated in some specific regions such as East and central Asia. Long term agreements often give
better sourcing facility for the players as in case of resource constraints these players are usually given priority.
Additional capacities and modest potash demand likely in medium-term

As per IFA estimates and our industry interactions, global primary potash production would slightly recover by 0.8%
to 42.1 million tonnes K2O in 2020 in response to better market fundamentals and rising potash demand, after seeing
a decline in production in 2019. Global production of muriate of potash (MOP) in 2019 is estimated to increase by
almost 1% on-year to 67 million tonnes product.
Between 2019 and 2021 global potash supply is projected to increase by 5% (+2.5 million tonnes K2O). The global
potash market will likely remain supply-driven in the near term since very large new capacity projects in EECA (Russia
and Belarus) would increase substantial potential supply.
Figure 102: Review and outlook on region-wise segmentation of global K2O capacities
(mn tonnes)
70
60
50 24.3 23.8 24.8 24.8 25.7
21.4
20.1
40
30 11.1 11.1 11.6 11.9 11.9 11.9
10.7
20
23.6 25.8 26.4 26.5 26.6 26.6 26.8
10
0
2016 2017 2018 2019 2020P 2021P 2022P
P: Projected
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Phopshatic fertilisers likely to see a stronger realisations compared to other products due
narrower demand-supply gap
During 2021, as per estimates by IFA and our interactions with the industry, the demand-supply gap is expected to
widen as compared to 2020 for Urea and Potassium while it is expected to remain constant for Nitrogen. On the other
hand, the gap is expected to narrow for Phosphoric Acid as was the case last year. This is expected to boost
realizations for the phosphatic products during the year. On the other hand, considering significant supply overrun
and a widening of demand-supply gap for second consecutive year, the prices of urea are likely to be under pressure.
Table 12: Review of demand-supply scenario for key nutrients

World Nitrogen World Urea World Phosphoric Acid World Potassium
Supply/Dem and Supply/Dem and Supply/Dem and Supply/Dem and
(Mt N) (Mt urea) (Mt P2O5) (Mt K2O)
Year 2019 2020 2021 2019 2020 2021 2019 2020 2021 2019 2020 2021
Supply 152.6 154.9 158.0 186.2 190.3 196.7 50.0 50.7 51.2 47.6 48.4 50.1
Demand 145.3 146.5 149.7 178.3 181.3 185.4 47.0 48.3 49.3 41.6 42.1 42.9
Balance 7.2 8.4 8.3 7.9 9.0 11.3 2.9 2.4 1.9 5.9 6.3 7.3
Source: IFA, CRISIL Research
Top-10 countries account for more than 3/4th share of global exports
Globally, top-10 exporting countries account for more than 75% of the global fertiliser exports over the last five years
from 2015 to 2019. The domination of exports by a few is largely on account of presence of key raw material in these
countries. Russia leads the pack globally account for almost 20% of global exports followed by China in the second
position. China lost its preeminent position to Russia in 2016 which has been the top exporter since.
Figure 103: Review of global fertiliser exports

(mn tonnes product)
200
180
160 48 44
44 32
140 40
4 8 3 3
7 7 4
7 3 7
120 4 7 9
7 4
8
100 11 12 12 7
11 9 14 12
80 20 19 21 11 22
60 24 24
35 27 27
40 12
20 41 45 34 35
32
-
2015 2016 2017 2018 2019
Russia China Canada Belarus USA Netherlands Morocco Germany Egypt Belgium Others
Source: UNCOMTRADE, CRISIL Research
Among the fertiliser products, Nitrogen segment accounts for the largest share of exports. It accounts for almost 2/5th
share of the global fertiliser exports followed by potassic segment which accounts for a third of the global fertiliser
exports. Within Nitrogen segment, China and Russia lead the pack accounting for almost 25% of the overall Nitrogen
product exports. Within the fertiliser segments, China and Morocco lead in terms of phosphatic products exports
accounting for almost half the global exports. On the other hand, Russia, China and Belarus together account for
almost 80% of the global potassic product exports.
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Top-6 countries account for almost 2/3 share of global fertiliser consumption; India second
largest in the world
Globally, top-6 countries viz. China, India, USA, Brazil, Indonesia and Russia accounted for almost 2/3 rd share of the
global fertiliser consumption in 2018. The consumption is both a function of land used for agriculture, population level
and soil fertility. China leads the pack globally accounting for almost 1/4 th share followed by India which accounted
for ~15% consumption share in 2018.
Figure 104: Key country-wise share of global fertiliser consumption in nutrient terms (2018)
(mn tonnes) 9%
50.0 47.0
36%
40.0
25%
30.0 27.4
20.3
20.0 17.0
1% 11%
15%
10.0 6.2 3%
2.5
- Brazil China India USA Indonesia Russia Others
China India USA Brazil Indonesia Russia
5.3 Impact of Covid-19 on global fertiliser industry

COVID-19 pandemic severely impacted agri value chain; however, with government
support in most countries they recovered strongly
Agricultural supply chains have been negatively affected by COVID-19. Although the persistence of these
disturbances in the long-term is unlikely, some governments have set up plans to support food supply chains and
farmers. As an example, to ensure the safe and orderly production, supply, and retail of fertilizers, by April 2020, over
20 countries in lockdown had officially declared fertilizers and workers involved in the fertilizer supply chai n as
essential. As for farmers, countries like the U.S.A. and China have set up aid packages to farmers and
agribusinesses, and France, Italy, the United Kingdom, and Australia have taken supportive measures to tackle
labour shortages.
Global demand took a hit in the initial phase

The global health crisis caused by the COVID-19 pandemic affected fertilizer consumption in two ways: through its
primary impact on labour and logistics, and through its secondary impact on demand for agricultural commodities.
Overall, by mid-April 2020, the impact of COVID-19 on 2020 fertilizer deliveries had been contained in North America
and in Europe, where farmers had already procured their fertilizers for the main growing season; some delays in the
supply of fertilizers were deemed possible for later occurring top-dressing applications. Potential delays in input
deliveries were expected in countries with a later start of the growing season, if farmers had not yet procured and
received their fertilizers.
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However, demand impact in FY 2020 expected to be less severe compared 2008/09
financial crisis
The decline expected in global fertilizer use in FY 2020 is much smaller than the 8% drop that took place in FY 2008
during the last financial crisis. The logistics and labour issues caused by the current health crisis are not expected to
affect all countries to the same extent. And while the global economic downturn in 2020 is expected to be deeper
versus 2008/09, there has been significantly less volatility in crop and fertilizer pri ces in the period preceding the
health crisis than in the period preceding the 2008/09 crisis.
Slew of measures by government across the globe to support agri sector

China, the world’s largest producer and consumer of fertilisers, was the first country to be affected with the global
pandemic. During the lockdown, the country underwent various disruptions such as shortage of labour, temporarily
plant closures, piling inventories with manufacturers, overstocking of exports at ports, reduced supply of inputs and
liquidity crunch. However, the Chinese government extended aid to fertiliser manufacturers in numerous forms. They
were offered inputs at lower prices (temporary reduction in natural gas and electricity costs) and also granted loans
to farmers. Besides, fertiliser transportation was prioritised over other goods and fertiliser credit support was provided
for the upcoming spring season.
Taking cue from this, various governments across the world have announced help for aiding farmers in order to boost
the demand of fertilisers which is recognized as an essential commodity. The US decided to pay an additional $14
billion to agricultural producers. On the other hand, Canada planned to give CA$ 5 billion in lending capacity to
various members of the agricultural value chain. It has also allowed farmers an additional half year to pay back
previously taken government loans, with the possibility of a further interest free loan available. The Europe also
extended the limit for state aid to €100,000 per farm, while food processing companies can benefit from a maximum
of €800,000.
5.4 Overview of recent trends and growth drivers for global fertiliser industry
Some of the key recent trends observed in the global industry are as follows:
Increasing regulatory pressure

In many jurisdictions, at regional, national and sub-national levels, the fertilizer industry is subject to new supply-
related regulations. As FIA’s recent report, policymakers are adopting new regulations on fertilizers, product and
plant certifications, and tailings management due to environmental and safety considerations. More fertilizer
producers are seeking registration in high-standard certification programs. Phosphogypsum management regulatory
requirements in China and Green Deal in the EU, as well as implementation of emissions trading and carbon schemes
across the world are expected to have wider implications for the evolution of the fertilizer industry going forward.
Trade sanctions impact fertilizer flows

In recent years the pace of trade liberalization has slowed while restrictive trade measures have increased. Trade
policy actions in FY 2019/2020 impacted movements of commodities, including fertilizers. They comprised a variety
of initiatives such as trade defense measures, import bans, lifting of export tariffs and administrative import barriers.
The industry sectors affected by trade barriers include UAN, AN, NPKs and other country specific sanctions, e.g.
against Iran, which is a major supplier of nitrogen products to the international market. In the middle of 2020, a new
countervailing duty investigation was initiated on imports of phosphate fertilizers into the U.S.A.
115
Some of the key growth drivers for the global industry are as follows:
Decrease in per capita arable land

Agricultural land growth has stagnated over the last few years. Agriculture land use has declined steadily from 4,830
million hectare in 2007 to 4,800 million hectare in 2018. The agriculture land has seen reduction of 30 million hectare
in the given period. On the other hand global population is increasing which has caused reduction in per capita land.
This has fuel the consumption of fertilisers as farmers seek more productivity in same or lesser amount of land.
Rising population leading to increased food demand

Globally, population growth is expected to remain the dominant driver of total agricultural commodity demand over,
in particular for commodities that have high levels of per-capita consumption in regions with fast expanding
populations. World population is expected to reach around 9 billion by the year 2050. Total agriculture production
and consumption is also expected to rise along the same lines. Increased food demand coupled with stagnant
agriculture land will lead to greater demand for inputs like fertilisers and pesticides in order to improve crop yield.
Increased per capita food consumption

Globally, aggregated food consumption (measured in calories) is projected to grow by about 3% over the projections
period, reaching just over 3,000 kcal in 2029, fats and staples accounting for about 50% of the additional calories.
By far the highest growth rate is projected for fats at 9% over the coming decade. Staples remain the most significant
are projected to consume more energy from staples. As stated earlier, with stagnant agriculture land growth, demand
for fertiliser, pesticides, high quality seeds, etc. are expected to rise to improve crop yields. Additionally, along with
increased per capita consumption, the demand for high value crops/ food products is also expected to increase on
account of rising income levels. These high value crops in turn will lead to greater demand for fertilisers.
Global efforts to reduce hunger and improve nutrition

Current estimates are that nearly 690 million people are hungry, or 8.9 percent of the world population – up by 10
million people in one year and by nearly 60 million in five years. The number of people affected by severe food
insecurity, which is another measure that approximates hunger, shows a similar upward trend. In 2019, close to 750
million – or nearly one in ten people in the world – were exposed to severe levels of food insecurity. Considering the
total affected by moderate or severe food insecurity, as per FAO, an estimated 2 billion people in the world did not
have regular access to safe, nutritious and sufficient food in 2019. The world is not on track to achieve Zero Hunger
by 2030. If recent trends continue, the number of people affected by hunger would surpass 840 million by 2030. A
preliminary assessment suggests that the COVID-19 pandemic may add between 83 and 132 million people to the
total number of undernourished in the world in 2020 depending on the economic growth scenario.
Food consumption and diet quality are believed to form a critical link between food security and nutrition outcomes.
Diet quality comprises four key aspects: variety/ diversity, adequacy, moderation and overall balance. According to
WHO, a healthy diet protects against malnutrition in all its forms, as well as non-communicable diseases (NCDs)
such as diabetes, heart disease, stroke and cancer. It contains a balanced, diverse and appropriate selection of foods
eaten over a period of time. Increasing availability of and access to nutritious foods that comprise healthy diets is a
key component of stronger efforts to achieve the 2030 targets. The governments across the world in coordination
with the FAO and World Bank have been devising various strategies and running social sector programs to tackle
these issues. For these efforts to bear fruit, the agriculture production also needs to grow at the required rate in order
to fulfill the demand created through these initiatives. With shrinking land availability and growing population, the only
way to achieve these targets are though drastic improvement in agriculture yield globally and especially in the mid
and low income countries.
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Government support in the form of subsidies across globe
Many of the high fertiliser consuming countries have subsidy regime. All the essential fertili sers like urea have
massive amounts subsidies. Subsidies enable farmers to procure fertilizers at much lower prices.
Awareness for diversification in fertilisers

In recent times more emphasis has been given on diversification of fertilisers in terms of nutrient content. Currently,
urea dominates the product wise use of fertilizers. Farmers are being made more aware about balanced use of N, P,
K nutrients. To achieve this use of complex fertilizers is being promoted and farmers are shifting their fertilizer portfolio
from urea dominated one to balanced one. This shift in product augurs well for the industry.
5.5 Review of key global players

Some of the key player globally are as follows:
Nutrien
Nutrien is a Canadian fertilizer company based in Saskatoon, Saskatchewan. It is the largest producer of potash and
the third largest producer of nitrogen fertilizer in the world. It was formed through the merger of PotashCorp and
Agrium, in a transaction that closed on January 1, 2018. The company has manufacturing capabilities of 27 million
tonnes of potash, nitrogen and phosphate products for agricultural, industrial and feed customers world-wide. It has
operations in 14 countries, with over 22,000 employees and more than 500,000 grower accounts. It has over 2,000
worldwide retail stores though which it sells more than 1,850 proprietary products. Company’s overall revenue stood
at USD 13.2 billion in 2019 of which USD 5 billion was contributed by fertiliser segment. It gross margin in the fertiliser
segment stood at 21% during the corresponding year. It sold around 11 million tonnes of fertilisers during 2019; with
US alone accounting for 80% of these sales. It has 20.6 million product tonnes of installed capacities for Potash 3.5
million tonnes for urea and 1.6 million tonnes for DAP/ MAP.
The Mosaic Company

Mosaic is a Fortune 500 company catering to customers in more than 40 countries. It is the largest U.S. producer of
potash and phosphate fertiliser. It has manufacturing facilities in 9 locations across North and South America. It has
25 million tonnes of finished concentrated potash and phosphate. Mosaic has approximately 10.4 million tonnes of
operational potash capacity. Mosaic has approximately 16.8 million tonnes of operational capacity for finished
concentrated phosphates. Mosaic is the largest producer of finished phosphate products with an annual capacity
greater than the next two largest producers combined. It has a global distribution network made up of plants, port
facilities, warehouses and sales offices.
Acron Group
It is a global Russian mineral fertilizer producer. In 2018, the Group's output of ammonia and mineral fertilisers
(exclusive of own use) totaled 7.5 million tonnes. Acron is a global mineral fertiliser producer of complex fertilisers
such as NPK and bulk blends, and nitrogen fertilisers such as urea, ammonium nitrate and urea-ammonium nitrate.
The Group's key markets are Russia, Brazil, Europe and the United States. Acron has two production facilities –
Acron (Veliky Novgorod, Russia) and Dorogobuzh (Smolensk Region, Russia). Acron's logistics and transportation
capabilities include its own fleet of railway cars and three sea port trans -shipment facilities on the Baltic Sea – at the
Kaliningrad port of Russia, at the Estonian Sillamäe port and at the Estonian Muuga port. The Group operates
distribution networks in Russia and China.
PhosAgro
It is a Russian chemical holding company producing fertilizer, phosphates and feed phosphates. The company is
based in Moscow, Russia, and its subsidiaries include Apatit, a company based in the Murmansk Region and
engaged in the extraction of apatite rock. Phosagro is one of the world’s leading producers of phosphat e-based
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fertilisers. The Company is Europe’s largest producer of phosphate-based fertilisers, the world’s largest producer of
high-grade phosphate rock and the world’s second largest producer (excluding China) of MAP and DAP (according
to Fertecon), Russia’s only producer of feed monocalcium phosphate (MCP), and also the sole producer of nepheline
concentrate in Russia. It is the world’s largest producer of high grade phosphate rock and third largest producer of
DAP/MAP. The company has an overall fertiliser capacity of 6.5 million tonnes.
Uralchem
Uralchem Group is a Russian manufacturer of a wide range of chemical products, including mineral fertili sers. It is
one of the largest producers of ammonium nitrate as well as of ammonia and nitrogen fertilizers in Russia. It has
annual production capacities of 3 million tonnes of ammonia and ammonium nitrate, 1.2 million tonnes of urea as
well as 1 million tonnes of phosphate and complex fertilizers, accounting for 27.6% of ammonium nitrate, 16.9% of
ammonia and 15% of urea production in Russia.
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6 Overview of the fertiliser industry in India
6.1 Introduction to fertilisers
Fertilisers are composed of wide variety of nutrients
A fertiliser is a material - organic or inorganic, natural or synthetic, that supplies one or more of the elements required
for plant growth. Plants need around 16 nutrients for their growth. While some of the nutrients can be obtained from
the atmosphere, others have to be obtained from the soil. The different types of fertilisers include chemical fertilisers,
organic fertilisers and bio-fertilisers. Fly ash, green manure and fertilisers made from coir pith are also used to
replenish soil fertility.
Fertilisers are composed of the following basic nutrients:

 The primary nutrients are nitrogen (N), phosphorous (P) and potassium (K), which are required in large
quantities and are normally supplied through chemical fertilisers
 Secondary nutrients are required in smaller quantities vis-a-vis the primary nutrients and include calcium,
magnesium and sulphur
 Micronutrients are groups of nutrients that are essential for plant growth, though plants require them in
smaller quantities. These include iron, zinc, manganese, copper, boron, molybdenum and chlorine. The most
extensively used micronutrient in India is zinc sulphate.
In terms of tonnage and value, chemical fertilisers is the largest segment (vis -a-vis organic or bio-fertilisers) supplying
the primary nutrients. At present, there are around 25 chemical fertilisers that are used in India. These can be
classified into nitrogenous, phosphatic, potassic, and complex fertilisers, depending on their nutrient content.
Different nutrients impart different characteristics to the fertilisers

 Nitrogenous fertilisers impart colour to plants and increase their veget ative growth. Urea and calcium
ammonium nitrate (CAN) are the main nitrogenous fertilizers and are expressed as 46-0-0 and 25-0-0,
respectively.
 Phosphatic fertilisers are used to strengthen the roots in a plant. Single super phosphate (SSP) is the main
phosphatic fertilizer and is expressed as 0-16-0.
 Potassic fertilisers are essential for crops as they build their resistance to drought and diseases. In India,
they are mainly combined with N and P2O5 (phosphate) to produce complex fertilizers. Muriate of potash
(MoP) is the main potassic fertiliser and contains 60% potassium.
 Complex fertilisers are produced out of a chemical combination of two or more nutrients; nitrogen and
phosphorous (NP) or nitrogen, phosphorous, and potassium (NPK). DAP (di-ammonium phosphate) is one
of the major complex fertilizer consumed in India and is expressed as 18-46-0.

The different chemical fertilisers differ from each other on the basis of their nutrient content. For exam ple, urea has
46% nitrogen and no phosphate or potassium, while DAP has 18% nitrogen, 46% phosphate and no potassium).
Their application as well differs for different crops. Different crops require different proportions of N, P and K. For
instance, one tonne of paddy absorbs 9.74 kg of nitrogenous nutrient, 3.12 kg of phosphatic nutrient and 3.26 kg of
potassic nutrient from the soil, while one tonne of wheat extracts 15.96 kg of nitrogenous nutrient, 1.89 kg of
phosphatic nutrient and 3.43 kg of potassic nutrient from the soil.
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The quantum of nutrient absorption also varies across different kinds of soil. In India, the ideal NPK usage ratio is
supposed to be 4:2:1. In reality, the usage ratios differ from region to region, due to variations in soil types, crops
grown and farmer price preferences. This discrepancy in the usage ratio is driven primarily by farmer preferences.
For instance, the consumption of nitrogenous fertilisers in India is much higher than that of phosphatic and potassic
fertilisers. This is because the impact of nitrogenous fertiliser consumption is immediately visible and also the cheaper
availability of urea as compared to the other fertilizers.
Phosphatic fertilisers have seen demand grow on account of increasing awareness about
their benefits
Phosphorus plays a vital role in photosynthesis, functioning in the capture and transfer of energy into chemical bonds.
New, rapidly growing plant meristematic tissues have a high concentration of P. The genetic materials, DNA and
RNA, are built around a backbone of P atoms, and P plays a major role in the metabolism of sugars and starches,
all critical to cell division and growth processes.
Key products as well as their usage and efficacy

Single Super Phosphate (SSP):
SSP is cheaper compared to other Phosphatic fertilisers. It is more suited for crops like oil seeds, pulses, horticulture,
vegetables, sugarcane, paddy etc. Single Super Phosphate (SSP) fertilizer is mainly used for improving root growth
and chlorophyll synthesis and thus improves product quality. Multi-nutrient fertilizer containing P2O5 as primary
nutrient and Sulphur and Calcium as secondary nutrients. The presence of both P and Sulphur (S) in SSP can offer
an agronomic advantage where both of these nutrients are deficient. In agronomic studies where SSP is
demonstrated to be superior to other P fertilizers, it’s usually because of the S, Ca (or both) that it contains.
SSP helps in improving root growth and development which is most important for uptake of plant nutrient and water.
For Leguminous crops like groundnut, use of SSP, ensures a large number of nodules on the roots, which fix
atmospheric Nitrogen directly into the soil and also increase Nitrogen uptake. SSP improves soil aeration and
increase water holding capacity of the soil and increase root growth which increase crop yield. Oil content of
Groundnut and other oil seeds increases. The quantity and quality of oil seeds crops increases. In Sugarcane, the
sugar content increases which provide more production and monetary benefit to the farmers
Mono-Ammonium Phosphate (MAP)

Ammonia gas is combined with phosphoric acid, granulated, dried and screened to produce MAP. One of the major
cropping fertilisers as a source of phosphorus and nitrogen. The low level of nitrogen makes it useful as a ‘starter’
fertiliser and as there is no free ammonia, the risk of affecting germinating seeds is minimal. It’s water-soluble and
dissolves rapidly in adequately moist soil. Upon dissolution, the two basic components of the fertilizer separate again
to release ammonium and phosphate both of which plants rely on for healthy, sustained growth. The pH of the solution
surrounding the granule is moderately acidic, making MAP an especially desirable fertilizer in neutral - and high-pH
soils. Agronomic studies show that, under most conditions, no significant difference exists in P nutrition between
various commercial P fertilizers under most conditions.
Muriate of Potash (MOP)

Occurs as a natural salt and after processing to cleanse out unwanted salts (especially common salt), it is usually
compacted into ‘chips’ and screened to meet size specifications. MOP is used extensively for fertilising pastures,
sugar cane, fruit trees, vegetables, and other field crops. It plays a vital role in the production of proteins and sugars.
It also protects against draught by maintaining plants water content which in turn is a benefit for photosynthesis as
leafs maintain their shape and vigor.
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Sulphate of Ammonia (SOA)
SOA is often manufactured by the direct mixing of sulphuric acid and ammonia, or as a by-product of refinery or
caprolactum manufacture. SOA is a valuable fertiliser as a straight product or in blends. Sulphur in SOA is sulphate
sulphur which is the form taken up directly by plants. Sulphate sulphur is readily soluble in water and goes straight
into solution when applied to the soil (providing there is moisture). SOA releases nitrogen to the soil directly as
ammonium, which is converted by bacteria to nitrate nitrogen. This process is favoured by conditions conducive to
microbial activity, such as warm temperatures, moisture and organic matter. The rate of this reaction depends on
those conditions and complete nitrification of applied ammonium can vary from a few days to several weeks.
Sulphate of Potash (SOP)

Potassium Sulphate is manufactured in either of the following ways – i) Mined and processed to clean away unwanted
salts and ii) Muriate of Potash is reacted with Sulphuric Acid. Potassium sulphate (SOP) can be a more expensive
source of potassium than MOP and so its uses are often restricted to five main areas- i) Where soil or irrigation water
salt levels are high and MOP is undesirable, ii) Where chloride sensitive crops are being grown; for example, berries
and vines iii) Where high chloride levels occur in irrigation water.
Di-Ammonium Phosphate (DAP)

One of the major cropping fertilisers as a source of both phosphorus and nitrogen. The high phosphorus content
makes it a true high analysis fertiliser. It is used on a range of crops in broad-acre farming, cereals, sugar cane,
fodder crops and also in horticultural crops; for example, vegetables and tree crops. It’s highly soluble and thus
dissolves quickly in soil to release plant-available phosphate and ammonium. When applied as plant food, it
temporarily increases the soil pH, but over a long term the treated ground becomes more acidic than before upon
nitrification of the ammonium.
At present, DAP (18:46: 0) is the most widely used phosphatic fertilizer product in India. It is considered suitable for
a wide variety of crops including those which need high dose of P2O5 and low dose of N, particularly at the time of
sowing, such as pulses and other leguminous crops. Studies have also shown that DAP does not affect the seeds
even when applied under relatively dry farming conditions, unlike straight and some other complex fertilizers. Crops
such as oilseeds and pulses are generally sown under such conditions. It has also been favoured as basal dressing
for most crops. Another favourable factor with DAP is that nearly the entire P2O5 is available to the plants
immediately. DAP is also compatible with all other fertilisers so that other straight nitrogenous fertilizers as well as
potassium can be added to it according to requirements, without side reactions or handling problems. Since, both
Urea and DAP have similar sized granules, mixing them is particularly easy. Thus, it provides scope for correct
nutrient input adjustments, including provision for top dressing. As a high analysis fertiliser, the incidence of transport
cost per unit of nutrient in DAP is the lowest of all phosphatic fertilizers produced in India.
6.2 Review of key raw material required for manufacturing fertiliser

Natural gas, naphtha, fuel oil (nitrogenous fertilisers), phosphoric acid and rock phosphate (for phosphatic fertilisers)
are the primary feedstock being used in the fertiliser sector. In the nitrogenous fertiliser segment, natural gas is
increasing its share of total feedstock consumption due to cost and efficiency benefits. In case of phosphatic
fertilisers, India is dependent on imports for both rock phosphate and phosphoric acid.
Natural Gas

Natural gas, naphtha, coal, fuel oil, LSHS (Low sulphur heavy stock) are the primary feedstocks for producing
ammonia and thereafter, nitrogenous fertilisers. Of these, over 89% of capacities are based on natural gas. Natural
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gas is the preferred feedstock, as it is energy-efficient and economical. Natural gas is one of the major fossil fuels
and enjoys a reputation as a clean fuel in comparison with other fossil fuels such as gasoline or diesel.
Capacity additions, feedstock switching to drive demand from fertilisers sector

Natural gas demand declined to ~168 mmscmd (million metric standard cubic meter per day) in fiscal 2021 from 175
mmscmd in the preceding year. The fertiliser, CGD and power sectors accounted for 80% of the total gas
consumption of ~175 mmscmd in fiscal 2020. CRISIL Research expects natural gas demand to clock 6-7%
compound annual growth rate (CAGR) between fiscals 2021 and 2025 to 212-218 mmscmd. Fertilisers is also likely
to fuel demand in the long run owing to improved domestic gas supply and the government's policy/financial support.
The conversion of naphtha-based urea plants, commissioning of new capacities under the New Urea Investment
Policy, and the revival of urea plants are expected to drive gas demand from the fertiliser sector.
Figure 105: Trend in Natural gas offtake and consumption by Fertiliser sector
(mcm)
Offtake for Fertiliser sector: 4.2% CAGR
70,000 40.0%
33.7%
32.4% 32.4% 35.0%
60,000 30.4% 28.6%
28.3% 27.3% 27.8% 27.8%
30.0%
50,000 26.5%
23.1% 25.0%
40,000 22.4%
20.0%
30,000
15.0%
20,000
10.0%
10,000 5.0%
0 0.0%
FY03 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20P
Total offtake Offtake for Fertiliser sector Share of Fertiliser sector
Note: P:provisional, mcm:million cubic metres

Source: Fertilizer Association of India (FAI), CRISIL Research
Administrative pricing mechanism is followed for natural gas pricing

The power and fertiliser sectors take priority over other sectors to receive gas supplies under the Administered Price
Mechanism (APM). On October 18, 2014, Cabinet Committee on Economic Affairs (CCEA) approved increase in
domestic gas price by 33% to $5.6/mmbtu from $4.2/mmbtu effective November 1, 2014 onwards.
However, on October 18, 2014, the Cabinet Committee on Economic Affairs (CCEA) approved a new mechanism for
determining the price for domestic natural gas. The domestic price of natural gas is the volume weighted average of
gas prices at Henry Hub, Alberta Gas Reference Point, NBP and Russia. Prices at the three trading hubs/Russian
domestic price will be deducted by $0.5 per mmbtu to account for transportation and treatment charges.
In April 2015, the CCEA had approved a proposal to pool or average out prices of domestically available natural gas
and the more expensive imported liquefied natural gas (LNG) used by fertiliser plants. This is expected to make the
cost of gas uniform across plants. Currently, though the government provides adequate subsidy to all plants, the cost
of gas (which is used as both feedstock and fuel in urea production) varies across plants due to differential rates of
domestic gas and imported LNG.
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Tie-ups by fertiliser companies for R-LNG
The fertiliser companies have entered into contracts with GAIL for the supply of LNG. These contracts are structured
as take or pay contracts, meaning that the companies have to pay for the contracted quantities even if they fail to
utilise or lift the contracted amount.
Limited pipeline infrastructure prevents increased gas usage

Absence of pipeline infrastructure in certain parts of the country is limiting natural gas usage by the fert iliser sector.
As a result, 3 urea units are still running on naphtha which are comparatively much more costly.
Naphtha
Shift to natural gas in fertiliser sector led to decline in demand for naphtha
The fertiliser sector share in naphtha consumption has declined from close to about 41% in fiscal 2013 to 7% in fiscal
2015 following increased natural gas usage due to the regulations adopted by the Government, which made it
mandatory for the urea plants to switch to natural gas from naphtha. Three plants viz. SPIC (Tuticorin), Mangalore
Chemicals and Fertilisers, and Madras Fertilisers which were running on naphtha as a feedstock for manufacture of
urea got converted or are about to get converted to natural-gas based plants in the ongoing fiscal. Mangalore
Chemicals & Fertilizers Ltd (MCFL) and Southern Petrochemicals Industries Corporation (SPIC), Tuticorin, SPIC
(Tuticorin) and Madras Fertilisers plants are either running on gas or have converted to gas -based units and are
awaiting gas pipeline connectivity.
As per the third stage of urea pricing policy, the non-gas based units were to be converted to gas by March 2010.
However, since a number of plants are yet to have pipeline connectivity, not all plants have been converted. However,
once the pipeline connectivity is established, all the plants are expected to be converted. Hence, we expect the share
of naphtha in total feedstock to diminish in future.
Figure 106: Trend in total consumption of Naphtha and consumption by Fertiliser sector
('000 tonnes)
Offtake for Fertiliser sector: -16.2% CAGR
16,000 30.0%
14,000
25.4% 25.0%
12,000
20.0%
10,000
8,000 15.0%
6,000
10.0%
4,000 8.3% 8.4% 8.6%
7.3%
4.6% 5.0%
2,000
2.7% 2.4% 2.6% 2.9% 2.5%
1.1%
0 0.0%
Total consumption Consumption in Fertilisers Share of Fertiliser sector
Note: P:provisional
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Naphtha pricing happens through mutual consultations
Naphtha prices were decontrolled in 1999, with the result that prices now move in line with international prices.
However, oil companies continue to price their products through mutual consultation, in order to prevent wide
fluctuations in the prices of naphtha.
Phosphoric acid
Phosphoric acid is the key raw material used to produce the major phosphatic fertilisers, single super phosphate
(SSP) and di-ammonium phosphate (DAP). Companies either purchase phosphoric acid, or produce phosphoric acid
using rock phosphate and other inputs.
Majority of phosphoric acid requirement imported

Nearly 43% of phosphatic fertiliser capacities are based on utilising imported phosphoric acid, while the balance 57%
is based on captive production of phosphoric acid using rock phosphate and sulphuric acid. Around 6 1% of the
phosphoric acid demand i.e. 2.4 million tonnes was imported by the fertiliser industry during fiscal 2020. Domestic
production during the year was 1.6 million tonnes which translates into an utilisation rate of 70-75%. As of fiscal 2020,
total domestic installed capacity stood at 2.1 million tonnes. IFFCO is the largest player accounting for more than
40% share of these capacities while Coromandel International and Paradeep Phosphates followed second and third
respectively with around 15 and 14% share respectively.
Figure 107: Player-wise breakup of Phosphoric Acid production capacities in India (fiscal 2020)
SPIC, 10% RCF, 1%

Gujarat State
Fertilisers and
Chemicals, 3%
FACT, 7% IFFCO, 41%
Hindalco, 8%
Coromandel
International Ltd,
15% Paradeep
Phosphates, 14%
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Figure 108: Trend in production and imports of Phosphoric acid
('000 tonnes)
Total Phosphoric acid supply: 1.0% CAGR
3,500 80.0%
3,000 68.9% 70.1% 70.0%

64.1%64.2%
61.6% 60.9%
60.0%
2,500 58.1% 56.7%55.1% 56.7%
52.3% 52.2% 50.0%
2,000
40.0%
1,500
30.0%
1,000
20.0%
500 10.0%
0 0.0%
Production Imports Imports as % of total supply
Note: P: provisional
Rock Phosphate
Rock phosphate is the basic raw material used to make SSP and DAP. Smelting rock phosphate with sulphuric acid,
sulphur, nitric acid, pyrites or smelter gases produces phosphoric acid.
Imports of rock phosphates have seen steady growth due to demand from comple x
fertilisers
Four companies in India - Pyrites, Phosphates & Chemicals Ltd, Mussoorie; Rajasthan State Minerals & Metals,
Jhamarkotra; Madhya Pradesh State Mining Corporation Ltd, Jhabua and Sagar; and West Bengal Mineral
Development & Trading Corporation, Purulia manufacture rock phosphate. Reserves of Indian rock phosphate are
concentrated mainly in Jharkhand, Rajasthan, Madhya Pradesh, and Uttar Pradesh. Though the production of rock
phosphate has been rising over the years, it has still fallen short of demand. Consequently, imports of rock phosphate
have been going up since 1995-96 due to the higher growth in demand for complex fertilisers. In fiscal 2020, rock
phosphate imports was 7.7 million tonnes. Imports are mainly sourced from Jordan, Togo, Egypt, Peru and Morocco
which accounts for over 90 per cent of total imports.
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Figure 109: Trend in production and imports of rock phosphate
('000 tonnes)
Total Rock Phosphate supply: 1.9% CAGR
9,000 95.0%
8,000
7,000 89.7% 90.0%
89.8%
6,000 87.3%
86.4% 86.0%
85.5% 85.6% 85.0%
5,000 84.7%
4,000
80.0% 79.7% 80.0%
3,000
77.0% 76.9%
2,000 75.0%
1,000
0 70.0%
Ammonia
Share of imports in Ammonia consumption has increased over the last few years
Ammonia is a primary raw material for nitrogenous fertilisers. Ammonia is produced domestically as well as imported
from international markets. Ammonia production has been steady in over the years. In fiscal 2020, total domestic
ammonia production stood at 14.4 million tonnes whereas imports were at 2.6 million tonnes. However, during the
period from fiscal 2003 to 2020, the share of imports has increased from 11.4% to 15.4%.
Figure 110: Feedstock-wise share of ammonia for nitrogenous capacity (as of November 2020)
Coke oven gas,
Ammonia 0%
(external supply),
16%
Naphtha, 3%
Natural Gas, 81%
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Figure 111: Trend in production and imports of ammonia
('000 tonnes)
Total ammonia supply: 1,5% CAGR
16,000 18.0%
14,000 16.0%
15.5%15.4%
14.3% 14.0%
12,000 13.0% 12.7% 13.5%
12.6%
12.1% 12.0%
10,000 11.4% 11.4% 11.3%
10.7%
10.0%
8,000
8.0%
6,000
6.0%
4,000 4.0%
2,000 2.0%
0 0.0%
Sulphur
Imports of sulphur have declined over the last few years

Sulphur is another key raw materials used in manufacturing of fertilizers. Strengthening of domestic low-cost
production has led to subdued level of imports in recent years. Total imports of sulphur declined to ~1.2 million tonnes
in fiscal 2020 from ~1.8 million tonnes in fiscal 2003.
Figure 112: Trend in imports of sulphur

('000 tonnes) -2.2% CAGR
2,000
1,807 1,804
1,748
1,800 1,626
1,547
1,600 1,433
1,294 1,346 1,347
1,400 1,290 1,235
1,206
1,200
1,000
800
600
400
200
0
127
6.3 Overview of domestic fertiliser industry
Fertiliser industry in India had been under government control over the years. The Government of India has
formulated several policies to support the fertiliser industry in general and to control and maintain the prices of
essential fertilisers at low levels in particular. The government controls have influenced the extent of investments in
the fertiliser industry, degree of competition and marketing and distribution strategies of players.
High degree of government control

Since independence, the Government of India has formulated several policies to support the fertiliser industry in
general and to control and maintain the prices of essential fertilisers at low levels in particular. However, its approach
changed in 1991, when as part of the economic liberalisation programme, it gradually began relaxing its control on
the industry.
The government controls have influenced the extent of investments in the fertiliser industry, entry and exit of players,
degree of competition and marketing and distribution strategies of players. For instance, the retention price scheme
(RPS), introduced in the late seventies, for urea players (that was implemented till fiscal 2003) provided a 12% post-
tax return on net worth, which encouraged investments, but did not grant incentives for cost efficiency. In addition,
the government's norms on marketing and distribution of fertilisers influenced the level of competition in the industry,
since it specified not only the states to which each company could sell its products, but also the quantum of supply.
Varied feedstock base

Feedstock is the raw material used in the manufacture of fertiliser. The feedstock used in the manufacture of
nitrogenous fertilisers (natural gas, naphtha, coal, fuel oil, LSHS or external ammonia) is different from that used in
the manufacture of phosphatic fertilisers (phosphoric acid and sulphur). The feedstock used in a plant determines
the overall cost of production, subsidy allocation and also to some extent the profitability of the plant. The availability
and cost of the feedstock, the technology used in the plant and also the location of the plant are some of the reasons
for the use of varied feedstock.
As of November 2018, 79.3% of the domestic nitrogenous capacity was based on captive ammonia production, while
the remaining 14.6% is procured externally. Of the captive ammonia capacity, around 79.3% is based on natural gas,
5.8% on naphtha, and the rest on others such as caprolactam, LSHS and coal etc. Though the capacity under captive
ammonia production has been more or less constant since fiscal 2007 (on a year-on-year basis), the contribution of
natural gas as a feedstock for nitrogenous industries has increased during this period. This is mainly on the back of
switch from fuel oil to natural gas. Also, efforts of the government and players to convert from high cost feedstock
(naphtha) to natural gas have helped improve share of natural gas in overall feedstock. Going forward, this trend is
expected to continue.
Phosphoric acid and sulphur are the primary raw material used in the production of the major phosphatic fertilisers,
SSP and DAP. Companies either purchase phosphoric acid or produce it using rock phosphate and other inputs. A
few companies have their own manufacturing facilities, while the rest import their requirements.
Heavy dependence on imported fertilisers due to insufficient capacities

While India is one of the largest fertiliser consumer in the world, it is also one of the major importers around the globe,
on account of lower capacities compared to consumption. While the demand for urea has remained around 30 million
tonnes over the past few years, its capacities have remained more or less stagnant at around 22-24 million tonnes.
Moreover, India does not have any manufacturing capacities for MOP. As a result, the country is highly dependent
on import of fertilisers. Nonetheless, the government has made efforts to gradually increase the country's urea
capacity by reviving five non-operational urea plants. Of this, Ramagundam and Gorakhpur plants are likely to come
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on stream by H1 FY22 and Sindri and Barauni plants to commission in H2 FY22. Talcher plant is expected to get
commissioned in fiscal 2025 as the project has been delayed due to technical reasons.
Figure 113: Breakup between manufactured and traded fertiliser volumes (fiscal 2021)
Urea DAP and Complex
29% 37%
Total Volume
Total Volume
34.4 million tonnes
21.4 million tonnes
63%
71%
Traded Manufactured Traded Manufactured
Source: Fertilizer Association of India (FAI),mfms, CRISIL Research
Vulnerability to fluctuations in international fertilisers and raw material prices

Indian fertiliser industry is not only dependent on imported fertilisers, but for imports of raw materials as well.
However, requirement of imported raw materials varies from company to company, depending upon the product mix.
On account of this, Indian fertiliser industry is highly vulnerable to the fluctuations in the international prices of key
raw materials such as rock phosphate, phosphoric acid, ammonia, sulphur, sulphuric acid etc.
While for urea players, the entire rise in costs is pass-through by government in the form of subsidy, complex players
are more vulnerable as the subsidy provided to them is nutrient-based (fixed). Although the retail prices of complex
fertilisers are market driven w.e.f. April 1st, 2010, offsetting the rise in raw material cost by hiking price at similar
levels is not possible, as this would result in subdued demand.
Production is energy intensive

The fertiliser industry, especially the nitrogenous fertiliser segment, is energy intensive. Energy sources are used not
only as feedstock, but also to meet the power and fuel requirements of the industry. As feedstock, these are used to
produce ammonia, which is then converted into nitrogenous fertilisers. The material cost, and the power and fuel
expenses of the nitrogenous fertiliser segment constitutes more than 70-75% of the total production cost. Most plants
are set up near feedstock sources to maximise locational advantages.
Access to technology remains a key concern for the industry

Access to technology is a major constraint in the fertiliser industry, since the technology needed to manufacture major
fertilisers is domestically unavailable. For instance, there is no domestic capability in the urea plant for gassification
or for ammonia synthesis loops in ammonia production. Consequently, the basic process designs in the fertil iser
industry have been licensed. Ammonia, urea and phosphatic plants operate on established international
technologies. Moreover, technology acquisition costs are high due to supplier limitations worldwide. The preferred
technology suppliers for Indian plants have been Haldor Topsoe, followed by ICI, Shell and Kellogg. Among urea
plants, Snamprogetti and Montedison have been the main licensors.
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Sector is capital intensive
The fertiliser industry like other manufacturing industries is highly capital intensive. The average cost of setting up a
greenfield urea project is approximately Rs.40,000 to 45,000 per tonne (natural gas based). The average construction
period for a new plant is 35-40 months. Fertilizer industry is capital intensive in nature as cost of land acquisition,
construction costs of manufacturing facilities and machinery/equipment costs can be higher and may act as an entry
barrier for the players .entering in to market. Fertilizers manufacturing plants with proximity to transportation facilities
such as ports, railways, highways and waterways benefit in logistics operations .
Highly dependent on monsoon for demand growth

The most distinct characteristic of the fertiliser industry is its high dependence on monsoons for growth in demand.
Typically, the demand for fertilisers picks up during seasons of good rainfall, which helps the companies improve
their financial performance through volume growth. On the other hand, drought conditions lead to high inventory
levels and a consequent decline in profits.
Private sector leads in capacity share

Figure 114: Sector-wise breakup of installed capacities (nutrient terms) (fiscal 2020)
Phosphatic fertilisers (including SSP)

Nitrogenous fertilisers
25%
Total capacity Total capacity

49% 14.3 million tonnes 7.3 million tonnes
26%
Co-operative sector Public sector Private sector Co-operative sector Public sector Private sector
As of November 2020, nitrogenous fertiliser capacity stood at 14.3 million tonnes (in nutrient terms). Of these, 49%
was accounted for by the private sector while 26% and 25% by the public and co-operative sector, respectively. The
total phosphatic fertiliser capacity (nutrient terms) in the country was 7.3 million tonnes as of November 2020. Of
these, SSP capacity stood at 1.9 million tonnes and is dominated by the private sector with no participation of public
and co-operative sector.
6.4 Overview of manufacturing process and technology

In the past decade, there have not been any significant technological advancements in the basic manufacturing
process of fertilisers. The focus has largely been on refining existing processes, in order to reduce power
consumption, increase efficiency, develop better autoclave materials to enable production at a higher temperature
and pressure, and improve choice of catalysts.
The manufacture of ammonia and urea (nitrogenous fertilisers) is highly technology intensive, as compared with the
manufacture of complex fertilisers. The processes and equipment for almost all fertilisers (with the exception of SSP)
are procured from overseas technology licensors. The basic process designs in the fertiliser industry are patented
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and most countries use them under a licensing system. The choice of technology is dictated by the raw
materials/feedstock being used, government policies affecting their supply, process reliability, operational flexibility
and environmental friendliness.
Nitrogenous fertilisers - Urea

In India, urea is the most widely used nitrogenous fertiliser with a nitrogen content of 46%. The primary raw materials
required are carbon dioxide and ammonia, which are compressed and allowed to react at 160-220 atmosphere (atm)
and 170-190 in an autoclave to form ammonium carbamate, which is then decomposed to produce urea.
The choice of technology is largely influenced by the selection of feedstock, as it constitutes a high proportion of the
cost and its availability is a function of government policies. The other important criteria for the selection of technology
is per unit energy consumption and capital cost, as the manufacturing processes of ammonia and urea are energy
as well as capital intensive. In addition, other parameters such as process rel iability, operational flexibility and
environmental friendliness are considered. The following is the list of processes used by the players depending on
the feedstock to produce ammonia and hence urea.
Table 13: Feedstock and related process technology for manufacturing urea
Feedstock Process technology
Naphtha Gasification, Steam Reforming, Partial Oxidation
FO/LSHS Gasification, Partial Oxidation & Synthesis
Natural gas Steam reforming, Stamicarbon & Synthesis
Coal Kopper's Totzec coal gassification

The various manufacturing processes are Montedison process (Italy), Mitsui Toatsu Improved process (Japan-Toyo),
Carbon-dioxide stripping process (Stamicarbon-Holland), Technimont and Snamprogetti Ammonia stripping process
(Italy). The Indian fertiliser plants use technologies developed by these providers.
Nitrogenous fertilisers – Ammonium sulphate (AS)

It is one of the earliest nitrogenous fertilisers produced and has a nitrogen content of 20.6%. The raw materials
required to produce ammonium sulphate (based on the process used) are sulphuric acid, ammonia or gypsum. There
are about four methods of production of AS.
One of the key methods widely used in India is Gypsum process. In this process, Ammonia gas is absorbed in water
and then converted to ammonium carbonate by absorbing carbon dioxide. Ammonium carbonate is then reacted with
gypsum (calcium sulphate) to produce ammonium sulphate and carbon dioxide. Naturally occurring gypsum, or by-
product gypsum can be used for this process. The calcium carbonate that is produced can be used for manufacturing
cement. In India, approximately half of the ammonium sulphate capacity of around 0.6 million tonnes is manufactured
using this process.
In addition to the above, ammonium sulphate is formed as a by-product during the manufacture of caprolactam. In
India, approximately 0.3 million tonnes of ammonium sulphate, of the total capacity of 0.6 million tonnes, is produced
by this method.
Phosphatic fertilisers - Single super phosphate (SSP)

The raw materials required to produce SSP are rock phosphate and sulphuric acid. Ground rock phosphate is mixed
with sulphuric acid (55-75% strength) in a specially designed mixer that discharges the product on to a wide conveyor
belt where the reaction is completed. The reacted mass is then sent to a curing shed, where the product is stored for
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1-3 weeks for curing and drying. The cured product is reclaimed, milled, screened and either bagged or sent for
granulation. Granulation is done in the steam drum, and the finished product is subsequently bagged.
Potassic fertilisers - Muriate of potash (MoP)

The main raw materials required are potash minerals or brine (saline solution). The main potash mineral is sylvinite,
which is a mixture of potassium chloride and sodium chloride. Potassium chloride is recovered either by hot leaching
or by the flotation process.
Leaching process: The crushed ore is mixed with adequate quantity of recycled brine, which is already nearly
saturated with sodium chloride (NaCl) and heated almost to boiling point, in order to dissolve potassium chloride
(KCl). The KCl rich brine, on clarification and cooling by vacuum evaporation, produces KCl crystals, which are
centrifuged, washed, dried and packed.
Flotation process: The crushed ore is washed to remove clay slimes and first treated with starch or mannogalactan
gums, in order to render it inert to amines, and then with an amine-acetate, which selectively coats KCl particles. Air
is then bubbled through the slurry. The air bubbles attach themselves to the coated particles and float to the surface,
while uncoated particles sink. The floated KCl is centrifuged, dried and packed.
Potassic fertilisers - Sulphate of potash (SoP)

SoP is largely used for growing tobacco, which requires chloride-free potassium fertilisers. It is generally
manufactured from potassium chloride, although some part of the production is based on its double salt with
magnesium. SoP is manufactured by the action of sulphuric acid on potas sium chloride. The reaction is carried out
in a special furnace consisting of a cast iron muffle with rotating ploughs to agitate the reaction mixture. The gaseous
hydrochloric acid is then cooled and absorbed in water.
Complex fertilisers
Manufacturing of NPK trough granulation typically involves three steps:
 Mixing of raw material before granulation
 Pelletizing
 Processes after granulation
The raw materials are crushed into powder form and batched together. After batching in portions, these powders are
mixed as per desired product requirement. These pellets are then naturally dried or by using a drying machine.
Granulation is the most important process for manufacturing of NPK fertilisers. In this process the powdered materials
are converted into pellet fertilisers. Vapour is added during the process under controlled liquid condition exerts
squeeze force to convert materials into granules. These granules are then screened to weed out granules of
inappropriate sizes. The qualified granules are then coated and packed into bags.
Di-ammonium phosphate (DAP)

DAP (18-46-0) is a high analysis fertiliser that contains 18% ammoniacal nitrogen by weight and 46% phosphate by
weight (P2O5, mostly water soluble). Raw materials required for its manufacture are phosphoric acid with 40-54%
P2O5 and ammonia. DAP is manufactured by reacting two molecules of ammonia with one molecule of phosphoric
acid. The above reaction is exothermic.
H3PO4+ 2NH3 → (NH4)2HPO4
The preliminary neutralisation is carried out in a pre-neutraliser. Subsequently, the slurry containing a mixture of DAP
and MAP (mono ammonium phosphate) is measured into the granulator. In the granulator, it is further ammoniated
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to get the desired mole ratio of ammonia and phosphoric acid. The granulator discharge is then dried, screened,
cooled and conditioned by the coating agent, if necessary, and then bagged.
Figure 115: DAP manufacturing process
The main raw materials are phosphoric acid, ammonia, sand (as filler) and Defoamer Phosphoric acid (54%) and an
hydrous ammonia are pumped from storage tanks to pre- neutralizers (PN Reactor) reaction takes place as a result
of which DAP and mono- ammonium phosphates are formed. The slurry contains 80% solids and is pumped to rotary
granulators where further ammonia is fed to convert mono-ammonium phosphate to di-ammonium phosphate in a
mole ratio of 1.8.
The recycled material along with the filler mixed in the fines conveyors are fed to the granulators. Wet DAP granules
flow by gravity to rotary dryers where they are dried in aco-current stream of hot air. The dried granules are screened
for size separation in doubled eck vibrating screens where over-sized and under sized material are sent back to the
system by means of fine conveyors. The product falls into the product compartment of the screen hopper and is
withdrawn through product coolers and dispatched to product storage or direct to the Bagging Plant as required.
The wet process system consists of scrubbing and reaction sections. Scrubbers, which are venture cyclone type,
handle the ammonia and dust bearing fumes and gases evolved from the pre-neutralizer, granulator, drier and dust
systems. The scrubbing medium for the three scrubbers is recirculated phosphoric acid solution. The fumes and
gases from dryer and fume scrubbers are forced by respective fans to a tail gas scrubber whereas gases and fumes
from pre-neutralizer granulators and coolers are scrubbed and exhausted to atmosphere through the fume stack.
Overview of manufacturing technology
Raw materials Dosing system

Solid raw material fed to the process plant is mainly filler viz. sweet river sand or ETP sludge,-spec material is also
transferred from off spec/filler storage to process plant. Filler material is charged either manually or by pay loaders
into the offspec/ filler hopper placed over inlet chute of offspec/ Filler bucket elevator Filler/offspec will be fed to this
elevator uniformly by vibratory feeder.
Slurry Preparation
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The process is based on the operation of single pipe reactor fitted within the granulator, operating on gas Ammonia.
Ammonia is supplied from Ammonia transfer pumps from Ammonia storage tanks to pipe reactors. The required N/P
ratio is finally reached in the granulator by injection of additional liquid Ammonia into the solids bed through a
ploughshare ammoniation system. The production of DAP is controlled by controlling the flow of ammonia and
phosphoric acid in the pipe reactor accurately through ratio control. The N:P ratio is controlled within the range of 1.8
to 2.
The pipe reactor installation facilitates the slurry of Ammonium phosphate and small amount of sulphate formed by
neutralization reaction inside pipe reactor to be sprayed directly onto the solids bed of the granulator this pipe reactor
(P.R.) slurry have temperatures ranging from 135 to 150 deg C and moisture content between 4 and 8%. Phosphoric
acid fed to pipe reactor is made by the acid coming from the scrubbing system, complemented by the concentrated
acid fed to pipe reactor vessel plus, occasionally, some process water.
Granulation
To make DAP, all the raw materials and recirculated solids are fed to the granulator. Recycle flow put normally an
upper limit in the solids capacity of the plant. The recycle is constituted by fines, crushed oversize and part of the
commercial product, which is returned to the granulator to keep the water and heat balance.
Granulator is equipped with a lump kicker to prevent any lump from remaining inside the drum disturbing the flow of
solids and avoiding their normal flow in the dryer. Lumps kicker reject the lumps to an attached grizzly, which
disintegrate them by the rotating action. Solids leaving granulator, normally with moisture content around 1.8- 2.4%
are gravity fed to dryer, in order to achieve the final guaranteed moisture of 1.0%. Gases emitted in the granulator
are sucked towards the Granulator Prescrubber to recover most of the evolved dust and ammonia.
Product Drying, Screening and Grinding

In the Rotary Drum Dryer, the moisture in the solids coming from granulator is reduced with a preheated air in a co-
current flow. Dryer drum exit is equipped with a grizzly, to avoid any lump, which could block the dryer elevator. If
any lump is coming out, grizzly takes it up and throws it into a hopper, which feeds the lump crusher. Crushed lumps
will join the rest of dryer discharged product on exist dryer belt conveyor. Air leaving the dryer contains some
Ammonia escaped from the product as well as dust and water evaporated from product when drying.
Cyclones separators are used to separate the carried dust and the air is subsequently scrubbed to get free from
ammonia. Dried product is fed to the process screens. The on-size product from screen passes directly to a recycle
regulator. The separated oversizes fall by gravity into oversize mills. Undersize product from screen falls by gravity
to the recycle belt conveyor.
Air Desaturation Unit

The purpose of the Air De-saturation Unit is to chill air to low temperature to reduce moisture content and to heat the
outgoing air from the chilling unit to reduce the relative humidity of the air going to the Rotary Cooler. This is required
to prevent moisture pick up by outgoing product from the ambient air provided for cooling.
Final Product Treatment
On-size product is cooled down using conditioned air from the Desaturation unit. DAP having critical relativity humidity
(CRH) of about 75% at 30 deg C, the product DAP picks up moisture if the ambient air has a higher relative moisture.
Air heater increases air temperature and consequently decreases air relative humidity. Dust coming out with the air
leaving the cooler and plant dedusting system is recovered and fed back to the recycle conveyor. Cooled product is
fed to the final product belt conveyor.
Gas Scrubbing
The gas scrubbing is carried out in several washing steps e.g. in a granulator prescrubber, dryer scrubber,
Granulator scrubber, Cooler and dedusting scrubber and final tail gas scrubber, where the s treams leaving the
mentioned three scrubbers will be washed. The gases leaving Dryer scrubber together with the gases from the
granulator scrubber and Cooler & Dedusting scrubber are fed to the Tail gas scrubber. Scrubber exhaust gases will
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be cleaned with acidulated water to reduce its dust, fluorine and ammonia content. To achieve this, the scrubber
liquor is slightly acidulated with sulphuric acid in order to absorb both Ammonia and Fluorine. Process water is used
as a washing liquid in the scrubber. Defoamer is used in the scrubbers and vessels where phosphoric acid is used
to prevent the formation of foams.
6.5 Overview of government policies and regulatory framework for fertiliser

industry in India
Evolution and extent of regulation in the industry
Given the regulated nature of the industry, the government policies are an extremely important aspect of the Indian
fertiliser sector. The extent of regulation though differs from category to category. The key aspects for different
categories of fertilisers are given in the table below:
Table 14: Different aspects of government policy

Aspect Urea Regulated (Y/N) Remarks
Capacity addition As per new urea investment policy, permission is

(expansion/new Y required for brownfield expansion, new projects
project/debottlenecking) as well as bottlenecking of plants
The reimbursement will be based on variable cost
plus the lowest fixed cost of all the urea plants i.e.
Production over 100 N Rs 2300/MT (subject to cap of import parity price
plus incident charges borne by government on
import)
Since November 2014, domestic prices has been
linked to the certain benchmark gas prices. Gas
Feedstock Partly prices will be determined on half-yearly prices at
the hubs with one quarter leg
Sales of 50 per cent production of the reassessed

capacity are controlled. The manufacturer is
allowed to sell the remaining 50 per cent on his
Distribution Partly own. Rail freight is paid on actual basis while road
freight rates are escalated by WPI (composite
index)
Imports are allowed only through canalising
agencies. Exports are permitted under license
Import/Export Y and gains have to be equally shared with the
government
Farmers get urea at MRP, while producers get
the subsidy from the government which is the
Pricing Y difference between the concession price and the
MRP
The major development took place on April 1, 2003, when the government replaced the erstwhile Retention Pricing
Scheme (RPS) with Group-based concession scheme (New pricing scheme - NPS). The RPS was in existence since
1977.
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The evolution of the NPS scheme in recent years
Impact of key developments throughout NPS regime

 Lowering of base of retention prices during NPS I adversely affected all units, though, magnitude of impact
was minimal for the efficient ones.
 Under the second stage due to revision of the CRC, companies that commissioned their plants after 1992
took a further hit. However, the impact on the industry was not significant since the energy consumption
norms of the units was moderate (except for some).
 During NPS III, few urea units were converted to natural gas based plants as the subsidy was proposed to
be discontinued for plants operating on other feedstock. Also, half of the industry units undertook de -
bottlenecking of their capacities which enabled production beyond the reassessed capacities.
 International urea prices declined significantly to around $218 per tonne in 2016-17 from around $275 per
tonne in 2015-16. Hence, production above reassessed capacities (RAC) remained unviable for majority of
players in 2016-17 as the cost of urea production was relatively higher than the reimbursement (which was
linked to Import Prices Parity (IPP)).
New urea policy - 2015

In order to address players' concern for producing beyond RAC, in May 2015, the government came up with new
urea policy, replacing the existing modified NPS stage III policy. It was initially applicable from June 1, 2015 to March
31, 2019. However, in April 2019, the Cabinet Committee on Economic Affairs announced the extension of this policy
until further notice. Under this policy, there are two major changes that have been implemented compared to the
previous policy.
Tighter energy consumption norms- Of the 30 total indigenous urea plants, the energy consumption norms for 25
plants has been revised with an intention to enhance efficiency as the energy consumed by majority of the players
was lower than the preset norms of NPS-III. The calculation of arriving at new energy consumption norms for each
unit is explained below:
Calculation to determine new consumption norms for each unit
Source: Department of Fertilizers, CRISIL Research
Change in formula for computing reimbursement beyond the reassessed capacities- With a view to incentivize
players for producing beyond the cut-off capacity, the government has proposed following change in the formula for
reimbursement calculation.Governemnt of India started implementation of New urea policy from June 2015.
Old Urea Policy New Urea Policy
Beyond 100% RAC and up to 110% of RAC

Gain sharing betw een government and unit in
ratio of 65:35 w ith respect to IPP subject to
concession rate
Beyond 110% of RAC and up to cut off level
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At concession rate subject to overall cap of Variable cost + uniform MT Incentive*subject to
IPP cap of IPP plus incidental charges borne by
government on imports
Beyond cut off level
At 85% IPP
Note:*Lowest fixed cost of all the urea plants –Rs.2300 per tonne
Source: Government notifications, CRISIL Research
However, this policy does not include MFL-Madras, MCFL-Mangalore and SPIC-Tuticorin as they are not connected
to the gas pipeline network. Further, the government has proposed that the Brahmaputra Valley Fertilizer Corporation
Limited Namrup-II & III plants be replaced with energy-efficient units for which, a restructuring process will be worked
out. Until then, these two units shall continue to operate under the provisions of the Modified NPS -III.
Amendment to New Urea Policy 2015 - In March 2017, the amendment to New Urea Policy 2015 approved by the
cabinet. The ceiling imposed on production beyond RAC during 2016-17, was raised so as to enable all urea units
to produce additional production which otherwise were not able to do so due to low import parity price. The said
amendments were aimed at protecting the production beyond re-assessed capacity by the urea units and are
expected to boost production.
Amendment to New Urea Policy 2015 Revision of energy norms under the new urea policy - During March
2018, under the new urea policy, the Department of Fertilisers (DoF) revised the energy norms under the new urea
policy. The energy norms were extended further to ensure easy availability of urea to farmers and help maximise the
indigenous urea production and reduce the import of urea.
Gas price pooling - In March 2015, the CCEA had approved a proposal to pool or average out prices of domestically
available natural gas and the expensive imported liquefied natural gas (LNG) used by fertiliser plants. It was made
effective from July 1, 2015. This scheme was intended at making the cost of gas uniform across all the plants.
Currently, though the government provides adequate subsidy to all plants, the cost of gas (which is used as both
feedstock and fuel in urea production) varies across plants due to differential rates of domestic gas and imported
LNG. Domestic gas is available at less than half the price of imported LNG. The government also notified that urea
plant of Brahmaputra Valley Corporation would be kept outside the pooled price mechanism for technical reason.
Under this, the pooled gas price for period between fiscals 2016 and 2018 was being computed based on the
requirements of the existing urea plants including the conversion plants as and when the pipeline connectivity is
established. Post fiscal 2019, pooling of gas is estimated to have been computed after considering the requirements
of existing units as well as the proposed brownfield/greenfield units.
Margins for Urea distributors revised to Rs 354 per MT- During March 2018, the government of India revised the
dealers’ margin to Rs 354 per MT for the sale of Urea. The margin is paid to the dealers on the quantity sold via the
POS (point of sale) devices only. Before the revision, the margins were being paid at the rate of Rs 180 per MT to
private agencies and cooperatives and Rs 200 per MT to institutional agencies, in accordance with the notification
dated 18th June, 1999. The dealers and fertiliser companies, after the implementati on of DBT, were consistently
demanding that the margins be increased to ensure financial viability of dealers.
Subsidy payment mechanism for urea

Under the m-FMS system, the subsidy payment takes place in 2 parts. Instead of 100% repayment of "Regular Claim"
in Urea, Department of Fertilisers releases 95% of subsidy to the manufacturers on basis of receipt of fertilisers in
the districts. The balance 5% claim gets released subject to State government's certification on quantity in m-FMS
as well as fertiliser receipt confirmation by retailers through m-FMS.
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Mandatory neem coating of urea
The government has made it mandatory for all domestic producers of urea to produce 10% as neem coated urea
with the objective of promoting the balanced use of fertilisers. Entire quantity of indigenous and imported urea is
being neem coated w.e.f. 1st September, 2015 and 1st December, 2015 respectively.
Reduction of size of urea bag

The government introduced 45 kg bag of urea in place of 50 kg bag of urea from September 2017 onwards in order
to encourage reduction in consumption of urea.
NBS policy for P & K fertilisers

Overuse of one particular fertiliser can result in loss of soil fertility over a period of time and the situation is not
conducive for increasing agricultural productivity to meet the food requirements of the huge population of a country
like India. In India, the consumption of urea was almost 50% more than the consumption of P&K fertilisers.
Additionally, there is non-awareness of usage and deficiency of nutrients other than N, P, K required by soil and
declining response ratio of the soil to the fertilizers application. In order to tackle these issues, the government
introduced a subsidy regime that is nutrient based rather than product based in order to revers e the skew in favour
of Nitrogen and encourage use of Phosphorus and Potassic fertilisers.
The Nutrient Based Subsidy (NBS) policy for P & K fertilisers was implemented by the government w.e.f. 1st April
2010. NBS policy entails providing subsidy at nutrient level, which the government announces on an annual basis.
Currently, 21 grades of P & K fertilisers viz. DAP, SSP, MOP, etc. and 15 grades of NPKS complex fertilisers are
covered under this policy. As per this, retail price of P & K fertiliser are kept at the discretion of the manufacturers. In
April 2020, the CCEA slashed the subsidy on non-urea fertilisers amidst outbreak of COVID-19 to ease the subsidy
burden. NBS rates of all nutrients were reduced by the government.
In April 2021, domestic non-urea fertiliser manufacturers undertook price hikes for di-ammonium phosphate (DAP)
and other complex fertilisers because of an increase in raw material prices. As a result, the retail price of a bag (50
kg) of DAP rose to Rs 1,900 compared with Rs 1,200 prevailing until March. Then on 19th May 2021, the government
announced its plan to increase subsidy on DAP to Rs 1,200 per bag from Rs 500 per bag. And on May 20, it also
hiked the NBS rate for phosphorous (P) content to Rs 45.324 per kg from Rs 14.888 per kg earlier. The revised NBS
rates for DAP and other complex fertilisers will be effective May 20 through October 31 this year. The NBS rates for
other nutrients such as nitrogen (N), potash (K), and sulphur (S) remain unchanged.
Thus, subsidy on DAP has been raised by 137%, and for other complexes by up to 204%, based on the type of
complex fertiliser. Farmers will now be able to purchase a bag of DAP (50 Kg) at old rates (Rs 1,200) with effect from
May 20, 2021, compared with Rs 1,900 seen in April 2021.
Table 15: Trend in nutrient-wise NBS rates

Nutrient FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22* FY22
Revised
rates**
N 20.9 20.9 20.9 15.9 19.0 18.9 18.9 18.8 18.8 18.8
P 18.7 18.7 18.7 13.2 12.0 15.2 15.2 14.9 14.9 45.3
K 18.3 15.5 15.5 15.5 12.4 11.1 11.1 10.1 10.1 10.1
S 1.7 1.7 1.7 2.0 2.2 2.7 3.6 2.4 2.4 2.4
Note:*-Previous rates for FY22, **-Applicable between 20th May 2021 to 31 st October 2021
Source: FAI, CRISIL Research
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Although the government was earlier thinking of inclusion of urea into NBS scheme, it denied the deregulation of
urea prices in June 2019.
After considering all the issues relating to agriculture productivity, balanced fertilisation and growth of indigenous
fertiliser industry, and examining all options for rationalisation of existing fertiliser subsidy regime, the government
implemented the NBS regime, wherein the farm gate prices of fertilizers are decontrolled and subsidy is fixed for
each fertiliser based on nutrient content. The announcement came in the backdrop of declining response of
agricultural productivity to increased fertiliser usage. Thus, to ensure balanced application of fertilisers, the
Government introduced a nutrient based subsidy regime instead of the current product pricing regime. The purpose
is to improve availability of innovative fertilizers products in the market at reasonable prices.
The country is fully dependent on imports in Potassic sector and to the extent of 90% in Phosphatic sector in the form
of either finished products or its raw material. Subsidy being fixed, and fluctuation in international prices has effect
on the domestic prices of P&K fertilizers.
Broad structure of Nutrient Based Subsidy (NBS) - Under the NBS Policy, the Government announces a fixed
rate of subsidy (in Rs. per Kg basis), on each nutrient of subsidized P&K fertilizers, namely Nitrogen (N), Phosphate
(P), Potash (K) and Sulphur (S), on annual basis taking into account all relevant factors including international prices,
exchange rate, inventory level and prevailing Maximum Retail Prices of P&K fertilizers. The per Kg subsidy rates on
the nutrients N, P, K, S is converted into per Tonne subsidy on the various subsidized P&K fertilizers covered under
NBS Policy.
Fertilizers Covered under NBS - At present 21 grades of P&K fertilizers namely DAP, MAP, TSP, MOP, Ammonium
Sulphate (produced by M/s FACT), SSP and 15 grades of NPKS complex fertilizers are covered under the NBS
Policy with following NPKS ratios:
Table 16: Fertiliser grades covered under NBS subsidy

Nam e of fertilizers NPKS ratio/Nutrient content
DAP 18-46-0-0
MOP 0-0-60-0
SSP 0-16-0-11
NPS 20–20–0-13
NPK 10–26–26-0
NP 20-20-0-0
NPK 15–15–15
NP 24-24-0-0
AS 20.5-0-0-23
NP 28–28–0-0
NPK 17–17–17
NPK 19–19–19
NPK 16-16-16-0
NPS 16-20-0-13
NPK 14–35–14
NPS 24-24-0-8
MAP 11-52-0-0
TSP 0-46-0-0
NPK 12–32–16
NPK 14–28–14
NPKS 15-15-15-09
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Per Kg Nutrient Subsidy Rate - An Inter-Ministerial Committee (IMC) has been constituted with Secretary
(Fertilizers) as Chairperson and Joint Secretary level representatives of Department of Agriculture & Cooperation
(DAC), Department of Expenditure (DOE), Planning Commission and Department of Agricultural Research and
Education (DARE). This Committee recommends per nutrient subsidy for ‘N’, ‘P’, ‘K’ and ‘S’ before the start of the
financial year for decision by the Government (Department of Fertilizers). The IMC recommends a per tonne
additional subsidy on fortified subsidized fertilizers carrying secondary (other than ‘S’) and micronutrients. The
Committee also recommends inclusion of new fertilizers under the subsidy regime based on application of
manufacturers/ importers and its need appraisal by the Indian Council for Agricultural Research (ICAR), for decision
by the Government.
Additional Subsidy for Micro-Nutrients Under NBS - Under the policy, any variant of the subsidized P&K fertilizers
with secondary and micronutrients (except Sulphur ‘S’), as provided for under FCO, is also eligible for subsidy. There
is separate additional subsidy for micronutrients namely Boron and Zinc. The secondary and micronutrients (except
‘S’) in such fertilizers attracts a separate per tonne subsidy to encourage their application along with primary nutrients.
Import of subsidized P&K fertilizers - Import of all the subsidized P&K fertilizers including complex fertilizers has
been placed under Open General License (OGL). NBS is available for imported complex fertilizers also except
Ammonium Sulphate. However, in case of Ammonium Sulphate (AS) the NBS is applicable only to domestic
production by M/s FACT.
Freight Subsidy for NBS Covered P&K Fertilizers - In addition to NBS, subsidy for primary freight movement of
the decontrolled fertilisers (except SSP) by rail and road and coastal shipping / inland shipping is being provided to
enable wider availability of fertilisers even in the remotest places in the country.
MRP of NBS covered P&K Fertilisers - Under the Policy, MRP of P&K fertilizers has been left open and fertiliser
manufacturers/marketers are allowed to fix the MRP at reasonable rates. In effect, the domestic prices are
determined by demand supply mechanism. Companies are allowed to fix the MRP on their own. The intention behind
introduction of NBS was to increase competition among the fertiliser companies to facilitate availability of diversified
products in the market at reasonable prices.
As a result of payment of subsidy, farmers are paying less than MRP for P&K fertilizers compared to what it would
have been without subsidy. Though the market price of subsidized fertilizers, except Urea, is determined based on
demand-supply dynamics, the fertilizer companies are required to print Retail Price (RP) along with applicable
subsidy on the fertilizer bags clearly. Any sale above the printed MRP is punishable under the EC Act. MRP is fixed
by fertilizer companies as per market dynamics which is monitored by the Government. Since, P&K fertilizers are
decontrolled and the MRP is fixed by fertilizer companies as per cost of production/ import at reasonable level and
thus can have fix different prices in different markets. Thus, location of the manufacturing facility, proximity to ports
and other transport infrastructure as well as distribution network are key to players’ growth strategy.
Calculation and Payment of Subsidy - The distribution and movement of fertilizers along with import of finished
fertilizers, fertilizer inputs and production by indigenous units is monitored through the online web based “Fertilizer
Monitoring System (FMS). The basic principle adopted in fixation of subsidy rates for different nutrients, is the
identification of benchmark international prices of major consuming fertilizers viz. Urea, DAP and MOP. Based on
these benchmark prices, the delivered prices of these fertilizers are determined taking into account the prevailing
exchange rate. The IMC also takes into account other relevant factors like requirement of nutrients in the country,
balanced use of fertilizers, subsidy burden, MRP of fertilizers etc.”
Freight subsidy
Freight subsidy is provided for the movement of Urea and subsidized P&K-fertilizers. The Department of Fertilizers
notified Uniform Freight Subsidy on 17-07-2008. The Department of Fertilizers had followed different freight subsidy
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policies for different fertilizers prior to implementation of the extant Uniform Freight Subsidy policy. The rates of freight
subsidy for indigenous urea, imported urea, indigenous P&K fertilizers & imported DAP & MOP, etc were different.
The Department of Fertilizers announced the Uniform Freight Policy (UFP) with effect from April 1, 2008 vide
notification dated July 17, 2008 with an objective to ensure the availability of fertilizers in all parts of t he country,
especially distant/remote corners of the country.
Under the Uniform Freight Subsidy policy, movement of fertilizers is classified into two categories namely (i) Primary
Movement & (ii) Secondary Movement. Freight subsidy for each of the two categories of fertilizer movement is
different. Gist of salient features of the Uniform Freight Subsidy policy is given in appended table:-
Table 17: Features of freight subsidy

Type of Movement, Definition & coverage Subsidy Amount
Primary Movement By Rail - From Actual freight is paid on Railway Receipt
It refers to direct movement of plant/port to rake (RR)
subsidised fertilizers by rail point (upto 1400
and/or coastal shipping/inland Kms)]
water transportation including Freight amount calculated for the month
road bridging upto final based on PTPK slab rates;
By Road - From
destination or by any or two or OR
Plant/Port to Block- the actual expenditure incurred by the
by all three modes of
HQ (upto 500 Kms). company during the month, duly certified by
transportation from plant or port
(Transportation company’s statutory auditors, whichever is
to various rake points of
districts. through Coastal / lower
Inland waterways is also
Admissible for Urea and all
permitted)
subsidized P&K fertilizers
excluding SSP.
PTPK Slab rates are notified based on the recommendations of Tariff Commission. Further, the freight
on primary movement of all P&K fertilizers is on the basis of actual rail freight w.e.f. 01-04-2012.
Secondary Movement Freight subsidy is calculated on the basis of

By Road lead distances (average of distances in the
It refers to movement from
[From nearest railrake district) and normative Per tonne Per Km
nearest rake point to District /
point to District / (PTPK) rate* and paid on monthly basis (or)
Block-HQ
Block-HQ] actual freight whichever is lesser
Admissible for Urea only
Source: MoCF, CRISIL Research
Based on the recommendations of Tariff Commission, the slab-wise rates in respect of primary road movement upto
500 Kms were notified for the year 2008-09. These rates are escalated/ de-escalated for each financial year and
notified accordingly. Department of Fertilizers had issued Normative Per tonne per Km Transportation Rates for the
year 2007-08, 2008-09 and 2009-10 based on recommendations made by Tariff Commission in the case of
secondary movement of fertilizers from unloading rake point to retail point in September, 2011. The escalated/de-
escalated Per Tonne Per Kilometre (PTPK) for road transportation in the case of secondary movement of fertilizers
are notified by Department of Fertilizers annually.
The key players currently engaged in the industry have their plants located strategically to leverage on this freight
subsidy available from the government in order to cater to newer and larger markets/ states. These players already
have plants located in the states which are significant in terms of fertiliser demand. However, with the freight subsidy
available for distances as long as 500 kms (in case of road) and 1,400 kms (in case of rail), they can reach markets
which otherwise would have been difficult to compete in considering the intense competition with respect to pricing.
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Direct Benefit Transfer
Direct Benefit Transfer (DBT) is the process of transferring the subsidy or the Government’s scheme benefits directly
to the beneficiary’s bank account. With the entire process being digitalized, it completely eliminates the need of
intermediaries and therefore reduces the turnaround time for the process. Also, it is step by the Government to
increase the efficiency in governance by implementing technology. The primary objective of introducing DBT was to
increase transparency, reduce leakages of benefits and increase efficiency of the social security programmes.
The Government introduced Direct Benefit Transfer (DBT) system in Fertilizers w.e.f. October 2016. Under the
fertilizer DBT system, 100% subsidy on various fertilizer grades is released to the fertilizer companies on the basis
of actual sales made by the retailers to the beneficiaries. Sale of all subsidized fertilizers to farmers/buyers is made
through Point of Sale (PoS) devices installed at each retailer shop and the beneficiaries are identified through
Aadhaar Card, KCC, Voter Identity Card etc. Pan-India Roll out was completed by March, 2018.
Under DBT, the fertilizer sales are being done through the PoS devices installed at retail points across the country.
The cost of installation and maintenance PoS devices and other IT related equipment is borne by the Fertilizer
companies out of the incentive of Rs. 50/MT allowed by the Govt. for acknowledging the receipt of Fertilizers through
Fertilizer Monitoring System (iFMS).
The Department of Fertilizers has recently developed the PoS software version 3.0. The features of DBT PoS
software version 3.0 are as follows:
 New system will provide Aadhaar virtual ID option during use to registration, login and sale activity in DBT
Software
 It captures Sale to farmers, Mixture manufacturers, Planter association separately.
 It has Multi-lingual facility
 It has Provision for Soil Health Card (SHC) recommendation: area-specific, crop specific recommendations.
Integrated Fertilizer Management System (iFMS) for monitoring the sale of fertilizers
DOF has developed an IT enabled system viz., Integrated Fertilizer Management System (iFMS), which captures
end to end details of Fertilizer in terms of Production, Movement, availability, requirement, Sale, Subsidy Bill
Generation to Subsidy payment to fertilizer companies. Few features of iFMS portal are as below:
 Real time, online tracking of fertilizer movement, along the plant/port -rake point district- wholesaler-retailer
chain.
 Real time Fertilizer availability data at state, district, wholesaler & retailer level.
 Real time tracking of sale of fertilizers at subsidized rates to farmers through PoS devices.
 Provision of Soil Health Card (SHC) recommendations to farmers for balanced use of fertilizers.
 Process re-engineering to ensure “Just in Time” release of subsidy to fertilizer companies.
 A complete end to end transaction visibility of fertilizers starting from import/ production till sales to farmers.
As of now, under DBT system, fertilizers are sold on a no-denial basis and it is not mandatory for the buyer to provide
Soil Health Card details while purchasing fertilizers. Further, there is a provision of generating Soil Health Card (SHC)
recommendations to farmers for balanced use of fertilizers, which is only an optional facility.
Subsidized Fertilizer is only allowed to be sold through DoF registered PoS devices only after Aadhaar Based
Biometric Authentication/Presenting Kisaan Credit Card/Voter ID at the time of purchase with Aadhaar enrolment
number. The Details of all purchases are captured in the system and the captured Buyers information (Name,
address, mobile no., ID type etc.) is made available in terms of Top 20 Buyers / Top 20 Frequent Buyers to State
Agriculture Departments and District Collectors for monitoring any malpractices in Fertilizer sale activity.
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In addition, all retailers are sensitized through regular training programs conducted for sensitizing new or old retailers
on correct procedures to follow on sale through PoS devices.
DBT payment system does not cover Imported Urea as the cost of imported urea is completely borne by Government
of India. Subsequently, cost of imported urea is recovered at the statutory rate from Fertilizers Marketing Entities /
handling agencies after adjusting Port dues, customs duty etc. Therefore, no s ubsidy is payable to fertilizer
companies after sale of Imported Urea through PoS devices. However, quantity of Imported Urea sold by retailers
through PoS devices and beneficiary details are captured in iFMS.
Table 18: Difference between earlier process and DBT Model

Earlier Process DBT
Data tracked by mfms only till wholesaler lever; no Data tracked directly at the retailer level through
online tracking of data at the retailer’s level AADHAR-linked PoS machine
85-90% of subsidy paid on basis of receipt of bills at

100% subsidy will be paid based on data recorded at
wholesaler level; remaining subsidy paid after
the retailer level by the PoS machine
retailer’s acknowledgement
Lag of 45-60 days in subsidy payment after sale to

Government intends to make subsidy payments within a
wholesalers, as data not recorded electronically
week of sale recorded by PoS machine
during the sale
Note: mfms - Ministry of Chemicals & Fertilizers' Integrated Fertilizer Management System
Soil Health Card (SHC) scheme

Government has been implementing Soil Health Card (SHC) Scheme since 2015 to provide soil health cards to all
farmers across the country once in a cycle of 2 years. Soil Health Card provides information to farmers on nutrient
status of their soil based on 12 parameters namely primary nutrients (N, P & K); secondary nutrient (S); micronutrients
(B, Zn, Mn, Fe, & Cu); and others (pH, EC & OC) along with recommendations on appropriate dosage of nutrients to
be applied for improving soil health and its fertility for major crops of the area. In cycle-1 (2015-17), 107.4 million and
in cycle-2 (2017-19), 117.5 million SHCs were distributed to the farmers. Financial assistance is provided under Soil
Health card (SHC) for imparting the farmer’s trainings and field demonstrations on balanced use of fertilizers.
During 2019-20, a pilot project ‘Development of Model Villages’ has been initiated in 6954 villages (one village/
revenue block) where individual farm holding based sample collection with farmer’s participation is ensured along
with awareness campaign and demonstration of application of fertilizers as per prescription of SHC.
Under Soil Health Card (SHC) scheme, financial assistance is provided to State governments as follows:
 Training of farmers @ Rs. 24,000/- per training for 2 days with 30 or more participants. So far, 1946 farmer
trainings have been sanctioned to States
 Organizing field demonstration @ Rs. 2,500/- per ha demonstration. So far, 5.50 lakh demonstrations have
been sanctioned to States
 Organizing farmer melas / campaigns @ Rs. 1.00 lakh per farmer mela / campaign. So far, 7425 farmer
melas / campaigns have been sanctioned to states.
6.6 Overview of key risk factors for the industry

Dependence on imported fertilisers, fluctuations in international raw material prices, fluctuation in natural gas prices,
changes in government policy and high dependence on monsoon are key risk factors.
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Key risk factors
Note: L-Low, M-Moderate, H-High

Moderate dependence on imported fertilisers

India is one of the largest fertiliser consumers in the world as well as one of the major importers, with demand
outstripping capacities. While the demand for urea has remained at ~30 million tonnes over the past few years,
capacity is at ~26 million tonnes. With the New Urea Policy 2014, capacity is expected to increase by 23% by fiscal
2025. This is likely to reduce import dependency in case of urea. Besides, India does not have any manufacturing
capacities for muriate of potash (MOP). As a result, the country is highly dependent on imports of fertilisers.
Fluctuations in international raw material prices

The Indian fertiliser industry is not only dependent on imported fertilisers, but on imported raw materials as well.
However, the latter requirement varies from company to company, depending upon the product mix. On this account,
the Indian fertiliser industry is highly vulnerable to fluctuations in the international prices of key raw materials such as
rock phosphate, phosphoric acid, ammonia, sulphur, sulphuric acid, etc. Also, Indian producers are at a cost
disadvantage, as they have to incur huge freight and storage costs while importing rock phosphate, phosphoric acid,
and liquid ammonia. The consolidated nature of global suppliers also adds to the domestic players’ disadvantage.
The government covers the entire rise in costs for urea players in the form of subsidy. However, it provides only
nutrient based (fixed) subsidy to complex players, making them more vulnerable. Although retail prices of complex
fertilisers have become market driven with effect from April 1, 2010, offsetting the rise in raw material cost by hiking
prices commensurately is not possible, as it would affect demand. To mitigate volatility in the prices of raw materials,
some domestic players have acquired stakes in overseas companies producing fertiliser raw material to ensure
feedstock supplies. However, India is likely to continue to import non-urea fertiliser feedstock, owing to persistent raw
materials shortage.
Dependence on gas prices

Lack of adequate natural gas supply is a major concern for urea producers. Shortage of cheaper domestic gas has
forced companies to use more expensive liquefied natural gas (LNG) as feedstock. While companies are largely
insulated from changes in raw material prices, they may face delays in receiving subsidies from the government. This
often leads to higher working capital requirements, pushing up interest costs. In June 2015, the government
implemented pooled gas pricing, which averaged out the cost of domestically available natural gas and high -cost
imported LNG, thereby levelling the cost of gas across plants. Thus, even though the government bears the burden
of raw material, some players benefit or lose out due decrease/increase in working capital requirements.
144
Changes in government policies
Since independence, the Government of India has formulated several policies to support the fertiliser i ndustry in
general and to control and maintain the prices of essential fertilisers at low levels in particular. Government controls
have influenced the extent of investments in the fertiliser industry, entry and exit of players, degree of competition
and marketing and distribution strategies of players. For instance, the retention price scheme (RPS), introduced in
the late seventies, for urea players (that was implemented till 2002-03) provided a 12% post-tax return on net worth,
which encouraged investments, but did not grant incentives for cost efficiency. In addition, the government's norms
on marketing and distribution of fertilisers influenced the level of competition in the industry, since it specified not only
the states to which each company could sell its products, but also the quantum of supply.
Moderate dependence on monsoons

Like any agri-commodity, fertilisers also depends heavily on monsoons for growth in demand. Typically, demand is
robust in seasons of good rainfall, driving financial performance of companies through volume growth. On the other
hand, drought conditions lead to high inventory and a consequent decline in profits. With a normal monsoon in 2021
by IMD, this risk to weighs less heavily on the industry compared with the other risk factors listed above.
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7 Assessment of the fertiliser industry in India
7.1 Overview of fertiliser consumption pattern
India consumes higher quantity of fertiliser per hectare of Arable Land and Land under
Permanent Crops compared to global average
The per hectare fertiliser consumed in India is higher than the global average. Nitrogenous fertilisers, especially urea,
are consumed significantly higher in India compared to most countries in the world. India’s consumption per hectare
is also higher compared to USA. However, China is way ahead in terms of all product categories and has more than
double the consumption per hectare compared to India.
Figure 116: Comparison of India’s fertiliser consumption per hectare of Arable Land and Land under
Permanent Crops compared to other key markets and global average (2018)
(kg per ha)
400
346.2
350
300
250 208.5
200 161.6
150 120.7 126.6
104.1
100 69.7 72.6 79.6
58
41.1
50 26 25.4 24.9 16.4 28.6
0
N P K Total
World China India USA
Source: FAI, FAO, CRISIL Research
7.2 Review and outlook of overall domestic fertiliser consumption

Fertiliser demand to grow at moderate pace in the near term
CRISIL Research expects domestic fertiliser demand to increase by 1.2-2.2% in fiscal 2022 on the back of an
expected normal monsoon. Additionally, government initiatives and marketing activities is likely to create further
awareness among farmers. We expect non-urea fertiliser consumption to grow by ~2-4% on-year, while growth in
urea is pegged at a marginal 0-1% during the year. The push for higher yield, rise in minimum support price (MSP)
of key crops, increased reservoir levels and increasing awareness among farmers about the benefits of complex
fertilisers will aid faster growth in the non-urea segment.
As per CRISIL Research, sown area under field crops during the ongoing kharif season is projected to increase by
0-1% over a high base of 5% in the preceding year. Healthy onset of monsoon, increased moisture content in the
soil and timely kharif harvest is likely to lead to a further single-digit increase in rabi sowing. Moreover, the government
increased the MSP on key fertiliser consuming kharif crops such as paddy and cotton. The Centre hiked paddy MSP
to Rs 1,940 per quintal in fiscal 2022 from Rs 1,868 per quintal in the preceding year. The MSP on cotton has also
been hiked by 3.8% for fiscal 2022. Additionally, the government's procurement of wheat soared to an all -time high
in the current rabi marketing season, with Punjab taking the lead position. Moreover, the government disbursed fiscal
2021-22’s first installment of over Rs 20,500 in farmers’ accounts on 14th May 2021, in turn providing additional cash
in hand of farmers.
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Demand growth in fiscal 2021 was led by non-urea fertilisers
In fiscal 2021, the domestic demand for fertilisers increased by 7.5% (volume terms). Demand for urea and non-urea
grew by 4.4% and 11.2%, respectively. The demand in H1 remained buoyant on account of timely arrival of monsoon,
migration of labourers to hometowns, increased rabi acreage, improved reservoir levels and government norms. In
H2 of FY21, fertiliser demand growth moderated to 1% on year over a high base of 10%.
Over the last six years from fiscal 2015 to fiscal 2021, the growth in fertiliser segment has been largely led by non-
urea segment which witnessed a CAGR of 3.9% as compared to urea segment which recorded a CAGR of 1.2%
during the corresponding year. The higher non-urea segment growth was largely on account of greater awareness
surrounding benefits of Phosphatic and complex fertilisers, training programs by players, government encouragement
through Soil Health Card (SHC) scheme, etc.
Figure 117: Trend and outlook on fertiliser consumption
(million tonnes) FY21 Y-o-Y:Urea + FY21-FY23 CAGR:

FY15-21 CAGR- Urea: 1.2%, Non urea: 3.9% Non-urea: 7.5% Urea: 1-1.5%
35 No-Urea:2.5-3% 10.0%
30 8.0%
7.5%
6.0%
25 5.3%
4.0%
20
2.4% 2.2% 2.7%
2.0% 1.7% 2.1% 2.0%
15
0.0%
10
-2.0%
5 -4.0%
-4.9%
- -6.0%
FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22E FY23P
Urea Non-urea Overall y-o-y growth
Source: FAI, FAO, CRISIL Research
Demand to increase 1.5-2.5% over the next five years

During fiscals 2021 to 2026, demand for overall fertilisers is expected to witness a compound annual growth rate
(CAGR) of 1.5-2.5% to ~68 million tonnes rising from 61 million tonnes in fiscal 2021. Urea is expected to grow at a
0.8-1.8% CAGR to 34-35 million tonnes. Urea will continue to have a dominant share in fertilisers owing to higher
preference among marginalized farmers (constituting ~45% based on holding size) and middle-income farmers.
However, growth is expected to be much slower than the fifteen year growth of ~2.5% CAGR due to increasing
awareness among farmers regarding soil fertility.
On the other hand, non-urea fertilisers are expected to register 2.2-3.2% CAGR to reach 32.5-33.5 million tonnes.
Initiatives taken by the government (soil health card scheme) towards increasing awareness among farmers and
training programs conducted by fertiliser companies will be the key growth drivers. As part of the scheme, a total of
107 million and 115 million soil health cards were distributed in the first (2015-17) and second cycle (2017-19) of the
scheme, respectively. The adoption of non-urea fertilisers is projected to increase in the long term driven by under-
penetration. The CAGR for fertiliser consumption is only marginally higher during fiscals 2021-26 as compared to
1.9% clocked during FY16-21 due to a high base of fiscal 2021.
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Soil health card provide information to farmers on nutrient status of their soil along with recommendations on
appropriate dosage of nutrients to be applied for improving soil health and fertility. Soil status is assessed regularly
every 2 years so that nutrient deficiencies are identified and corrective steps taken. Soil Health Card provides two
sets of fertiliser recommendations for 6 crops that can be grown in a particular area. Recommendations for additional
crops are also given based on the requirement of farmers. Hence, SHC is intended to encourage farmers to adopt
Integrated Nutrient Management for judicious use of fertilizers & crop planning for increase in productivity of the land.
Considering the high level of usage of urea and damage to the soil quality, farmers are encouraged to adopt
Phosphatic and complex fertilisers which are better compared to urea in maintain and improving the soil nutrient
quality. Initiatives such as soil health card are steps toward promoting balanced fertilization and can be driver for
Non-urea fertilizer sales for players. Thus, the Soil Health Scheme is a major driver for Phosphatic segment growth.
Fertiliser application efficiency to improve

The NPK ratio languished to 6.6:2.7:1.0 in fiscal 2020 from 4.7:2.3:1 in fiscal 2011 due to increased usage of urea
over the years. Going ahead, the ratio is expected to improve to 5.8:2.6:1.0 by fiscal 2026 led by government's efforts
to increase awareness about soil fertility and higher adoption of fertiliser mixtures (complex fertilisers) instead of
single-nutrient fertilisers. In spite of this, the ratio is likely to be much higher than the ideal NPK ratio (4:2:1) required
for optimum soil productivity.
Figure 118: Share of products in fertiliser consumption
(mn tonnes)
FY15-FY21 CAGR : 2.6% FY21-FY26 CAGR: 2-2.5%
35.0
31-32 33-34
29.8 30-31 3.5-4.0
30.0 25.6 3.3
3.0 3.2
2.4 2.6 2.7
25.0 2.5 2.5 2.8 8-9
7.0 7.0 8.5
7.0 7.0 7.0 7.3
20.0 6.1 6.7
15.0
10.0 18.8 19.0 19.3 20-21

16.9 17.4 16.7 17.0 17.3 17.8
5.0
-
FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22E FY23P FY26P
N P K
Note: E-Estimated, P-Projected

Source: Department of Fertilizers (DoF), CRISIL Research
Urea
Urea demand growth pegged at 0-1% in fiscal 2022

In fiscal 2021, demand for urea increased by 4.4% on-year. A normal monsoon coupled with increased acreage
during kharif and rabi season propelled the demand of urea. Interactions with industry suggest that urea remained
the preferred fertiliser among the marginalised and middle-income earning farmers. This is owing to high price
differential between urea and non-urea fertilisers. In fiscal 2022, urea demand is expected to witness a marginal 0-
1% increase on the back of an expected similar rise in kharif sowing and normal monsoon. Further, the government
148
increased minimum support price for various kharif crops and also disbursed the first tranche of more than Rs 200
billion into bank accounts of over 95 million farmers under the Pradhan Mantri Kisan Samman Nidhi scheme.
In fiscal 2020, urea consumption increased by 2% on-year during fiscal 2020 aided by a healthy demand in the
second half of the year. Our interactions suggest discounts offered by non-urea fertiliser manufacturers led to a
slower growth in urea consumption vis-à-vis non-urea (3.5%) in FY20.
Figure 119: Trend and outlook on consumption, production and imports of Urea
(mn tonnes) Urea Consumption FY15 to FY21:1.2% CAGR
35.0 32.3 32.5-33 33-34 6.0%
31.2 30.4 31.0
30.0 29.1 29.8 4.4% 29.9
30.0 3.8% 27-27.5 4.0%
24.5 24.2 24.12.6% 24.0 24.5 24.6
25.0 22.6 1.9% 2.0% 2.0%
1-2%
0-1%
20.0 0.0%
15.0 -1.9% -2.0%

8.7 9.1 9.8
10.0 8.5 7.9-8.9
6.0
7.6 7.0-8.0 -4.0%
5.0
5.0 -6.0%
-6.8%
- -8.0%
Consumption Production Imports Consumption growth

Demand for urea to grow 0.8-1.8% over the next five years
Demand for urea increased marginally (1.2% CAGR) between fiscal 2015 and fiscal 2021. The growth was hampered
on account of demonetisation in November 2016 and 100% neem-coating of urea in fiscal 2017. Going ahead, CRISIL
Research expects urea consumption to clock 0.8-1.8% CAGR to 34-35 million tonnes during fiscal 2021 and 2026.
Going forward, even though urea will continue be the dominant fertiliser in overall consumption, increasing number
of farmers are projected to opt for complex fertilisers. Farmers in North India have been traditionally consuming urea
over non-urea. Going ahead, this pattern is expected to change with rising awareness of soil health. This will lead to
lower urea consumption, as compared with the last 15 years growth (2.5%).
149
Figure 120: Trend and outlook on urea consumption in India
(mn tonnes)
40.0 FY15-FY21 :1.2% CAGR FY21 to FY26: 0.8-1.8% CAGR
34.1-35.1
35.0 32.5-33.5
32.3 32-33
31.2 30.4 31.0
30.0 29.1 29.8
30.0
25.0
20.0
15.0
10.0
5.0
-

Urea imports to see declining trend in fiscal 2022 led by increase in domestic capacity
Over the years, domestic production of urea has not been able to keep pace with the demand requirement. In fiscal
2020, imports grew substantially by 22% on year to 9.1 million tonne as domestic plants faced shut downs due to
lack of working capital financing. In fiscal 2021, urea imports further increased by 8% owing to lack of domestic
production and increase in demand. In fiscal 2022, the urea imports are projected to decline led by an increase in
domestic capacity. This is on account of the expected commissioning of Ramagundam, Sindri, Gorakhpur and Baruni
plants in the current fiscal, which will add 5.1 million tonnes of capacity.
Figure 121: Trend and outlook on urea imports

(mn tonnes)
12.0 35.0%
30.4%
10.0 29.1% 30.0%
29.4%
27.2% 24.1-24.3%
24.9% 25.0%
8.0 21.1-21.3%
20.2% 20.0%
6.0 17.1%
15.0%
4.0
10.0%
2.0 5.0%
8.7 8.5 5.0 6.0 7.6 9.2 9.8 8.0 7.0
- 0.0%
Imports Imports as % of consumption

150
Non-urea
Non-urea fertilisers include fertilisers, such as di-ammonium phosphate (DAP) and nitrogen-phosphorus-potash
(NPK) fertilisers, as well as straight fertilisers, such as single super phosphate (SSP) and muriate of potash (MOP).
In fiscal 2021, non-urea fertiliser consumption growth outpaced the growth in urea consumption. Over the long term,
demand for non-urea fertilisers is expected to clock 2.2-3.2% CAGR between fiscals 2021 and 2026.
Non-urea fertiliser demand to grow at a 2.2-3.2% CAGR over the next five years
In fiscal 2021, non-urea consumption grew by ~11% on-year to 28.9 million tonnes. The increase was led by a
significant push by companies in conducting training programs to use this fertiliser over urea. Moreover, government's
initiatives of providing additional cash-in-hand to farmers through various schemes, decline in non-urea fertiliser
prices and increased availability of water through completion of irrigation projects in key non-urea consuming states
is likely to have propelled the demand. Going ahead, demand is projected to moderate over a high base of preceding
fiscal. In fiscal 2022, non-urea fertiliser demand is estimated to increase by 2-4% on year. The growth will be
supported by continued marketing initiatives by companies, increased sowing, and better reservoir levels led by an
expected normal monsoon. Moreover, the government’s decision of providing phosphatic fertilisers to farmers at last
year’s prices in spite of an increase in raw material costs is expected to benefit the segment.
Over the long term, demand for non-urea fertilisers is expected to clock 2.2-3.2% CAGR between fiscals 2021 and
2026. The introduction of NBS in 2010 led to a steep drop in non-urea fertiliser consumption until fiscal 2014.
However, after fiscal 2014, consumption grew at a healthy pace, driven by growth in the DAP and NPK complexes.
Going ahead, DAP and NPK would continue to grow at a faster pace of 3% CAGR each during the next five years.
SSP and MOP are expected to register 2% and 2.1% CAGR, respectively. The growth in non-urea consumption is
likely to be lower during fiscal 2021-26 as compared to the preceding five years due to a high base of fiscal 2021.
Barring FY21, non-urea fertiliser consumption increased only by 1.4% CAGR during the four years ending fiscal
2020.
Figure 122: Trend and outlook on non-urea fertiliser demand in India

(mn tonnes)
35.0 32.6-33.6
30-31
29.2-30.2
30.0 28.9
25.1 26.0
24.6 24.0 24.5
25.0 23.0
20.0
15.0
10.0
5.0
-

151
Complex and DAP to lead non-urea segment growth over the next five years
During the preceding five years from fiscal 2015 to fiscal 2020, DAP was the fastest growing product within the non-
urea segment. It grew at a CAGR of ~5.3% during the corresponding period; complex fertiliser came in second
growing at ~3.3%. Over the next five years from fiscal 2021 to fiscal 2026, DAP and complex fertilizers are expected
to continue to drive the segment growth along with complex fertilisers as India’s production of crops like fruits and
vegetables, sugarcane, cotton, etc. see a higher growth compared to the past. Also, governments attempt on
reducing urea consumption and growing awareness regarding benefits of complex and Phosphatic fertilisers will aid
these products over the next five years. The government has also to encourage of non-urea fertilisers through
introduction of nutrient based subsidy for P&K fertilisers.
Figure 123: Trend and outlook on non-urea product demand

(mn tonnes) FY 21 to FY26 CAGR- DAP: 3-4%, MOP: 2-3%, SSP:2-2.5%
35.0 Complex: 3-4%%
12.5-13.5
30.0
11.1-12.1
25.0
10.8
9.3
8.9
8.8
8.6
8.4
20.0
8.5
4.5-5.0
4.2 4.0-4.5
15.0 3.4 3.5 3.5
4.3 3.8 4.5-5
4.0 3.4 4.0 4.0-4.5
10.0 2.5 2.9 3.2 3.3
11.6-12.6
2.9
10.3-11.3
10.0
9.8
9.5
9.3
9.1
9.0
5.0
7.6
-
FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22P FY26P
DAP MOP SSP NPK

Balanced nutrition benefit to soils and deregulation to aid phosphatic segment growth in
future
The key reason for growth of Phosphatic fertilisers over the last five years is largely on account of increased
awareness among farmers and partial deregulation of the segment. Lesser government control has allowed players
to come into the market with innovative products and compete as per prevalent market conditions. This has allowed
private sector players to gain a strong hold in this segment. With MRP decided by players based on market forces,
factors like distribution network, manufacturing facility location, access to transport infrastructure like ports, rail, etc.
and sourcing or raw material at lower prices become critical to the players’ growth prospects.
Increased population pressure, reduced length of fallow, deforestation and improper agricultural practices have led
to widespread soil degradation in many parts of the developing world. An important manifestation of this
environmental damage is the inadequate replenishment of soil nutrients and organic matter. In particular, phosphorus
(P) deficiency is becoming critical in many soils. Moreover, because of complementarities in the uptake of plant
nutrients, this deficiency threatens to disturb the viability of applying other nutrients. In order to preserve the
sustainability of agriculture and safeguard the livelihood of large segments of the rural population, there is an urgent
need to rebuild soil fertility and so maintain and improve current levels of productivity and farm income.
Sustainable intensification and shifts towards higher-value crops require a careful application of external inputs such
as inorganic fertilizers. A number of factors have constrained fertilizer use, especially in sub-Saharan Africa and low-
income Asia. The most important of these factors are: the limited financial means and risk-taking capacity of farmers;
152
poor and expensive distribution systems for fertilizers (and marketable crop surpluses); a lack of adequate knowledge
of the potential of using local phosphate rock (PR); and the absence of non-industrial techniques to increase the
solubility of PR. Wide ranging studies conducted by FAO at global level have indicated that farmers can not only earn
substantial rates of return at the assumed PR cost but these fertilisers also bring along important environmental
benefits.
Table 19: Trend in import and production of non-urea fertilisers

(in m illion
DAP NPKS MOP SSP
tonnes)
Production Im ports Production Im ports Im ports Production
FY17 4.4 4.2 8.5 0.4 2.8 3.9
FY18 4.6 4.3 8.8 0.5 3.5 3.9
FY19 3.9 6.9 9.5 0.7 3.0 4.1
FY20 4.5 5.4 9.3 0.9 2.9 4.3
FY21 3.7 5.8 10.0 1.7 3.5 4.9
Source: Ministry of Chemicals & Fertilizers' Integrated Fertilizer Management System, CRISIL Research
The demand for DAP and NPKS fertilisers is catered through both domestic production as well as imports. However,
a significant share of NPKS demand is met domestically, while almost more than half of the DAP demand is met
through imports which indicates significant opportunity for domestic players. On the other hand, almost 90% of the
NPKS demand is met through domestic production. Demand for MOP is largely met through imports while that for
SSP is largely met through domestic production. Imports for all product segments have increased over the last five
years from fiscal 2017 to 2021.
NPK nutrient ratio to improve at a moderate pace

Due to the government's efforts to improve soil fertility, coupled with the expected faster growth of non-urea fertilisers
versus urea, CRISIL Research estimates that the NPK ratio will improve (i.e., the potash and phosphorus content in
the mix will increase) during the next five years to 5.8:2.6:1.0 by fiscal 2026 from ratio of 6.2:2.6:1.0 in fiscal 2021.
Figure 124: Trend and outlook on NPK nutrient ratio

(Ratio)
9.0 8.2 8.0
8.0 7.2
6.7 6.7 6.7 6.7 6.6
7.0 6.1 6.2
5.9 5.8 5.8 5.8 5.8
6.0
5.0
4.0 3.1 3.2
2.7 2.9 2.7 2.7 2.7
2.4 2.5 2.6 2.6 2.6 2.6 2.6 2.6
3.0
2.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0
1.0
-
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22P FY23P FY24P FY25P FY26P
N P K

153
7.3 Review of niche and value added products
Government has taken various initiatives to promote organic cultivation and lower use of chemical fertilisers to
support growth in bio fertilisers industry in the medium term.
Growth of bio-fertilisers aided by increased focus on improving soil health

Biofertilisers are used as supplements to chemical fertilisers, and not as replacements. Unlike chemical fertilisers,
these are not sources of nutrients but can help plants in accessing nutrients from the environment. These fertilisers
aid in restoring soil's natural nutrients and build organic matter. Also, biofertilisers are different from organic fertilisers
in the sense that latter are made up of processed material of biological nature (animal or plant) and include mineral
materials that have been altered through microbiological decomposition process, while biofertilisers are essentially
carrier-based living microorganisms.
Fertilisers are used to enhance farm productivity. Since the Green Revolution, usage of fertilisers has grown
exponentially, to meet a burgeoning population's food demand. However, due to long-term harmful effect of chemical
fertilisers (on environment), the government is encouraging use of biofertilisers, along with chemical fertilisers to
maintain soil health. Biofertilisers (solid or liquid) contain living microorganisms that aid nitrogen fixation, phosphorus
solubilisation or nutrient mobilisation, and thus increase soil and/or crop productivity.
Liquid biofertilisers are gaining popularity

Liquid biofertilisers are technical modifications of carrier-based fertilisers. These are liquid inoculant formulations
containing sprayable particles of the inoculant mixed with a suitable medium. It helps extend the viability of fertilisers
and enhances biological activity. Formulations can be in semi-dry form or suspensions containing oil or water-based
emulsions. Formulations contain not only the desirable growth medium, but also some form of dormant spores or
cysts that extend shelf life and increase tolerance to adverse weather conditions. Liquid biofertilisers have several
benefits over carrier-based biofertilisers, such as:
 Longer shelf life

 More cost effective
 Easy and quick quality-control protocols
 Absence of contamination, which ensures high enzymatic activity that further enables absorption of nutrients
by plants
 Less dependent on temperature and humidity
 Easier to use, with 10 times lower dosage than carrier-based powder biofertilisers
Bio-fertiliser industry to grow at 13-14% CAGR over next 3 fiscals

The bio-fertiliser industry grew at ~10-15% compound annual growth rate (CAGR) between fiscals 2018 and 2020.
The expansion was driven by several factors, such as higher demand for organic food, increasing awareness among
farmers about the benefits of bio-fertilisers, and support from the government and regulatory bodies through various
policies issued for the production of bio-fertilisers. Transportation has been a bottleneck due to the implied restrictions
across state, making it difficult for movement of raw materials. Domestic demand is expected to reduce due to slower
growth rate in the economy and more emphasis towards essential goods and services. While the growth has been
achieved on a low statistical base, the increase has been steady. Since 75% of the industry is unorganized, due to
COVID 19 restrictions problems related to logistics and raw material were faced resulting in merely ~4% growth in
FY21. On the organic side, for farmers having organic farms, it is mandatory to use bio fertilizer for crop treatment.
This results in steady consumption in spite of challenges in revenue and logistical front. Bio Fertilizer industry
expected to grow at CAGR of 13-14% fiscal 2021 to fiscal 2024.
154
Figure 125: Trend and outlook on bio-fertiliser industry growth
(Rs billion)
25
20
15
10
10.3 12.4 13.1 13.5 19.8

0
FY18 FY19 FY20 FY21E FY24P
One other reason for the industry’s growth is the increase in the use of liquid bio-fertilisers. These are easier to use,
store and transport and are also more efficient than carrier-based bio-fertilisers. The share of liquid bio-fertilisers is
on the rise. In the future, the growth in liquid bio-fertilisers will be higher than the growth in solid carrier-based bio-
fertilisers. This is because of rising production and growing awareness and availability.
We expect growth in both types of bio-fertilisers to be driven by an increase in volumes. While, the realisations for
carrier-based bio-fertilisers is expected to increase gradually over the next few years, realizations for liquid fertilisers
will fall, only marginally, with an increase in production and availability. Increased c ompetition and more players
entering the liquid bio-fertiliser manufacturing segment will also contribute to the fall in realizations.
Water soluble fertilisers are seeing growing traction over the last few years
Water Soluble Fertilisers (WSFs) have seen growing adoption in India over the last few years. These fertilisers are
largely used in horticulture crops which have seen strong growth over the last few years. Efficient uptake of nutrients
from soil and as result higher nutrient use efficiency to crop yield and economy of cultivation. Being readily soluble
in water, Water soluble fertilizers (WSF) achieve this by releasing essential plant nutrients at the root zone from
where they are readily absorbed and used elsewhere in the plant system. This helps reduce required nutrient intake
and allows for uniform application to each and every plant. Another advantage is that they reduce the accumulation
of salts in the soil.
7.4 Review of state and nutrient level consumption

UP, Maharashtra and MP together account for more than a third of the domestic
consumption
The fertiliser consumption is unevenly spread across states of India. Uttar Pradesh (4.7 million tonnes), Maharashtra
(2.8 million tones) and Madhya Pradesh (2.3 million tonnes) together account for more than a third of India’s domestic
fertiliser consumption. Almost all states have a higher share of Nitrogenous fertilisers among its consumption. This
is largely due to higher usage of urea in India.
155
Table 20: Trend in key state-wise consumption of fertilisers in terms of nutrients
FY17 FY18 FY19
(‘000 tonnes) N P K Total N P K Total N P K Total
Andhra
Pradesh 983 479 225 1,687 920 423 221 1,564 927 427 202 1,556
Telangana
926 321 125 1,372 897 349 146 1,392 888 343 115 1,346
Karnataka
876 511 241 1,628 878 459 258 1,595 936 536 307 1,780
Tam il Nadu
514 232 163 908 529 209 182 920 556 275 298 1,129
Gujarat
1,143 340 121 1,604 1,289 416 136 1,842 1,135 345 118 1,598
Madhya
Pradesh 1,272 618 92 1,982 1,263 655 98 2,016 1,440 743 102 2,285
Chhattisgarh
389 221 63 673 330 169 51 550 313 178 63 554
Maharashtra
1,542 799 465 2,806 1,510 880 554 2,944 1,404 839 527 2,770
Rajasthan
998 341 16 1,355 862 317 25 1,204 1,077 408 40 1,525
Haryana
1,008 292 43 1,343 1,049 280 46 1,376 1,101 302 49 1,452
Punjab
1,397 370 52 1,819 1,324 299 51 1,674 1,388 330 42 1,760
Uttar Pradesh
2,890 1,134 238 4,261 3,224 1,192 239 4,655 3,481 1,051 190 4,722
Bihar
1,053 309 147 1,509 1,113 386 158 1,658 1,188 396 148 1,732
Orissa
302 131 61 494 325 140 72 537 350 152 75 577
West Bengal
780 412 310 1,502 747 436 368 1,551 771 428 337 1,535
Note: States Highlighted have most skewed N:P:K consumption ratio in terms of consumption of N nutrient
156
Figure 126: Key state-wise share of fertiliser consumption (fiscal 2019)
Telangana tops the country in terms of per hectare fertiliser consumption

The fertiliser consumption per hectare varies significantly across states. Telangana leads the pack with a
consumption of 245 kg/ hectare in fiscal 2019. Telangana is closely followed by Bihar, Punjab and Haryana with 224-
230 kg/ hectare. Almost all states have a higher per hectare consumption of Nitrogenous fertilisers compared to
phosphatic and potassic products.
Table 21: Trend in key state-wise per hectare consumption of fertilisers in terms of nutrients
FY17 FY18 FY19
(kg/ hectare) N P K Total N P K Total N P K Total
Andhra
109 53 25 186 109 50 26 185 103 48 23 173
Pradesh
Telangana 171 59 23 253 163 63 27 253 162 63 21 245
Karnataka 90 52 25 167 91 47 27 164 96 55 32 183
Tam il Nadu 91 41 29 161 86 34 30 149 92 45 49 186
Gujarat 91 27 10 128 101 33 11 145 96 29 10 135
Madhya
51 25 4 80 51 27 4 82 57 29 4 90
Pradesh
Chhattisgarh 59 34 10 103 52 27 8 87 49 28 10 86
Maharashtra 63 33 19 115 64 37 23 124 64 38 24 126
Rajasthan 38 13 1 52 34 12 1 47 43 16 2 61
Haryana 155 45 7 207 162 43 7 213 170 47 8 224
Punjab 179 47 7 233 169 38 7 214 177 42 5 224
157
Uttar Pradesh 105 41 9 154 117 43 9 168 125 38 7 170
Bihar 137 40 19 197 143 50 20 213 156 52 19 227
Orissa 38 17 8 63 42 18 9 69 43 19 9 71
West Bengal 82 43 33 158 78 46 39 163 81 45 35 161
NPK/DAP fertilizers consumption ratio in some of the key states
6.00 5.60
4.94
5.00 4.65 4.63
4.45
4.20 4.13 4.24
4.07 3.94
3.78
4.00 3.51
3.37 3.24 3.34 3.46
3.17 3.12 3.22 3.13
2.86 2.96 2.85 3.01
2.89 2.83 2.84
3.00 2.67 2.92
2.31 2.39 2.40 2.93
2.02
1.79
2.00
1.11 1.16
0.94 0.97 1.00 1.01 1.01
1.00 0.24
0.30 0.27 0.32 0.24 0.33 0.250.26 0.35 0.26 0.26 0.25 0.320.28
0.00 0.37 0.31 0.24 0.28 0.33 0.24 0.26

FY15 FY16 FY17 FY18 FY19 FY20 FY21
All India AP CH KA MP MH TG UP WB
Note: AP-Andhra Pradesh, CH-Chhattisgarh, KA-Karnataka, MP-Madhya Pradesh, MH-Maharashtra, TG-Telangana, UP-Uttar
Pradesh, WB-West Bengal
Source: mFMS, CRISIL Research
7.5 Review of government subsidy to the industry

Government subsidy bill to increase substantially in FY22 owing to increased production
and revised NBS rates
Government's total fertiliser subsidy payment declined by ~10% on-year in fiscal 2021 to Rs 637 billion. During the
year, subsidy for naphtha-based plants almost halved (48%) owing to 25% fall in domestic naphtha prices and
conversion of Madras Fertilizers Limited to natural-gas based plant. Subsidy for urea plants based on natural gas fell
by 32% on-year due to a 34% decline in gas pooled prices. On the other hand, imported urea subsidy bill surged by
32% due to an 8% rise in imports along with higher landed cost of urea led by completion of contract with OMIFCO
in July 2020 through which the international urea was sourced at a substantially lower rate. Subsidy on complex
fertilisers increased 6% on year to Rs 222 billion.
Table 22: Trend in nutrient subsidy rates (Rs/ kg)

Nutrient FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
N 20.9 20.9 20.9 15.9 19.0 18.9 18.9 18.8 18.8
P 18.7 18.7 18.7 13.2 12.0 15.2 15.2 14.9 30.1
K 18.3 15.5 15.5 15.5 12.4 11.1 11.1 10.1 10.1
S 1.7 1.7 1.7 2.0 2.2 2.7 3.6 2.4 2.4
158
Note: N- Nitrogen, P-Phosphate, K-Potash, S: Sulphur, Phosphorous content’s subsidy has been revised from Rs 14.9 per kg to Rs 45.324 per
kg between 20th May 2021 and 31st October 2021
Source: DoF, CRISIL Research
In fiscal 2022, total subsidy is expected to surge by ~43% led by a sharp increase in all sources of fertiliser subsidy
barring naphtha-based subsidy. Subsidy of naphtha-based plants is likely to reduce on the back of conversion of
Mangalore Chemicals & Fertilizers Limited to natural-gas based plant in December 2020 and expected similar
conversion of Southern Petrochemical Industries Corporation Ltd in the first half of fiscal 2022. In contrast, subsidy
on natural-gas based plants is projected to significantly increase by ~57% on-year. This is because prices of domestic
and imported natural gas are likely to escalate by 32% on the back of recovery in crude oil prices. Imported urea
subsidy bill is expected to increase by 18% as international urea prices are expected to rise at a robust pace (30 -
35%) owing to increase in input costs. Fall in imports on the back of commissioning of domestic capacity to somewhat
offset the increase in international urea prices. Complex fertiliser subsidy bill is likely to surge by 58% on year due to
an increase in non-urea consumption and revision of NBS rates. .
Figure 127: Trend in subsidy bill

(Rs billion)
1000 908-918
900
800
694 710
700 637
600 530
500
400 327 327 347-357 346-356
300 240 224 202 209 222
167191-201180
200 106 127
100 60
0
FY18 FY19 FY20 FY21 FY22E FY18 FY19 FY20 FY21 FY22E FY18 FY19 FY20 FY21 FY22E FY18 FY19 FY20 FY21 FY22E
Indigenous Urea Imported Urea Non-urea fertilisers Total Subsidy
Note: E-Estimate
Source: FAI, DoCF, CRISIL Research
The urea segment is highly dependent on the government subsidy support as compared to the P&K fertilisers which
are deregulated and receive subsidy basis their nutrient content. Thus, over the last few years, the share of urea in
subsidy has increased significantly as compared to the P&K fertilisers. A higher subsidy helps urea segment sell
more but also puts a strain on the players’ working capital since the subsidy payments are usually disbursed in a
delayed manner.
Trend in subsidy disbursement by government
159
(Rs.billion)
800 745
700
600
500 431 432

390
400
320 322
300 241 235 250
222
172 196 208
200
100 121
100
0
FY18 FY19 FY20 FY21 FY22
Indigenous Urea Imported Urea Nutrient based subsidy
Note: Number for FY18,FY19 and FY20 are actual numbers whereas numbers for FY21 and FY22 are budgeted numbers. FY21 numbers have
been revised compared to budgeted numbers on account of fertilizer subsidy payment announced in Atmanirbhar package.
Source: Department of Chemicals and fertilizers, Budget Document of Indian Government, CRISIL Research
Roll-Over subsidy to increase in fiscal 2022

Lower than required provisioning of fertiliser subsidy by the government since the past few years resulted in a subsidy
backlog of Rs 481 billion as of fiscal 2020. However, with sufficient budget allocation for fiscal 2021, the outstanding
subsidy arrears declined substantially to ~Rs 70 billion as of March 2021. In spite of more than required budgeting,
there was a roll over subsidy towards pending clearance of stock through point -of-sales. In February 2021, the
government announced Rs 795.3 billion for fertiliser subsidy in the Union Budget 2021-22. In May 2021, the Cabinet
allocated an additional Rs 147.75 billion for non-urea fertilisers by revising the NBS rates for the ongoing kharif
season. Of the newly announced budget, Rs 91.25 billion and Rs 56.5 billion would be spent on DAP and other
complex fertilisers, respectively.
As per our calculations based on fertiliser consumption in the ongoing fiscal, subsidy due would be ~Rs 913 billion.
Resultantly, the total payment likely due for payment by the government in the current fiscal would increase to Rs
983 billion, including the rollover subsidy of Rs 70 billion.
In our base case, we expect the government to pay 82% of the allocated revised subsidy amount (Rs 943 billion). As
a result, it is likely that the roll over subsidy for fiscal 2022 would increase to Rs 209 billion from Rs 70 billion in fiscal
2021. However, if the government decided to disburse the entire budgeted subsidy, roll over subsidy would come
down to Rs 40 billion in fiscal 2022.
160
Figure 128: Trend in unpaid subsidy carried forward next year
(Rs billion)
600
541
529
500
481
400
368
320
300
204-214
248
200
100 35-45
65-75
0
FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E
Note: - - - - - Subsidy amount carried forward when 100% of the subsidy allocation is disbursed
Source: FAI, DoCF, CRISIL Research
Industry marked by high working capital requirement; Urea players more at disadvantage
compared to non-urea players
The fertiliser industry is characterised by an extended working capital cycle of 6-7 months, mainly because of delay
in subsidy disbursement by the government. Although deregulation of non-urea fertiliser prices has augured well for
the industry, the industry remains dependent on timely subsidy receipts.
As per the Nutrient-Based Subsidy Policy introduced in 2010-11, the subsidy on non-urea fertilisers is fixed at the
nutrient level (nitrogen, phosphorus, potassium), and producers have the freedom to fix retail prices. However,
government subsidies still account for 30-40% of the realisations. For urea, the government continues to regulate
pricing, which has remained relatively stable at ~Rs 5,377.7 per tonne with effect from 1st March 2018(Calculated as
per price for 45kg bag of urea) - subsidy accounts for 60-70% of the overall realisation. Hence, companies which
have a large non-urea fertiliser portfolio, have better liquidity than players which are mainly into urea; the subsidy
amount for urea is much higher than the subsidy for non-urea.
7.6 Review of profitability of industry

EBITDA margins of urea players to remain largely stable in fiscal 2022
The operating margins of urea manufacturers are relatively stable, as the effect of fluctuations in raw material costs
is borne by the government through subsidies. After declining by 34% in the preceding year, gas pooled price for
urea is projected to increase by ~32% in fiscal 2022. The profitability of urea companies is likely to remain unchanged
or decline by 5-15 basis points (bps) in FY22 as the gas price hike will be a direct pass -through for companies and
due to stable urea consumption. We expect urea players to operate at similar capacity utilisation levels as last year.
This is because higher international prices of urea would make operations lucrative for domestic players. For FY 21,
margins of urea players are estimated to have expanded by 380-400 bps driven by healthy demand for fertilisers led
by normal monsoon, loan moratorium provided to farmers and grant of an additional average fixed cost of Rs
385/tonne to 30 urea manufacturing units.
161
In case of non-urea fertiliser, manufacturers benefit from the fall in input costs. CRISIL Research estimates EBITDA
margin for complex fertiliser players to contract by 125-175 bps in fiscal 2022. This can be attributed to a sharp rise
in raw material prices amid limited ability to pass on the cost. International phosphoric acid, sulphur and ammonia
prices have been on a rising trend since the past few months due to supply constraints and higher demand. The
government revised nutrient-based subsidy (NBS) rates for phosphorous content from Rs 14.888 per kg to Rs 45.324
per kg to be effective from May 20 through October 31 this year. This would provide some aid to non-urea fertiliser
players during the ongoing kharif season. However, subsidy for the latter half of the year is expected to be at last
year’s levels, in turn impacting profitability of non-urea players. .
Figure 129: Trend and outlook on operating profitability of urea and non-urea players
14.0%
12.2-12.4%
12.0% 12.0-12.2%
10.0% 9.8%
9.3%
8.4%
8.1%
8.0% 8.2% 8.2%
7.7% 7.9%
7.6%
6.5% 6.7%
7.1% 6.5%
6.0% 6.9-7.1%
5.4-5.6%
4.0%
3.1%
2.0%
FY14 FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22P
Urea Non-Urea
Note: Players considered for urea margins- Chambal Fertilisers and Chemicals Limited, National Fertilizers Limited and Rashtriya Chemicals &
Fertilizers Ltd.
Players considered for non-urea margins- Coromandel International Limited, Gujarat State Fertilizers & Chemicals Limited, Zuari Agro Chemicals
Ltd, and Mangalore Chemicals and Fertilizers Limited. Source: Company reports, CRISIL Research
Price of key raw material rebounding in fiscal 2022

The government regulates pricing, net realisation, and partially, the distribution of urea. The maximum retail price
(MRP) at which urea is sold to the farmers is fixed by the government. To make it affordable to farmers, the price of
urea has remained more or less stable at Rs ~5,377.7 per tonne with effect from 1st March 2018(Calculated as per
price for 45kg bag of urea). The government also controls 50% of the distribution under the Essential Commodities
Act. More importantly, it reimburses the cost of production to the producers through subsidies.
The government has decontrolled retail prices for non-urea fertilisers. As per the Nutrient-based Subsidy Policy
introduced in 2010-11, the subsidy on non-urea fertilisers is fixed at the nutrient level (N,P,K) and producers have
the freedom to fix retail prices. However, government subsidies still account for 30-40% of realisation.
Freight charges vary from company to company and depending on the distance. Rail freight charges for urea are
fully reimbursed by the government. However, if the transport is via road, the amount is reimbursed upto 500 kms on
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a normative basis. On the other hand, players have to bear the entire freight charge for non-urea fertilisers. The
government does not reimburse the amount. Dealer and wholesaler margin accounts for around 3-5% of the price.
Figure 130: Trend and outlook on prices of key raw material

USD/tonne
1200
1000
800
600
400
200
Rock phosphate Phosphoric acid Sulphur
7.7 Growth drivers for Fertiliser sector

Fragmentation of arable land resulting in higher cropping intensity key driver of fertilizer
industry in India
With urbanisation reaching all over the country, arable land has seen continuous decline. With the decline in total
arable land India has also seen fragmentation of farm land. This was mainly due to distribution among heirs. The
fragmentation of farm land has led to increased crop intensity. More farmers are using different inputs such as
fertilizers to achieve the level of output with same or even lesser arable land, fertilizers will be extensively used. This
trend in decline of arable land is expected to continue further and with this the growth in fertilisers industry.
Figure 131: Trend in avg. size of landholding (in ha.) Figure 132: Trend in category-wise landholding
distribution
2.50 2.28
2.00
1.84 30%
2.00 1.69 44%
1.55
1.41 1.33
1.50 1.23 1.15 23%
1.10 1.09
23%
1.00
46%
0.50 32%
-
FY1991 FY2019
Marginal+Small Semi medium Medium+Large
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Increase in per capita food consumption and dietary changes
As per census 2011, India’s population was 1.21 billion which is expected to grow further. Population increase
catalyses increase in food demand. In the period 2014 to 2017,per capita food consumption has increased from
2,442 kcal per capita per day to 2517 kcal per capita per day, registering a growth of CAGR 1% in the mentioned
period. Increased disposable income and better food security has resulted in increased food consumption. There has
also been a dietary shift among rural and urban population. The consumption of cereals and pulses have seen
declining trend whereas edible oils and animal food products have seen uptick in consumption. This rise in
consumption is likely to put strain on agriculture sector .Agriculture has to provide for this food demand and fertilizer
being a key input to agriculture industry, growth in agriculture will fuel growth in fertilizers industry in India.
Figure 133: Trend in per capita food consumption (Kcal/capita/ day)

2550
2517
2496
2500
2461
2442
2450
2400
2346 2346
2350
2300
2250
1997 2007 2014 2015 2016 2017
Figure 134: Per capita/kg/ annum consumption of key commodities
Per capita rise in income and ease of credit availability drives fertilizer use among farmers
India have seen increase in per capita income in urban as well as rural area. The per capita income has increased
from Rs.63,462 in 2011-12 to Rs.94,556 in the year 2019-20. Per capita income has registered a CAGR of 5.1% in
the above period. The buoyant trend of India’s per capita income growth is expected to continue at a healthy rate.
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Rising disposable income will be driven by factors such as the implementation of the ‘one rank one scheme’ and a
sustained low inflation, thus enabling higher domestic consumption. A higher disposable income would aid increase
in spending worth thus improving demand. Non-food bank credit has also increased in lines with per capita income.
Credit has increased at the rate of 10-11% CAGR. Increase in income coupled with ease of credit availability in rural
areas has motivated farmers to use farm inputs such as seeds, fertilizers and pesticides.
Figure 135: Trend in per capita income (Rs)
1,00,000 92,241 94,556

87,828 85,929
90,000 82,931
77,659
80,000 72,805
68,572
70,000 63,462 65,538
60,000
50,000
40,000
30,000
20,000
10,000
0
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21AE
Note: AE- Advanced Estimates

Source: MoSPI, CRISIL Research
Figure 136: Trend in non agri bank credit (Rs billion)
Source: Reserve bank of India (RBI), CRISIL Research
High subsidy support from the government

Many of the essential fertilizers in India are subsidised. Portion of the total price is borne by the government. Widely
used fertilizers like urea is highly subsidized. Subsidy bill of government has steadily increased from FY2017 to FY
2020 with a CAGR of 12.4%. The subsidy allocation in fiscal 2021 including the allocation under Atmanirbhar 3.0
package stands at 1.36 trillion which is the highest amount in the recent years. The government provides subsidies
to fertilizer considering its criticality to agriculture produce.
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Heavy dependence on imported fertilisers due to insufficient capacities
While India is one of the largest fertiliser consumer in the world, it is also one of the major importers around the globe,
on account of lower capacities compared to consumption. While the demand for urea has remained around 30 million
tonnes over the past few years, its capacities have remained more or less stagnant at around 22-23 million tonnes.
Moreover, India does not have any manufacturing capacities for MOP. As a result, the country is highly dependent
on import of fertilisers. Nonetheless the government has made efforts to gradually increase the country's urea
capacity by reviving five non-operational urea plants.
Heavy dependence of agriculture on monsoon

Agriculture in India is still heavily dependent on natural rainfall. It also faces challenge of power shortage. Also,
compared to developed economies, there is low usage of high quality seeds and crop protection products. Farm
mechanization levels are low. Hence, these provide significant opportunities for development in the market.
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8 Assessment of phosphatic fertiliser segment
8.1 Overview of phosphatic fertilisers
Phosphorus key nutrient for plant’s growth
Phosphorus (P) is an element that is widely distributed in nature and occurs, together with nitrogen (N) and potassium
(K), as a primary constituent of plant and animal life. Phosphorus is an essential element for all living organisms. As
a component of every living cell, P is indispensable because no other element can replace it in its vital role in many
physiological and biochemical processes. As a consequence, the production of crops for food, feed, fuel and fibre
requires an adequate supply of P in the soil. Of the plant nutrients required by crops in large amounts, P is of most
concern because of the rate of exploitation of this non-renewable resource to meet current demand. DAP (Di-
ammonium Phosphate) and NPK fertilizers are the major phosphatic fertilizers used.
P plays a series of functions in the plant metabolism and is one of the essential nutrients required for plant growth
and development. It has functions of a structural nature in macromolecules such as nucleic acids and of energy
transfer in metabolic pathways of biosynthesis and degradation. Unlike nitrate and sulphate, phosphate is not
reduced in plants but remains in its highest oxidized form. As per FAO reports, P is absorbed mainly during the
vegetative growth and, thereafter, most of the absorbed P is re-translocated into fruits and seeds during reproductive
stages. P-deficient plants exhibit retarded growth (reduced cell and leaf expansion, respiration and photosynthesis),
and often a dark green colour (higher chlorophyll concentration) and reddish coloration.
Soils in tropical and subtropical regions have high P-deficiency

As per FAO reports, extensive tracts of land in the tropical and subtropical regions of Asia, Africa and Latin America
contain highly weathered and inherently infertile soils. These areas generate low crop yields and are prone to land
degradation as a result of deforestation, overgrazing and inadequate farming practices. In addition to socio-
economic factors, the main constraints are soil acidity and low inherent N and P fertility. While N inputs can be
obtained from organic sources, P inputs need to be applied in order to improve the s oil P status and ensure normal
plant growth and adequate yields. Tropical and subtropical soils are predominantly acidic and often extremely P
deficient with high P sorption (fixation) capacities. Therefore, substantial P inputs are required for optimum growth
and adequate food and fibre production.
Manufactured WSP fertilizers are commonly recommended for correcting P deficiencies. However, most developing
countries import these fertilizers, which are often in limited supply and represent a major outlay for resource-poor
farmers. In addition, intensification of agricultural production in these regions necessitates the addition of P inputs
not only to increase crop production but also to improve soil P status in order to avoid further soil degradation.
8.2 Overview of raw materials for phosphatic fertilisers

Phosphate rock forms the key input for phosphatic fertilisers
Phosphate rock denotes the product obtained from the mining and subsequent metallurgical processing of P -bearing
ores. PRs can be used either as raw materials in the industrial manufacture of WSP fertilizers or as P sources for
direct application in agriculture. The world phosphate industry is based on the commercial exploitation of some PR
deposits. In spite of their extremely variable composition, PRs are the commercial source of P used as the raw
material for manufacturing P fertilizers. The fertiliser industry consumes a major share of world PR production.
Sulphuric acid and PR are the raw materials used in the production of single superphosphate (SSP) and phosphoric
acid. Phosphoric acid is an important intermediate by-product that is used to make triple superphosphate (TSP) and
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ammonium phosphate. As per FAO, highly concentrated, compound NPK formulations now form the mainstay of the
world fertilizer industry.
Imports of rock phosphates have seen steady growth due to demand from comple x
fertilisers
Four companies in India - Pyrites, Phosphates & Chemicals Ltd, Mussoorie; Rajasthan State Minerals & Metals,
Jhamarkotra; Madhya Pradesh State Mining Corporation Ltd, Jhabua and Sagar; and West Bengal Mineral
Development & Trading Corporation, Purulia manufacture rock phosphate. Reserves of Indian rock phosphate are
concentrated mainly in Jharkhand, Rajasthan, Madhya Pradesh, and Uttar Pradesh. Though the production of rock
phosphate has been rising over the years, it has still fallen short of demand. Consequently, imports of rock phosphate
have been going up since 1995-96 due to the higher growth in demand for complex fertilisers. In fiscal 2020, rock
phosphate imports was 7.7 million tonnes. Imports are mainly sourced from Jordan, Togo, Egypt, Peru and Morocco
which accounts for over 90 per cent of total imports.
Figure 137: Trend in production and imports of rock phosphate

('000 tonnes)
Total Rock Phosphate supply: 1.9% CAGR
9,000 95.0%
8,000
7,000 89.7% 90.0%
89.8%
6,000 87.3%
86.4% 86.0%
85.5% 85.6% 85.0%
5,000 84.7%
4,000
80.0% 79.7% 80.0%
3,000
77.0% 76.9%
2,000 75.0%
1,000
0 70.0%
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Majority of phosphoric acid requirement imported
Figure 138: Player-wise breakup of Phosphoric Acid production capacities in India (fiscal 2020)
SPIC, 10% RCF, 1%

Gujarat State
Fertilisers and
Chemicals, 3%
FACT, 7% IFFCO, 41%
Hindalco, 8%
Coromandel
International Ltd,
15% Paradeep
Phosphates, 14%
Nearly 43% of phosphatic fertiliser capacities are based on utilising imported phosphoric acid, while the balance 57%
is based on captive production of phosphoric acid using rock phosphate and sulphuri c acid. Around 61% of the
phosphoric acid demand i.e. 2.4 million tonnes was imported by the fertiliser industry during fiscal 2020. Domestic
production during the year was 1.6 million tonnes which translates into an utilisation rate of 70-75%. As of fiscal 2020,
total domestic installed capacity stood at 2.1 million tonnes. IFFCO is the largest player accounting for more than
40% share of these capacities while Paradeep Phosphates followed second with around 14% share.
Figure 139: Trend in production and imports of Phosphoric acid

('000 tonnes)
Total Phosphoric acid supply: 1.0% CAGR
3,500 80.0%
3,000 68.9% 70.1% 70.0%

64.1%64.2%
61.6% 60.9%
60.0%
2,500 58.1% 56.7%55.1% 56.7%
52.3% 52.2% 50.0%
2,000
40.0%
1,500
30.0%
1,000
20.0%
500 10.0%
0 0.0%
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8.3 Overview of manufacturing process and technology for phosphatic
fertilisers
Manufacturing of NPK trough granulation typically involves three steps:
 Mixing of raw material before granulation
 Pelletizing
 Processes after granulation
The raw materials are crushed into powder form and batched together. After batching in portions, these powders are
mixed as per desired product requirement. These pellets are then naturally dried or by using a drying machine.
Granulation is the most important process for manufacturing of NPK fertilisers. In this process the powdered materials
are converted into pellet fertilisers. Vapour is added during the process under controlled liquid condition exerts
squeeze force to convert materials into granules. These granules are then screened to weed out granules of
inappropriate sizes. The qualified granules are then coated and packed into bags.
Di-ammonium phosphate (DAP)

DAP (18-46-0) is a high analysis fertiliser that contains 18% ammoniacal nitrogen by weight and 46% phosphate by
weight (P2O5, mostly water soluble). Raw materials required for its manufacture are phosphoric acid with 40-54%
P2O5 and ammonia. DAP is manufactured by reacting two molecules of ammonia with one molecule of phosphoric
acid. The above reaction is exothermic.
H3PO4+ 2NH3 → (NH4)2HPO4
The preliminary neutralisation is carried out in a pre-neutraliser. Subsequently, the slurry containing a mixture of DAP
and MAP (mono ammonium phosphate) is measured into the granulator. In the granulator, it is further ammoniated
to get the desired mole ratio of ammonia and phosphoric acid. The granulator discharge is then dried, screened,
cooled and conditioned by the coating agent, if necessary, and then bagged.
Figure 140: DAP manufacturing process
The main raw materials are phosphoric acid, ammonia, sand (as filler) and Defoamer Phosphoric acid (54%) and an
hydrous ammonia are pumped from storage tanks to pre- neutralizers (PN Reactor) reaction takes place as a result
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of which DAP and mono- ammonium phosphates are formed. The slurry contains 80% solids and is pumped to rotary
granulators where further ammonia is fed to convert mono-ammonium phosphate to di-ammonium phosphate in a
mole ratio of 1.8.
The recycled material along with the filler mixed in the fines conveyors are fed to the granulators. Wet DAP granules
flow by gravity to rotary dryers where they are dried in aco-current stream of hot air. The dried granules are screened
for size separation in doubled eck vibrating screens where over-sized and under sized material are sent back to the
system by means of fine conveyors. The product falls into the product compartment of the screen hopper and is
withdrawn through product coolers and dispatched to product storage or direct to the Bagging Plant as required.
The wet process system consists of scrubbing and reaction sections. Scrubbers, which are venture cyc lone type,
handle the ammonia and dust bearing fumes and gases evolved from the pre-neutralizer, granulator, drier and dust
systems. The scrubbing medium for the three scrubbers is recirculated phosphoric acid solution. The fumes and
gases from dryer and fume scrubbers are forced by respective fans to a tail gas scrubber whereas gases and fumes
from pre-neutralizer granulators and coolers are scrubbed and exhausted to atmosphere through the fume stack.
Overview of manufacturing technology
Raw materials Dosing system

Solid raw material fed to the process plant is mainly filler viz. sweet river sand or ETP sludge,-spec material is also
transferred from off spec/filler storage to process plant. Filler material is charged either manually or by pay loaders
into the offspec/ filler hopper placed over inlet chute of offspec/ Filler bucket elevator Filler/offspec will be fed to this
elevator uniformly by vibratory feeder.
Slurry Preparation
The process is based on the operation of single pipe reactor fitted within the granulator, operating on gas Ammonia.
Ammonia is supplied from Ammonia transfer pumps from Ammonia storage tanks to pipe reactors. The required N/P
ratio is finally reached in the granulator by injection of additional liquid Ammonia into the solids bed through a
ploughshare ammoniation system. The production of DAP is controlled by controlling the flow of ammonia and
phosphoric acid in the pipe reactor accurately through ratio control. The N:P ratio is controlled within the range of 1.8
to 2.
The pipe reactor installation facilitates the slurry of Ammonium phosphate and small amount of sulphate formed by
neutralization reaction inside pipe reactor to be sprayed directly onto the solids bed of the granulator this pipe reactor
(P.R.) slurry have temperatures ranging from 135 to 150 deg C and moisture content between 4 and 8%. Phosphoric
acid fed to pipe reactor is made by the acid coming from the scrubbing system, complemented by the concentrated
acid fed to pipe reactor vessel plus, occasionally, some proc ess water.
Granulation
To make DAP, all the raw materials and recirculated solids are fed to the granulator. Recycle flow put normally an
upper limit in the solids capacity of the plant. The recycle is constituted by fines, crushed oversize and part of the
commercial product, which is returned to the granulator to keep the water and heat balance.
Granulator is equipped with a lump kicker to prevent any lump from remaining inside the drum disturbing the flow of
solids and avoiding their normal flow in the dryer. Lumps kicker reject the lumps to an attached grizzly, which
disintegrate them by the rotating action. Solids leaving granulator, normally with moisture content around 1.8- 2.4%
are gravity fed to dryer, in order to achieve the final guaranteed moisture of 1.0%. Gases emitted in the granulator
are sucked towards the Granulator Prescrubber to recover most of the evolved dust and ammonia.
Product Drying, Screening and Grinding

In the Rotary Drum Dryer, the moisture in the solids coming from granulator is reduced with a preheated air in a co-
current flow. Dryer drum exit is equipped with a grizzly, to avoid any lump, which could block the dryer elevator. If
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any lump is coming out, grizzly takes it up and throws it into a hopper, which feeds the lump crusher. Crushed lumps
will join the rest of dryer discharged product on exist dryer belt conveyor. Air leaving the dryer contains some
Ammonia escaped from the product as well as dust and water evaporated from product when drying.
Cyclones separators are used to separate the carried dust and the air is subsequently scrubbed to get free from
ammonia. Dried product is fed to the process screens. The on-size product from screen passes directly to a recycle
regulator. The separated oversizes fall by gravity into oversize mills. Undersize product from screen falls by gravity
to the recycle belt conveyor.
Air Desaturation Unit

The purpose of the Air De-saturation Unit is to chill air to low temperature to reduce moisture content and to heat the
outgoing air from the chilling unit to reduce the relative humidity of the air going to the Rotary Cooler. This is required
to prevent moisture pick up by outgoing product from the ambient air provided for cooling.
Final Product Treatment

On-size product is cooled down using conditioned air from the Desaturation unit. DAP having critical relativity humidity
(CRH) of about 75% at 30 deg C, the product DAP picks up moisture if the ambient air has a higher relative moisture.
Air heater increases air temperature and consequently decreases air relative humidity. Dust coming out with the air
leaving the cooler and plant dedusting system is recovered and fed back to the recycle conveyor. Cooled product is
fed to the final product belt conveyor.
Gas Scrubbing
The gas scrubbing is carried out in several washing steps e.g. in a granulator prescrubber, dryer scrubber,
Granulator scrubber, Cooler and dedusting scrubber and final tail gas scrubber, where the s treams leaving the
mentioned three scrubbers will be washed. The gases leaving Dryer scrubber together with the gases from the
granulator scrubber and Cooler & Dedusting scrubber are fed to the Tail gas scrubber. Scrubber exhaust gases will
be cleaned with acidulated water to reduce its dust, fluorine and ammonia content. To achieve this, the scrubber
liquor is slightly acidulated with sulphuric acid in order to absorb both Ammonia and Fluorine. Process water is used
as a washing liquid in the scrubber. Defoamer is used in the scrubbers and vessels where phosphoric acid is used
to prevent the formation of foams.
8.4 Overview of government regulations for phosphatic fertilisers

Post introduction of NBS policy for P & K fertilisers, government control over these
segments has reduced significantly
Overuse of one particular fertiliser can result in loss of soil fertility over a period of time and the situation is not
conducive for increasing agricultural productivity to meet the food requirements of the huge population of a country
like India. In India, the consumption of urea was almost 50% more than the consumption of P&K fertilisers.
Additionally, there is non-awareness of usage and deficiency of nutrients other than N, P, K required by soil and
declining response ratio of the soil to the fertilizers application. In order t o tackle these issues, the government
introduced a subsidy regime that is nutrient based rather than product based in order to reverse the skew in favour
of Nitrogen and encourage use of Phosphorus and Potassic fertilisers.
The Nutrient Based Subsidy (NBS) policy for P & K fertilisers was implemented by the government w.e.f. 1st April
2010. NBS policy entails providing subsidy at nutrient level, which the government announces on an annual basis.
Currently, 21 grades of P & K fertilisers viz. DAP, SSP, MOP, etc. and 15 grades of NPKS complex fertilisers are
covered under this policy. As per this, retail price of P & K fertiliser are kept at the discretion of the manufacturers. In
April 2020, the CCEA slashed the subsidy on non-urea fertilisers amidst outbreak of COVID-19 to ease the subsidy
burden. NBS rates of all nutrients were reduced by the government.
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In April 2021, domestic non-urea fertiliser manufacturers undertook price hikes for di-ammonium phosphate (DAP)
and other complex fertilisers because of an increase in raw material prices. As a result, the retail price of a bag (50
kg) of DAP rose to Rs 1,900 compared with Rs 1,200 prevailing until March. Then on 19 th May 2021, the government
announced its plan to increase subsidy on DAP to Rs 1,200 per bag from Rs 500 per bag. And on May 20, it also
hiked the NBS rate for phosphorous (P) content to Rs 45.324 per kg from Rs 14.888 per kg earlier. The revised NBS
rates for DAP and other complex fertilisers will be effective May 20 through October 31 this year. The NBS rates for
other nutrients such as nitrogen (N), potash (K), and sulphur (S) remain unchanged.
Thus, subsidy on DAP has been raised by 137%, and for other complexes by up to 204%, based on the type of
complex fertiliser. Farmers will now be able to purchase a bag of DAP (50 Kg) at old rates (Rs 1,200) with effect from
May 20, 2021, compared with Rs 1,900 seen in April 2021.
Table 23: Trend in nutrient-wise NBS rates

Nutrient FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22** FY22
Revised
rates*
N 20.9 20.9 20.9 15.9 19.0 18.9 18.9 18.8 18.8 18.8
P 18.7 18.7 18.7 13.2 12.0 15.2 15.2 14.9 14.9 45.3
K 18.3 15.5 15.5 15.5 12.4 11.1 11.1 10.1 10.1 10.1
S 1.7 1.7 1.7 2.0 2.2 2.7 3.6 2.4 2.4 2.4
Note:*-Applicable between 20 th May 2021 to 31 st October 2021,**-Earlier rates
Although the government was earlier thinking of inclusion of urea into NBS scheme, it denied the deregulation of
urea prices in June 2019.
After considering all the issues relating to agriculture productivity, balanced fertilisation and growth of indigenous
fertiliser industry, and examining all options for rationalisation of existing fertiliser subsidy regime, the government
implemented the NBS regime, wherein the farm gate prices of fertilizers are decontrolled and subsidy is fixed for
each fertiliser based on nutrient content. The announcement came in the backdrop of declining response of
agricultural productivity to increased fertiliser usage. Thus, to ensure balanced application of fertilisers, the
Government introduced a nutrient based subsidy regime instead of the current product pricing regime. The purpose
is to improve availability of innovative fertilizers products in the market at reasonable prices.
The country is fully dependent on imports in Potassic sector and to the extent of 90% in Phosphatic sector in the form
of either finished products or its raw material. Subsidy being fixed, and fluctuation in international prices has effect
on the domestic prices of P&K fertilizers.
Broad structure of Nutrient Based Subsidy (NBS) - Under the NBS Policy, the Government announces a fixed
rate of subsidy (in Rs. per Kg basis), on each nutrient of subsidized P&K fertilizers, namely Nitrogen (N), Phosphate
(P), Potash (K) and Sulphur (S), on annual basis taking into account all relevant factors including international prices,
exchange rate, inventory level and prevailing Maximum Retail Prices of P&K fertilizers. The per Kg subsidy rates on
the nutrients N, P, K, S is converted into per Tonne subsidy on the various subsidized P&K fertilizers covered under
NBS Policy.
Fertilizers Covered under NBS - At present 21 grades of P&K fertilizers namely DAP, MAP, TSP, MOP, Ammonium
Sulphate (produced by M/s FACT), SSP and 15 grades of NPKS complex fertilizers are covered under the NBS
Policy with following NPKS ratios:
Table 24: Fertiliser grades covered under NBS subsidy

Nam e of fertilizers NPKS ratio/Nutrient content
DAP 18-46-0-0
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MOP 0-0-60-0
SSP 0-16-0-11
NPS 20–20–0-13
NPK 10–26–26-0
NP 20-20-0-0
NPK 15–15–15
NP 24-24-0-0
AS 20.5-0-0-23
NP 28–28–0-0
NPK 17–17–17
NPK 19–19–19
NPK 16-16-16-0
NPS 16-20-0-13
NPK 14–35–14
NPS 24-24-0-8
MAP 11-52-0-0
TSP 0-46-0-0
NPK 12–32–16
NPK 14–28–14
NPKS 15-15-15-09
Per Kg Nutrient Subsidy Rate - An Inter-Ministerial Committee (IMC) has been constituted with Secretary
(Fertilizers) as Chairperson and Joint Secretary level representatives of Department of Agriculture & Cooperation
(DAC), Department of Expenditure (DOE), Planning Commission and Department of Agricultural Research and
Education (DARE). This Committee recommends per nutrient subsidy for ‘N’, ‘P’, ‘K’ and ‘S’ before the start of the
financial year for decision by the Government (Department of Fertilizers). The IMC recommends a per tonne
additional subsidy on fortified subsidized fertilizers carrying secondary (other than ‘S’) and micronutrients. The
Committee also recommends inclusion of new fertilizers under the subsidy regime based on application of
manufacturers/ importers and its need appraisal by the Indian Council for Agricultural Research (ICAR), for decision
by the Government.
Additional Subsidy for Micro-Nutrients Under NBS - Under the policy, any variant of the subsidized P&K fertilizers
with secondary and micronutrients (except Sulphur ‘S’), as provided for under FCO, is also eligible for subsidy. There
is separate additional subsidy for micronutrients namely Boron and Zinc. The secondary and micronutrients (except
‘S’) in such fertilizers attracts a separate per tonne subsidy to encourage their application along with primary nutrients.
Import of subsidized P&K fertilizers - Import of all the subsidized P&K fertilizers including complex fertilizers has
been placed under Open General License (OGL). NBS is available for imported complex fertilizers also except
Ammonium Sulphate. However, in case of Ammonium Sulphate (AS) the NBS is applicable only to domestic
production by M/s FACT.
Freight Subsidy for NBS Covered P&K Fertilizers - In addition to NBS, subsidy for primary freight movement of
the decontrolled fertilisers (except SSP) by rail and road and coastal shipping / inland shipping is being provided to
enable wider availability of fertilisers even in the remotest places in the country.
MRP of NBS covered P&K Fertilisers - Under the Policy, MRP of P&K fertilizers has been left open and fertiliser
manufacturers/marketers are allowed to fix the MRP at reasonable rates. In effect, the domestic prices are
determined by demand supply mechanism. Companies are allowed to fix the MRP on their own. The intention behind
introduction of NBS was to increase competition among the fertiliser companies to facilitate availability of diversified
products in the market at reasonable prices.
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As a result of payment of subsidy, farmers are paying less than MRP for P&K fertilizers compared to what it would
have been without subsidy. Though the market price of subsidized fertilizers, except Urea, is determined based on
demand-supply dynamics, the fertilizer companies are required to print Retail Price (RP) along with applicable
subsidy on the fertilizer bags clearly. Any sale above the printed MRP is punishable under the EC Act. MRP is fixed
by fertilizer companies as per market dynamics which is monitored by the Government. Since, P&K fertilizers are
decontrolled and the MRP is fixed by fertilizer companies as per cost of production/ import at reasonable level and
thus can have fix different prices in different markets. Thus, location of the manufacturing facility, proximity to ports
and other transport infrastructure as well as distribution network are key to players’ growth strategy.
Calculation and Payment of Subsidy - The distribution and movement of fertilizers along with import of finished
fertilizers, fertilizer inputs and production by indigenous units is monitored through the online web based “Fertilizer
Monitoring System (FMS). The basic principle adopted in fixation of subsidy rates for different nutrients, is the
identification of benchmark international prices of major consuming fertilizers viz. Urea, DAP and MOP. Based on
these benchmark prices, the delivered prices of these fertilizers are determined taking into account the prevailing
exchange rate. The IMC also takes into account other relevant factors like requirement of nutrients in the country,
balanced use of fertilizers, subsidy burden, MRP of fertilizers etc.”
The government encourages diversification of nutrient use through Soil Health Card (SHC)
scheme
Government has been implementing Soil Health Card (SHC) Scheme since 2015 to provide soil health cards to all
farmers across the country once in a cycle of 2 years. Soil Health Card provides information to farmers on nutrient
status of their soil based on 12 parameters namely primary nutrients (N, P & K); secondary nutrient (S); micronutrients
(B, Zn, Mn, Fe, & Cu); and others (pH, EC & OC) along with recommendations on appropriate dosage of nutrients to
be applied for improving soil health and its fertility for major crops of the area. In cycle-1 (2015-17), 107.4 million and
in cycle-2 (2017-19), 117.5 million SHCs were distributed to the farmers. Financial assistance is provided under Soil
Health card (SHC) for imparting the farmer’s trainings and field demonstrations on balanced use of fertilizers.
During 2019-20, a pilot project ‘Development of Model Villages’ has been initiated in 6954 villages (one village/
revenue block) where individual farm holding based sample collection with farmer’s participation is ensured along
with awareness campaign and demonstration of application of fertilizers as per prescription of SHC.
Under Soil Health Card (SHC) scheme, financial assistance is provided to State governments as follows:
 Training of farmers @ Rs. 24,000/- per training for 2 days with 30 or more participants. So far, 1946 farmer
trainings have been sanctioned to States
 Organizing field demonstration @ Rs. 2,500/- per ha demonstration. So far, 5.50 lakh demonstrations have
been sanctioned to States
 Organizing farmer melas / campaigns @ Rs. 1.00 lakh per farmer mela / campaign. So far, 7425 farmer
melas / campaigns have been sanctioned to states.
Through this initiative, the government is encouraging a diverse usage of nutrients to help improve soil quality. Since
the current use is highly skewed in favour of Nitrogen, it has been trying to shif usage towards toher nutrients like P
which are critical to soil health as well as crop yield.
8.5 Overview of phosphatic fertilisers market in India

Complex and DAP to lead non-urea segment growth over the next five years
During the preceding five years from fiscal 2015 to fiscal 2020, DAP was the fastest growing product within the non-
urea segment. It grew at a CAGR of ~5.3% during the corresponding period; complex fertiliser came in second
175
growing at ~3.3%. Over the next five years from fiscal 2021 to fiscal 2026, DAP and complex fertilizers are expected
to continue to drive the segment growth along with complex fertilisers as India’s production of crops like fruits and
vegetables, sugarcane, cotton, etc. see a higher growth compared to the past. Also, governments attempt on
reducing urea consumption and growing awareness regarding benefits of complex and Phosphatic fertilisers will aid
these products over the next five years. The government has also to encourage of non-urea fertilisers through
introduction of nutrient based subsidy for P&K fertilisers.
Figure 141: Trend and outlook on non-urea product demand

(mn tonnes) FY 21-FY26 CAGR- DAP: 3-4%, MOP: 2-3%, SSP:2-2.5%
35.0 Complex: 3-4%%
12.5-13.5
30.0
11.1-12.1
25.0
10.8
9.3
8.9
8.8
8.6
8.4
20.0
8.5
4.5-5.0
4.2 4.0-4.5
15.0 3.4 3.5 3.5
4.3 3.8 4.5-5
4.0 3.4 4.0 4.0-4.5
10.0 2.5 2.9 3.2 3.3
11.6-12.6
2.9
10.3-11.3
10.0
9.8
9.5
9.3
9.1
9.0
5.0
7.6
-
FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22P FY26P
DAP MOP SSP NPK

Balanced nutrition benefit to soils and deregulation to aid phosphatic segment growth in
future
The key reason for growth of Phosphatic fertilisers over the last five years is largely on account of increased
awareness among farmers and partial deregulation of the segment. Lesser government control has allowed players
to come into the market with innovative products and compete as per prevalent market conditions. This has allowed
private sector players to gain a strong hold in this segment. With MRP decided by players based on market forces,
factors like distribution network, manufacturing facility location, access to transport infrastructure like ports, rail, etc.
and sourcing or raw material at lower prices become critical to the players’ growth prospects.
Increased population pressure, reduced length of fallow, deforestation and improper agricultural practices have led
to widespread soil degradation in many parts of the developing world. An important manifestation of this
environmental damage is the inadequate replenishment of soil nutrients and organic matter. In particular, phosphorus
(P) deficiency is becoming critical in many soils. Moreover, because of complementarities in the uptake of plant
nutrients, this deficiency threatens to disturb the viability of applying other nutrients. In order to preserve the
sustainability of agriculture and safeguard the livelihood of large segments of the rural population, there is an urgent
need to rebuild soil fertility and so maintain and improve current levels of productivity and farm income.
Sustainable intensification and shifts towards higher-value crops require a careful application of external inputs such
as inorganic fertilizers. A number of factors have constrained fertilizer use, especially in sub-Saharan Africa and low-
income Asia. The most important of these factors are: the limited financial means and risk-taking capacity of farmers;
poor and expensive distribution systems for fertilizers (and marketable crop surpluses); a lack of adequate knowledge
of the potential of using local phosphate rock (PR); and the absence of non-industrial techniques to increase the
solubility of PR. Wide ranging studies conducted by FAO at global level have indicated that farmers can not only earn
176
substantial rates of return at the assumed PR cost but these fertilisers also bring along important environmental
benefits.
Table 25: Trend in import and production of DAP and NPK fertilisers
(in m illion
DAP NPKS MOP SSP
tonnes)
Production Im ports Production Im ports Im ports Production
FY17 4.4 4.2 8.5 0.4 2.8 3.9
FY18 4.6 4.3 8.8 0.5 3.5 3.9
FY19 3.9 6.9 9.5 0.7 3.0 4.1
FY20 4.5 5.4 9.3 0.9 2.9 4.3
FY21 3.7 5.8 10.0 1.7 3.5 4.9
Source: Ministry of Chemicals & Fertilizers' Integrated Fertilizer Management System, CRISIL Research
The demand for DAP and NPKS fertilisers is catered through both domestic production as well as imports. However,
a significant share of NPKS demand is met domestically, while almost more than half of the DAP demand is met
through imports which indicates significant opportunity for domestic players. On the other hand, almost 90% of the
NPKS demand is met through domestic production. Demand for MOP is largely met through imports while that for
SSP is largely met through domestic production. Imports for all product segments have increased over the last five
years from fiscal 2017 to 2021.
177
9 Assessment of competition in fertiliser industry in India
9.1 Comparative analysis of players in the fertiliser sector
In this section, CRISIL Research has compared key players in the fertiliser industry. Data in this section is obtained from publicly
available sources, including annual reports and investor presentations of listed players, regulatory filings, rating ration ales, and/or
company websites as relevant.
For this assessment we have considered key players namely Chambal Fertilisers & Chemicals Ltd, Coromandel
International Ltd, Deepak Fertilisers and Petrochemicals Corporation Ltd, Gujarat State Fertilizers & Chemicals Ltd,
Indian Farmers Fertilisers Co-Operative Ltd, Mangalore Chemicals & Fertilizers Ltd, National Fertilizers Ltd,
Rashtriya Chemicals and Fertilizers Ltd, Paradeep Phosphates Pvt Ltd, Zuari Agro Chemicals Ltd, Indorama India
Pvt Ltd and Grasim Industries Ltd (Indo Gulf Fertilisers Ltd).
Over the years, government controls have influenced the extent of investments in the fertiliser industry, entry and
exit of players, degree of competition and marketing and distribution strategies of players. Private players have a
strong presence in the industry even though the sector is highly regulated by government. Competition in the industry
is limited due to government regulations on investments and constraints with feedstock availability. Large players
account for lion's share in terms of sales.
9.2 Key operational parameters of major players

Among the peer set considered, PPL among top four players in India in terms of production
for non-urea segment after IFFCO and CIL and GSFC
Figure 142: Breakup of production volume of key players in terms of Urea vs. Non-urea (Fiscal 2021)
('000 tonnes)
Zuari Agro Chemicals Ltd (ZACL) 353
466
Indo Gulf Fertilisers Ltd (IGFL) 1095
Indorama India Pvt Ltd (IIPL) 670
Paradeep Phosphates Pvt Ltd (PPL) 1023
Rashtriya Chemicals and Fertilizers Ltd (RCFL) 539

2251
National Fertilizers Ltd (NFL) 3799
Mangalore Chemicals & Fertilizers Ltd (MCFL) 258
354
Indian Farmers Fertilisers Co-Operative Ltd (IFFCO) 4272
4675
Gujarat State Fertilizers & Chemicals Ltd (GSFC) 1531
371
Coromandel International Ltd (CIL) 2836
Chambal Fertilisers and Chemicals Ltd (CFCL) 3347
0 500 1000 1500 2000 2500 3000 3500 4000 4500 5000
Non-urea Urea
Note: Non-Urea Volume Includes DAP and NPK complexes fertilizers

Source: Mobile fertilizer and management system (mfms), CRISIL Research
178
PPL had production output of ~1 million tonnes of DAP and NPK fertilisers
Table 26: Overview of product-category-wise production of key players (in 000 tonnes)
FY16 FY21
Nam e of the player
Urea DAP Com plex Urea DAP Com plex
Cham bal Fertilisers and Chem icals Ltd (CFCL) 2,126 - - 3,347 - -
Corom andel International Ltd (CIL) - 288 2,110 - 183 2,654
Gujarat State Fertilizers & Chem icals Ltd (GSFC) 361 370 710 371 566 965
Indian Farm ers Fertilisers Co-Operative Ltd (IFFCO) 4,668 1,673 2,294 4,675 1,924 2,348
Mangalore Chem icals & Fertilizers Ltd (MCFL) 379 110 95 354 116 142
National Fertilizers Ltd (NFL) 3,798 - - 3,799 - -
Rashtriya Chem icals and Fertilizers Ltd (RCFL) 2,550 - - 2,251 - 539
Paradeep Phosphates Pvt Ltd (PPL) 0 562 758 - 639 384
Indoram a India Pvt Ltd (IIPL) 0 57 414 - 223 447
Indo Gulf Fertilisers Ltd (IGFL) 1,208 - - 1,095 - -
Zuari Agro Chem icals Ltd (ZACL) 400 136 508 466 - 353
 A few players like GSFC, IFFCO, MCFL, RCFL and ZACL are engaged in manufacturing of both Urea as well as
non-urea fertilisers
 Some large players like CFCL and NFL are only engaged in manufacturing of Urea, while some of the large
private players like CIL and PPL are engaged only in non-urea (DAP, Complex, SSP) segments; however,
PPL+ZACL Goa had 0.46 million tonnes production for Urea as well,as of fiscal 2021.Diversified portfolio allows
players to cross-sell and up-sell the offerings through dealer distribution network.
 Among the peer set considered, only IFFCO, MCFL, GSFC, RCFL and PPL+ZACL Goa have production facilities
for both urea and non-urea segments
 As of fiscal 2021, only 6 out of 46 plants have co-located facilities that manufactures both phophatic (DAP and
NPK complexes) and urea. ZACL’s Goa facility is one of them.
 ZACL with both urea and phosphate facility at one location is one of the few plants having both product categories
at one place . ZACL produces 3 grades of NPK .
 However, most of these players also trade in imported fertiliser in the domestic market since it forms a critical
part of the players’ brand strategy – most players market these imported products under their brand name in
order to diversify the product portfolio under its brand name and reach to wider customer base
Most players market their products across categories under one/ two brands; PPL sells its
products under ‘Navratna’ brand
Table 27: Key brands in the market
Company name Brands
Paradeep phosphate Ltd Jai Kisaan-Navratna
Cham bal Fertilisers and Chem icals Ltd Uttam
179
Corom andel International Ltd Gromor
Deepak Fertilisers and Petrochemicals Corporation Ltd Mahadhan
Gujarat State Fertilizers & Chem icals Ltd Sardar
Indian Farm ers Fertilisers Co-Operative Ltd IFFCO
Mangalore Chem icals & Fertilizers Ltd Jai Kisaan-Mangala
National Fertilizers Ltd Kisan
Rashtriya Chem icals and Fertilizers Ltd Sufala, Ujw ala
Zauri Agro Chem icals Ltd Jai Kisaan
Source: Company annual reports, investor presentations, CRISIL Research
 Branding forms a critical component of sales strategy for players in this industry considering the commoditized
nature of the products especially urea which is highly regulated
 Thus, players across public, private and cooperative space have focused on branding and marketing in order to
sustain and grown in the highly competitive market
 Most of these brands are strong in specific states/ regions where the players have their production facilities
located and have strong distribution network; thus, most of these are region/ state-level rather than pan-India
brands
 IFFCO, Uttam (CFCL), Kisan (NFL), Sufala and Ujwala (RCF) are some of the largest selling brands in the urea
space
 IFFCO, Gromor (CIL), Navratna (PPL) and Jai Kisaan (ZACL) are some of the largest selling brands in the non-
urea space
Urea production is dominated by co-operative and PSUs; After CFCL and IGFL, ZACL has
the third largest production volume among private players from the peer set considered
Figure 143: Urea production of major players (fiscal 2021)
('000 tonnes)
19%
5000 20%
4500 15% 18%
4000 14% 16%
3500 14%
3000 9% 12%
2500 10%
2000 8%
1500 4% 6%
1000 2% 1% 2% 4%
500 2%
0 0%
CFCL GSFC IFFCO MCFL NFL RCFL IGFL ZACL
Production Percentage of production of all players
 As of fiscal 2021, In terms of production volume in urea segment, IFFCO is the largest player in India followed
by NFL and CFCL
180
 Except CFCL, most of the larger players in the segment belong to co-operative or public sector considering the
highly regulated nature of urea in India
 However, there are private sector players also operating in the segment, CFCL being the largest among them in
terms of production volume as of fiscal 2021.
 ZACL comes in third among the private players in terms of production volume (0.46 million tonnes) after CFCL
and IGFL which has ~1.1 million tonnes urea production volume as of fiscal 2021.
PPL is the fourth largest player in non-urea segment in India in terms of production volume
among peers considered; third largest private sector player behind CIL and GSFC
Figure 144: Non-urea production volume of major players (fiscal 2021)
('000 tonnes)
4500 35%
31%
4000
30%
3500
25%
3000 21%
2500 20%
2000 15%
11%
1500
7% 10%
1000 5% 4%
3% 2% 5%
500
0 0%
IFFCO CIL GSFC PPL IIPL RCFL ZACL MCFL
Production Percentage of production of all players
Note: Non-Urea Volume Includes DAP and NPK complexes fertilizers

 The non-urea segment has a significant presence of private sector players apart from the co-operative and PSUs
 The private sector players also have significant presence in the segment considering the deregulated nature of
the products
 However, IFFCO tops the chart in the segment in terms of production volume for fiscal 2021 which is followed
by CIL,GSFC and PPL which come in overall second, third and fourth, respectively, among the peer set
considered.
 Among private sector players, CIL with 2.8 million tonnes of production volume leads the pack followed by GSFC
with production volume of 1.5 million tonnes, PPL which comes in at third place with 1.0 million tonnes of
production volume in fiscal 2021 for non-urea segment
 While CIL accounts for around 21% share of the non-urea volume production ,GSFC accounts for 11% and PPL
accounts for 7% of the volume production as of fiscal 2021.
 However, when considered in conjunction with ZACL, PPL+ZACL Goa account for almost ~10% of the total non-
urea volume production in fiscal 2021.
181
 Following the completion of acquisition of ZACL’s Goa plant, as per Fiscal 2021 in terms of Installed capacity,PPL
+ ZACL goa is expected to become 7th largest bulk fertilizers(Urea, DAP and NPK complexes) manufacturing
company in India and 3rd largest Private company in Bulk fertilizers manufacturing in India.
IFFCO has the highest volume sales in urea segment; ZACL among top players in the
private sector among peers considered
Figure 145: Urea volumes sold by key players (Average FY18-21)
(mn tonnes)
9.0
7.8
8.0
7.0
6.0
5.0 4.5
4.0
2.8
3.0 2.4
2.0
1.1
0.8 0.8
1.0 0.4 0.4
0.0
IFFCO NFL CFCL RCF Grasim CIL GSFC Zuari MCFL
Source: Company annual reports, investor presentations, Mobile fertilizer and management system (mfms), CRISIL Research
 Among the peer set considered, IFFCO is the largest player in the urea segment in terms of volumes sold
 From the above peer set, three of the top five players are either co-operative or public sector players
 Among private players, CFCL accounted for largest volumes sold (2. 8 million tonnes annually over fiscal 2018-
2021); ZACL sold an average of 0.4 million tonnes during the corresponding period
182
IFFCO sold the largest non-urea volumes followed by CIL; PPL is the third largest private
player in terms of non-urea and second largest DAP players in terms of volume sales
Figure 146: Non-urea volumes sold by key players (Average FY18-21)
5.0
(mn tonnes)
4.5
4.0
3.5 1.6
3.0
2.5 0.5
1.9
2.0
1.5
0.7 0.1
1.0 2.3 0.4 0.2
0.8
0.2 0.2 0.3
0.5 1.0 0.2 0.3 0.5 0.1
0.0
0.6 0.7 0.7 0.2 0.1
0.2
0.5 0.2 0.2 0.5
0.0 0.1 0.2
IFFCO CIL GSFC PPL CFCL IIPL ZACL RCF NFL MCFL
DAP Complex MOP
 Among the peer set considered, IFFCO is the largest player in the non-urea segment as well in terms of volumes
sold
 From the above peer set, three of the top five players from private sector due to the deregulated nature of the
products
 Among private players, CIL sold the largest volumes among private sector players; as the third largest private
player PPL sold an average of 1.3 million tonnes annually during fiscals 2018-2021
 However, among the peer set considered, PPL is also the third largest overall and second largest private sector
player in DAP segment selling ~0.7 million tonnes annually over the fiscals 2018-2021
Non urea accounts major share of volumes sold by private players like CIL, GSFC, PPL,
IIPL and ZACL; Urea accounted for major share of volumes sold by public sector players
Figure 147: Product category-wise segmentation of volumes sold by key players (fiscal 2021)
183
120%
100% 6% 5% 0% 3% 0% 0% 4% 2% 2% 0%
9% 10% 3%
13% 18%
22% 26% 22% 4% 22%
80% 25% 41%
18%
1%
60% 21% 57%
41%
68% 100%
40% 85%
67% 74% 73%
64% 58%
53%
20% 34% 33%
14%
0% 0% 0%
CFCL CIL IGFL GSFC IFFCO IIPL MCFL NFL PPL RCFL ZACL
Urea Complex DAP MOP
Key observations:
 Most players among the peer set considered have a revenue mix across diverse product segment; some of the
players also trade in imported fertilisers apart from selling their own manufactured products
 Large public sector players like RCFL and NFL and co-operatives like IFFCO are largely engaged in sale of urea;
among private players, CFCL has highest share of urea among its volume sales
 On the other hand, private sector players like CIL, GSFC and PPL largely sell Phosphatic and Complex fertilisers
which come under the nutrient based subsidy scheme and thus are not as regulated as urea which allows private
players to innovate on their products and fix prices based on market dynamics prevalent in the markets
 Most of the players trade in both urea and non-urea products. Usually, players tend to start with urea to gain
entry into the market and then enter into phosphatic and complex fertiliser segments by leveraging on their
established Urea brand. These players either manufacture non-urea products on their own or import and then
trade in India.
 Similarly, pure Phosphatic or complex players also trade in urea since it helps grow their brand equity and reach
and leverage on their existing distribution network. Also, since the subsidy amount for traded and manufactured
fertilisers is same, it makes economic sense for these players to trade in urea.
184
Most players have their sales concentrated in regions which are in close proximity of its
production facilities
Figure 148: Geography-wise segmentation of volumes sold by key players (fiscal 2021)
ZACL 39% 60% 0%

0%
RCF 28% 54% 8% 10%
PPL 23% 26% 33% 18%
NFL 10% 2% 18% 69%
MCFL 96% 4%0%
IFFCO 13% 13% 18% 56%
GSFC 15% 53% 9% 23%
CIL 73% 11% 13% 4%
CFCL 0%
2%
0% 98%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
SOUTH WEST EAST NORTH
Note: States considered under each region are1) North -Uttar Pradesh, Haryana, Punjab, Rajasthan, Uttarakhand, Himachal Pradesh, Madhya
Pradesh,J&K.2)West: Maharashtra, Gujarat, Goa, Dadara Nagar haveli.3)east -West Bengal,Jharkhand,Odisha,Bihar,Chhattisgarh.4)South-Tamil
Nadu, Andhra Pradesh, kerala, Karnataka, Telangana.
Key observations:
 Most of the players in the peer set considered are heavily focused on one or two regions rather than across the
country; this regional focus is a function of the location of their manufacturing facilities, distribution network and
brand recall in these markets
 Players like CIL and MCFL are largely focused on Southern states; GSFC and RCFL are largely engaged in the
western region while PPL is majorly focused on the eastern region
 However, the players have an incentive to reach beyond these proximate regions and cater to wider markets
with the help of freight linked subsidy made available by the government to ensure adequate supply of fertilisers
throughout the country and safeguard the margins of the manufacturers
Private players like CIL, PPL and ZACL have strong distribution networks
Figure 149: Distribution network of key players in the industry
No. of states
No. of depots No. of w holesalers
operating in
CFCL 16 - 4,796
CIL 15 1,497 7,452
IGFL 8 - 825
GSFC 15 221 2,217
185
IFFCO 25 203 5,237
IIPL* 17 - 2,565
MCFL 5 95 2,451
National Fertilizers Lim ited 15 - 5,098
PPL 15 37 4,969
RCFL 24 - 5,715
ZACL 19 179 6,047

Note: As per mfms website accessed in July 2021.
Key observations:
 The distribution network of the players in the industry is largely concentrated in states/ regions in which the
players have their production facilities located
 While most players have presence in 15-20, they are largely concentrated in only a few states that lie within their
region of influence
IFFCO dominates complex fertiliser segment across regions; PPL+ZACL Goa combine had
a considerable market share across regions in the fiscal 2021
Within the Complex fertiliser segment, IFFCO has a dominant market share across regions all regions in India. CIL,
GSFC IIPL and STL are the only private sector players that figure in the top-3 list across regions in the fiscal 2021.
While CIL had strong performance in East and South India,IIPL was dominant in east India, GSFC and STL were
dominant in North and West, respectively. However, PPL when considered along with ZACL Goa had a considerable
share in the Complex fertiliser segment across regions in the fiscal 2021. In India, N-19 fertilizer (19-19-19) is only
produced at ZACL's Goa facility from last five fiscal years(fiscal 2016 to fiscal 2021), which provides a competitive
advantage and supports the facility’s leading market position in this particular fertilizer product. Around ~98% of NPK
grades manufactured at the ZACL Goa Facility are sold in the states of Maharashtra, Karnataka and Andhra Pradesh.
As of fiscal 2021, these states have a higher NPK/DAP consumption ratio as compared to National average. Also in
the period fiscal 2018-2021, the growth rates for NPK fertilizers is higher in these states compared to DAP fertilizer
leading to better sales and growth prospects for the NPK grades manufactured at the ZACL’s Goa Facility.
Table 28: region-wise top players in complex segment (Fiscal 2021)

FY21
Player Market Share
IFFCO 29%
IIPL 27%
East
CIL 21%
PPL + ZACL Goa 8%
186
CIL 37%
FACT 21%
South
IFFCO 10%
PPL + ZACL Goa 5%
IFFCO 56%
GSFC 12%
North
KRIBHCO 8%
PPL + ZACL Goa 5%
IFFCO 19%
GSFC 17%
West
STL 15%
PPL + ZACL Goa 9%
Note: States considered under each region are1) North-Uttar Pradesh, Haryana, Punjab, Rajasthan, Uttarakhand, Himachal Pradesh, Madhya
Pradesh,J&K.2)West: Maharashtra, Gujarat, Goa, Dadara Nagar haveli.3)east -West Bengal,Jharkhand,Odisha,Bihar,Chhattisgarh.4)South-Tamil
IFFCO leading player in DAP fertiliser segment across regions; PPL+ZACL Goa combine
had a significant market share across regions in the fiscal 2021
Unlike Urea and even Complex fertiliser segment, private players have a relatively strong presence in the DAP
product segment. Private sector players like CIL, GSFC, PPL, IIPL have been among top-3 players across regions
during the fiscal 2021. Among private players CIL was the top player in Southern region while PPL was among top
players in East and west and CFCL in the North while GSFC was top player in west. However, PPL when considered
along with ZACL accounted for a very strong market share (in some case PPL+ZACL Goa were among top-3 players)
in the eastern and western region. Its strong performance in the western region is down to ZACL’s location in Goa
which is proximate to Maharashtra and Karnataka – among the top states in terms of consumption of Phosphatic
fertilisers. Similarly, PPL’s strong sales in eastern region is due to proximity to states like West Bengal which also
have a very high Phosphatic fertiliser consumption number compared to all India average. ZACL’s proximity to these
Maharashtra and Karnataka which are large complex fertiliser markets helps rationalize logistics cost since these
markets can be catered from the Goa plant.
Table 29: Trend in region-wise top players in DAP segment Fiscal 2021
FY21
Player Market Share
IFFCO 28%
IIPL 28%
East
PPL 16%
PPL + ZACL Goa 16%
CIL 25%
IFFCO 20%
South
IPL 17%
PPL + ZACL Goa 7%
North IFFCO 25%
187
CFCL 20%
IPL 20%
PPL + ZACL Goa 3%
GSFC 27%
PPL 18%
West
HINDALCO 11%
PPL + ZACL Goa 18%
Note: States considered under each region are1) North -Uttar Pradesh, Haryana, Punjab, Rajasthan, Uttarakhand, Himachal Pradesh, Madhya
Pradesh,J&K.2)West: Maharashtra, Gujarat, Goa, Dadara Nagar haveli.3)east -West Bengal,Jharkhand,Odisha,Bihar,Chhattisgarh.4)Sou th-Tamil
IFFCO has a significant market share in DAP+NPK across the key states considered; PPL
have a strong share in Odisha, Chhattisgarh and Maharashtra
Table 30: Market share (in volume terms) for DAP and complex segment in key states (Fiscal 2021)
CIL CFCL GSFC IFFCO NFL RCF PPL
Uttar Pradesh
0% 11% 3% 42% 4% 0% 6%
Bihar
1% 9% 5% 32% 6% 0% 9%
Odisha
23% 0% 0% 32% 0% 0% 34%
Telangana
58% 0% 1% 4% 5% 1% 6%
West Bengal
17% 0% 1% 26% 0% 3% 6%
Maharashtra
11% 1% 5% 16% 1% 14% 9%
Chhattisgarh
8% 7% 4% 26% 8% 1% 20%
Madhya Pradesh
5% 17% 4% 25% 11% 0% 3%
Source: Company annual reports, Mobile fertilizer and management system (mfms), CRISIL Research
Key observations:
 Most large players dominate the regions in which their manufacturing facilities are located
 IFFCO, CFCL and PPL dominate the largest state i.e. Uttar Pradesh while IFFCO and PPL is among the top two
player in Bihar, Chhattisgarh and Odisha
 Among private players, CIL has a strong presence in Telangana and Odisha on the eastern side and Maharashtra
on the western side while PPL is among the top-3 players in key states like Odisha, Chhattisgarh, Bihar and
Telangana
 PPL has a strong market share in the states in the vicinity of its manufacturing facility – it has 1/5th share in
Chhattisgarh and 1/3rd share in Odisha; it also has ~9% share in Maharashtra on the back of strong network of
ZACL in the state
188
IFFCO has a strong dealer network across states; however private players like CIL and
PPL also have dominant presence in their focus markets
Table 31: Distribution network (market reach) for DAP and complex segment in key states (Fiscal 2021)
Uttar Pradesh
0% 4% 1% 85% 3% 1% 3%
Bihar
3% 8% 3% 73% 16% NA 8%
Odisha
41% NA 2% 47% NA NA 51%
Telangana
77% NA 1% 15% 7% 8% 10%
West Bengal
29% NA 2% 63% 0% 8% 16%
Maharashtra
12% 2% 3% 9% 1% 84% 6%
Chhattisgarh
38% 26% 19% 54% 35% 5% 31%
Madhya Pradesh
17% 28% 6% 35% 34% 1% 9%
Note: 1)NA-Not Available 2) Market reach is calculated as Total dealers for a company/Total dealers in the state
Source: Company annual reports, investor presentations, Mobile fertilizer and management system (mfms),CRISIL Research
Key observations:
 IFFCO has a strong dealer network of co-operative across all the key states considered above
 However, as with market share, players have a strong reach in the states in the proximity of their manufacturing
facilities; CIL has a strong network in Telangana, Chhattisgarh and West Bengal while PPL has a strong network
in Odisha, Chhattisgarh, West Bengal,Telangana and Bihar. PPL has strong sales and distribution network in
terms of dealer presence across 15 states in India selling products across 16 states in India as of fiscal 2021.
 ZACL with its proximity to Maharashtra and Karnataka which are large consumers (average consumption for
these states is higher compared to all India average) of complex fertilisers give added advantage to PPL+ZACL
Goa in terms of market outreach
 Similarly, CFCL and NFL have a strong presence in central Indian states of Madhya Pradesh and Chhattisgarh
Apart from IFFCO, private players like CIL and PPL have markedly high wallet shares in
their focus markets indicating strong brand loyalty
Table 32: Wallet share (in volume terms) for DAP and complex segment in key states(Fiscal 2021)
Uttar Pradesh
3% 42% 22% 92% 16% 7% 22%
Bihar
8% 21% 20% 98% 10% NA 21%
Odisha
36% NA 2% 56% NA NA 44%
Telangana
60% NA 4% 18% 8% 2% 13%
189
West Bengal
29% NA 11% 45% 50% 16% 12%
Maharashtra
19% 3% 17% 36% 8% 27% 20%
Chhattisgarh
12% 10% 6% 31% 12% 4% 25%
Madhya Pradesh
8% 23% 8% 39% 14% 3% 8%
Note: 1)NA-Not Available,2) Wallet share : Total sales by dealers for a particular company/Total sales by the same dealers for all the
companies.
Source: Company annual reports, investor presentations, Mobile fertilizer and management system (mfms),CRISIL Research
Key observations:
 Apart from IFFCO, only PPL and CIL have a strong wallet share across majority of the key states considered
above
 IFFCO is in top-3 in terms of wallet share across all key states considered above
 Other public sector players like NFL and RCF in states like Madhya Pradesh, Chhattisgarh and West Bengal
 Private sector players like CIL and PPL are among top-3 in four (Odisha, Chhattisgarh, Telangana, Maharashtra
and West Bengal) and four states (Odisha, Chhattisgarh and Uttar Pradesh, Maharashtra), respectively which
suggests strong loyalty to their brands in these markets
190
Limited raw material availability has led to players entering into agreements foreign
entities for raw material supply; PPL among few players with captive phosphoric acid
capacities
Table 33: JVs entered into by key players
JV/Strategic
Nam e of the player Contract type Country Purpose
partnership entered
Cham bal
Fertilisers and
IMACID JV (33.33% stake) Morocco Sourcing of Phosphoric acid
Chem icals Ltd
(CFCL)
Canpotex Contract Canada Sourcing of MOP
TIFERT Contract Tunisia Sourcing of Phosphoric acid
FOSKOR JV South Africa Sourcing of Phosphoric acid
QAFCO JV (14% stake) Qatar Sourcing of Urea
QAFCO Contract Qatar Sourcing of Ammonia
Corom andel
International Ltd Yammar & Co., Mitsui
Contract Japan Sourcing of Ammonia
(CIL) & Co.
Yammar & Co., Mitsui
JV Japan Sourcing of Sulphur
& Co.
SQM JV Chile Sourcing of WSF, MAP
Yammar & Co., Mitsui
JV Japan Rice, Transplanter
& Co.
Getax JV (40% stake) Singapore Sourcing of Rock Phosphate
Gujarat State
Fertilizers & Kamalyte Strategic
20% equity stake Canada Sourcing of Potash
Chem icals Ltd Resources Inc.
(GSFC)
Indian Farm ers ICS JV (7% stake) Senegal Sourcing of phosphoric acid
Fertilisers Co-
OMIFCO JV (25% stake) Oman Sourcing of Urea
Operative Ltd
(IFFCO) JFICO JV (27% stake) Jordan Sourcing of Phosphoric acid
Zuari Maroc
Zuari Agro JV (50% stake) India Sourcing of Phosphoric acid
Phosphates Ltd
Chem icals Ltd
MCA Phosphates Pvt
(ZACL) JV (50% stake) Singapore Sourcing of Phosphoric acid
Ltd
Source: Company annual reports, investor presentations, CRISIL Research
India faces a scarcity of raw materials like Rock Phosphates, Phosphoric Acid, Ammonia, etc. and thus has to rely of
imports for most of the raw materials. Nearly 43% of phosphatic fertiliser capacities are based on utilising imported
phosphoric acid, while the balance 57% is based on captive production of phosphoric acid using roc k phosphate
and sulphuric acid. Though the production of rock phosphate has been rising over the years domestically, it has still
fallen short of demand. Consequently, imports of rock phosphate have been going up since 1995-96 due to the higher
growth in demand for complex fertilisers. Imports are mainly sourced from Jordan, Togo, Egypt, Peru and Morocco
which accounts for over 90% of total imports. To tackle this many of the Indian fertilizer players have entered into an
agreement or form a joint venture with the foreign entities to supply raw materials needed for manufacturing of
fertilisers. These long term agreements provide raw material security and may benefit players in achieving economies
of scale with better bargaining power for raw materials supply. These agreement and JVs are formed with key
suppliers from major exporting countries like Morocco, Jordan etc.
191
However, some players like CIL and PPL have adopted backward integration strategy and have set up domestic
phosphoric acid production facilities in order to reduce import dependence. As of fiscal 2021, ,CIL and PPL are
second and third largest backward integrated players respectively with phosphoric acid capacity in India. In the private
sector players, as of fiscal 2021, PPL is the second largest backward integrated player with phosphoric acid capacity.
This backward integration helps reduce raw materials cost as well as save on logistics cost. This helps these players
avoid volatility in the input cost which is critical to the margin on these products. It further helps minimal dependence
on external sources for supply of Phosphoric acid and thus ensures a steady production of fertilisers. Thus integrated
business models for fertilizer players provides production flexibility and is a key differentiating factor compared to
non- integrated and smaller players. Own manufacturing facility allows the player freedom to manufacture Phosphoric
acid of dilute or concentrated nature and thus allows for production of variety of products. Control over raw material
also helps the manufacturer to efficiently manage production volumes and product mix as well as optimise the
efficiency of the overall production process. It also allows for utilisation of by-products and waste products. Captive
power availability also helps the players reduce utility cost for their operations.
Additionally, infrastructure like storage facility, captive berths, proximity to ports, conveyor belt, cross-country
pipeline, etc. form critical factor in reducing input cost and improving the economics of the operations in this highly
competitive industry. It also helps these players gain an upper hand in terms of market reach since they can leverage
on the lower input cost to sell at competitive prices under the deregulation regime. Also, both PPL (near Paradeep
port) and ZACL (near Goa port) are located closer to major ports have a distinct advantage in terms of trading of
imported products/ raw material and help rationalize logistics cost.
9.3 Key financial parameters of major players

Table 34: Key financial parameters
Operating FY11-20 Net profit
OPBDIT Operating PAT
Key financials (FY20) incom e Revenue m argin
CAGR (Rs billion) m argin (%) (Rs billion)
(Rs billion) (%)
Cham bal Fertilisers and Chem icals 7.9%

122.4 20.1 16.4 12.2 10.0
Ltd
Corom andel International Ltd 131.2 5.9% 17.3 13.2 10.6 8.1
Deepak Fertilisers and 15.3%

17.1 0.9 5.2 0.3 1.8
Petrochem icals Corporation Ltd
Gujarat State Fertilizers & Chem icals 5.9%

75.4 2.4 3.1 1.0 1.3
Ltd
Indian Farm ers Fertilisers Co- 1.5%

295.0 25.0 8.5 10.4 3.5
Operative Ltd
Indoram a India Pvt Ltd* 33.9 N.A. 2.7 8.0 0.8 2.2
192
Mangalore Chem icals & Fertilizers Ltd 27.1 3.9% 2.1 7.7 0.6 2.4
National Fertilizers Ltd 128.5 7.7% 5.8 4.5 -4.6 -3.6
Rashtriya Chem icals and Fertilizers 5.4%

94.9 2.9 3.1 2.1 2.2
Ltd
Paradeep Phosphates Pvt Ltd 41.9 1.8% 4.9 11.8 1.9 4.6
Zuari Agro Chem icals Ltd 10.4 n.m. -14.1 n.m. -1.89 n.m.
Note: n.m.: not meaningful, N.A.-Not available, Standalone financials are considered for the analysis
Source: Company annual reports, CRISIL Research
Key observations
 In line with volume sales, IFFCO is the largest players in terms of volumes as well
 Other major urea players like NFL, CFCL and RCFL also earn significantly larger revenue compared to other
diversified and non–urea players
 As of fiscal 2021,among private sector players with focus on non-urea segment, CIL is the largest player followed
by PPL in terms of phosphatic fertilizers(DAP and NPK complexes) capacity.
 Private sector players like CFCL, CIL and PPL earned higher profitability compared to public sector players; non-
urea players like CIL and PPL have lower dependence on subsidy compared to urea players but have higher
pricing flexibility
 Operating margin for players like IFFCO,CIL and PPL are better in the peer set considered which may be
attributed to having backward integrated facilities with Phosphoric acid.
Table 35: Key financial parameters

Key financials Operating incom e OPBDIT (Rs Operating m argin PAT Net profit m argin
(FY21) (Rs billion) billion) (%) (Rs billion) (%)
Cham bal
Fertilisers and 127.2 24.6 19.4 13.5 10.6
Chem icals Ltd
Corom andel
141.6 20.1 14.1 13.1 9.2
International Ltd
Deepak Fertilisers
and
18.1 3.9 21.3 2.1 11.5
Petrochem icals
Corporation Ltd
Gujarat State
Fertilizers & 75.0 5.5 7.3 4.2 5.6
Chem icals Ltd
193
Mangalore
Chem icals & 21.4 2.1 9.6 0.7 3.1
Fertilizers Ltd
National
119.1 9.1 7.7 2.5 2.1
Fertilizers Ltd
Rashtriya
Chem icals and 82.8 7.3 8.8 3.7 4.5
Fertilizers Ltd
Note: Financials are as per quarterly published results in public domain, n m: Not meaningful, Standalone financials are considered for the analysis
Key observations
 Among the players whose financials were available publicly for fiscal 2021 which are listed in the above table,
Coromandel International Ltd., Chambal Fertilisers and Chemicals Ltd and National Fertilizers Ltd had the
highest revenues in the peer set.
 Players maintained healthy operating margins and net margins in the fiscal 2021.
Table 36: Product segment-wise sales growth of key players during fiscals 2018 to 2021( %CAGR)
Com pany Urea DAP Com plex
Cham bal Fertilisers and Chem icals Ltd 18% 14% -6%
Corom andel International Ltd -8% 1% 13%
Gujarat State Fertilizers & Chem icals Ltd 22% -4% 12%
Indo Gulf Fertilisers Ltd -2% - -
Indian Farm ers Fertilisers Co-Operative Ltd 13% 7% 9%
Indoram a India Pvt Ltd 29% 16%
Mangalore Chem icals & Fertilizers Ltd -10% -13% 14%
National Fertilizers Ltd 9% 16% 109%

-3% 5% 13%
Rashtriya Chem icals and Fertilizers Ltd
5% -7%
Paradeep Phosphates Pvt Ltd -
Zuari Agro Chem icals Ltd 2% -79% -7%
194
Com pany Urea DAP Com plex
Table 37: Key Financial Ratios for major players

Key financial ratios (FY20) RoE RoCE Debt/ Equity Share of Interest
(tim es) short term coverage
debt in (tim es)
total debt
Cham bal Fertilisers and Chem icals Ltd 34.3 14.2 2.5 59% 4.4
Corom andel International Ltd 27.2 25.6 0.4 100% 7.5
Deepak Fertilisers and Petrochemicals

Corporation Ltd 26%
1.9 4.6 0.5 1.8
Gujarat State Fertilizers & Chem icals Ltd 1.4 2.9 0.2 94% 2.5
Indian Farm ers Fertilisers Co-Operative Ltd 9.9 9.3 1.4 93% 2.6
Indoram a India Pvt Ltd* 13.3 9.1 2.2 89% 4.1
Mangalore Chem icals & Fertilizers Ltd 12.4 8.5 2.7 86% 2.0
National Fertilizers Ltd -22.3 -1.4 4.3 92% 1.5
Rashtriya Chem icals and Fertilizers Ltd 6.7 5.9 1.5 88% 1.6
Paradeep Phosphates Pvt Ltd 12.1 11.0 1.4 94% 2.2
Zuari Agro Chem icals Ltd n.m. 9.3 15.6 99% -3.2
Note: n m: Not meaningful

*Data for IIPL for fiscal 2019, Standalone financials are considered for the analysis
Table 38: Key Financial Ratios for major players

Key financial ratios (FY21) RoE RoCE Gearing
(tim es)
Cham bal Fertilisers and Chem icals Ltd 25.5 26.7 0.6
Corom andel International Ltd 25.2 35.9 0.0
Deepak Fertilisers and Petrochemicals

Corporation Ltd 10.4 13.5 0.3
195
Key financial ratios (FY21) RoE RoCE Gearing
(tim es)
Gujarat State Fertilizers & Chem icals Ltd 4.6 6.0 0.0
Mangalore Chem icals & Fertilizers Ltd 11.1 12.9 1.3
National Fertilizers Ltd 11.5 16.0 0.8
Rashtriya Chem icals and Fertilizers Ltd 11.2 13.3 0.6

Note: Financials are as per quarterly published results in public domain, n m: Not meaningful, Standalone financials are considered for the analysis
Key observations
 Companies with a higher share of urea, such as IFFCO, NFL and RCFL have stable but relatively lower returns
due to no pricing flexibility and strict regulation
 Players with a higher share of complex fertilisers, such as CIL and PPL have higher pricing flexibility, relatively
better returns but volatile revenue
 A significant share of the debt portion of the fertiliser are short term borrowings which are used to fund working
capital which remain stretched due to delay in subsidy payment from the government; however, this is largely in
case of players which have a higher share of urea products in their portfolio
 Players like CIL and PPL have gained from diversification in non-subsidised segments; this reduces dependence
on subsidy payments by the government (normally delayed) and improves working capital cycle and profitability
in the long run
 Over the last few years, even pure-play urea players like NFL have started trading of complex fertiliser products
due to better return potential
 Very few private players like CIL and PPL are backward integrated which allows them to reduce their input cost
significantly compared to other players
 However, most players have entered into strategic tie-ups with foreign entities to ensure smooth supply of raw
material as well as finished goods for trading
196
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Assessment of the

fertiliser market in India

2 Macroeconomic overview of India ...................................................................................................25

3 Overview of global agriculture sector ..............................................................................................48

4 Overview of agriculture sector in India ............................................................................................78

5 Assessment of global fertiliser industry ........................................................................................ 108

6 Overview of the fertiliser industry in India...................................................................................... 119

7 Assessment of the fertiliser industry in India ................................................................................. 146

8 Assessment of phosphatic fertiliser segment ................................................................................ 167

9 Assessment of competition in fertiliser industry in India ................................................................ 178

Figure 1: Trend and outlook on real GDP growth for World

2017 2018 2019 2020 2021 2022

Advanced econom ies 2.5 2.2 1.6 –4.7 5.1 3.6

Euro area 2.6 1.8 1.3 –6.6 4.4 3.8

Japan 2.2 0.3 0.3 –4.8 3.3 2.5

United Kingdom 1.2 1.3 1.4 –9.9 5.3 5.1

China 6.9 6.7 5.8 2.3 8.4 5.6

India 6.8 6.5 4.0 -7.3* 9.5* 7.8*

ASEAN 5.3 5.3 4.9 –3.4 4.9 6.1

World 3.8 3.5 2.8 –3.3 6.0 4.4

Covid-19 impact on some key economies and resolutions announced

Source: IMF, CRISIL Research

United Sates of America

1.2 Review and outlook on inflation

5 4.9 5.1 5.1 4.9

Advanced economies Emerging market and developing economies

Middle-income countries 5,753 6,280 7,016 0.7%

Low-income countries 776 993 1,488 2.2%

Figure 5: Real GDP growth in India (new GDP series)

India clocked a higher GDP growth compared to other large economies

United States Japan United Kingdom China India

P: Projection as per IMF update

2.2 Outlook on India’s GDP growth

E: Estimated; P: Projected by CRISIL Research; GDP calls updated as of May 2021;

Fiscal 2022 base case GDP growth to be 9.5%

Risks to GDP growth

GDP growth to rebound to 9.5% in this

Over fiscals 2023-25, growth is seen averaging

Risks to the fiscal 2022 forecast

There is one other scenario affecting our GDP forecast.

Figure 9:GDP growth in fiscal 2022%, y-o-y

Base Case Moderate Downside

Source: S&P Global ratings, CRISIL Research, Jun 2021

2.3 Review of global per capita GDP

Per capita GDP –

Per capita GDP –

2.4 Review of trend in inflation (CPI) in India

Figure 10: Trend and outlook on inflation (CPI)

2.5 Fundamental growth drivers of GDP

Figure 11: India’s population growth

Urbanisation likely to reach 40% by 2030

20% 35% 40%

Share of urban population (%) Share of rural population(%)

India’s youth to account for ~40% of its population by 2030

1970 1990 2010 2020P 2030P

Figure 14: Trend in working population (15-69 years)

India’s median age to stay below key countries up to 2030

Table 3: Trend in median ages across key countries

China 19.3 24.9 35.0 36.7 38.4 42.6

Figure 15: Broad split of population into income groups

Table 4: Per capita net national income at constant prices

Per capita net