Suggestions for Administrative and Legal Reforms in Fertilizer Sector vis-à-vis FCO

Presently, the fertilizer industry is regulated under Fertilizer Control Order (FCO),
1985 with an objective of price control, registration of
dealers/suppliers/importers/pool handlers etc., quality control and enforcement. The
enforcement of FCO is assigned to State Governments and Central Government
provides training facilities and technical guidance. With the passage of time, certain
bottlenecks have been felt across the fertilizer industry with respect to the
enforcement as well as implementation of FCO provisions which are required to be
addressed with suitable policy making and legal reforms. With a view to simplify and
improve the implementation of FCO and to ensure quality of fertilizers, a review of
the current regulatory mechanism under FCO is need of the hour.
In this backdrop, we are putting forward some suggestions which are broadly
classified are as under:
1. Effective implementation of FCO
2. Legal/Policy interventions for better quality control
3. Suggested amendments in FCO
The detailed submissions on the above points are as follows:
1. Effective implementation of FCO

1.1 Digital Certificate of Registration:

The complete process starting from submission of application to

grant/refusal/renewal of Certificate of Registration issued under Clause 8 FCO
should mandatorily be carried out across all states in online/digital mode only to
have minimum human intervention and to increase transparency and
timeliness.

1.2 Easing Permissible Tolerance Limits

1.2.1 It has been observed that a vast majority of fertilizer samples which fails in the
first round of analysis gets approved in the second round of referee analysis or
even sometimes fails in totally different parameters at the stage of referee
analysis. This variance in results may be attributed to factors such as non-
standard testing process, inferior quality of chemicals used, use of non-
calibrated instruments and ill trained lab technician etc.

1.2.2 Keeping in view the present condition of testing facilities/labs, the possibilities
of lab errors cannot be ruled out and such minor errors beyond permissible
tolerance limits may lead to contravention of FCO. In such circumstances,
where the testing facilities are not robust with respect to requirements of FCO
and accuracy of lab analysis results cannot be ascertained, permissible
tolerance limits under FCO gets difficult to comply with. Hence, it is suggested
that range of tolerance limit in plant nutrients and physical parameters may be
relaxed to some extent so as to address the issue of laboratory and sampling
errors.
 1.3 Introducing single use fertilizer sampling kits

1.3.1 Under FCO, certain measures and precautions are need to be observed while
withdrawing samples of fertilizers for testing. These measures mandates that
the sampling instruments shall be clean, dry and should be free from any
adventitious contamination. Further, it requires that the sample should be kept
in clean, dry and air tight glass or thick gauged polythene bag. It has been
observed that due to mishandling of samples and use of unclean sampling
instruments by the inspectors leads to contamination of samples. Such
contaminated samples are bound to fail on the specifications under FCO.

1.3.2 Contamination and mishandling of samples may be prevented by introducing

standard single use fertilizer sampling kits affixed with specified hologram and
codes. Use of holograms and codes may ensure that the kit conforms to
specified quality and approved for use by appropriate agency.

1.3.3 The development of such kits may be promoted by suitable funding to Start-ups
engaged in research and development of testing equipments.

1.4 Digitalization and Online Mapping of fertilizer testing laboratories

1.4.1 Presently, there are approximately 78 notified fertilizer testing laboratories

which are functioning at central and state level. As per FCO, every notified
laboratory is also a designated labs for testing the referee and third samples
sent by other states. This makes it clear that fertilizer testing mechanism is
inter-dependent in nature for states and hence there needs to be uniformity in
quality and procedures.

1.4.2 To keep checks and balances on the functioning of laboratories, every

fertilizers testing laboratory may be mapped with a unified portal. With the help
of portal, the real time data of sampling, testing of each laboratory may be
collected and each sample collected or tested may be assigned a code
number.

1.4.3 The data so collected through the portal may help in evaluating the
performance of a notified laboratory by analysing the data regarding the
number of samples analysed by a laboratory are sent for referee analysis and
out of which how many samples are getting approved in second or third round.
This data will be useful in identifying the labs which are not upto the mark
whereby the specified testing procedures are not followed and hence corrective
action may be taken.

1.4.4 Similarly, digitalization of fertilizer laboratories will ensure that human

interference is limited to withdrawal of fertilizer samples and hence scope for
abuse will be reduced to a large extent. Digitalization will ensure that the time
 limit of analysis as prescribed under Clause 30 is strictly adhered. Further, the
time taken in communication of results will be reduced to zero.

1.4.5 The process of digitalization of a notified laboratory may be as follows:

After withdrawal of a sample, the dealer/manufacturer may be assigned a code
number by the fertilizer inspector and the Form J will be uploaded on the portal
by the inspector. The memorandum in Form K will be filled by inspector and the
sample may be dispatched. The dispatch may be tracked till received by a
laboratory. After analysis, the laboratory will upload the analysis result in
Form L on the portal. The code number will be used by the dealer/manufacturer
to see the analysis results online.

1.4.6 If the dealer/manufacturer is not satisfied by the analysis results, provision of

filing appeal online may be provided. The appeal will be forwarded to appellate
authority by the system and suitable decision in this regard may be taken by
the concerned authority.

1.5 Increasing number of fertilizer testing laboratories

Number of testing laboratories recognized under FCO is approx.78 against
total dealers of near to 3 lakhs. Considering inadequate number of Testing
Laboratories, more testing labs needs to be added to the system. Private
entrepreneurs may be encouraged for setting up of the testing laboratories and
the same may be notified under FCO. For maintain the quality of analysis, such
private labs may be accredited by appropriate agency of the government.

1.6 Avoid Multiple Grades of fertilizers

There are various fertilizer grades included in FCO (for example we have
grades like 15:15:15, 17:17:17,18:18:18,19:19:19, 20:20:20 and so on) with
very small variations in nutrient contents in them but having uniform ratio . The
increasing number of fertilizer grades does not serve any purpose looking to
fact that:
 There are chances of lab errors in case of minor variations.
 This creates confusion amongst farmers and sellers may take
advantage of same by selling substitute product.
 Farmer may have to pay more towards freight in case of low analysis
fertilizer grades.
 The nutrient use efficiency of various nutrients is low hence the variation
of small percentage in fertilizer grade may not have any effect in
increasing productivity. This leads to wastage of precious nutrients.
 Still we do not have crop specific belts for tailor made fertilizers based
on soil tests.
Instead, a grade (like 19:19:19) which is more popular, having higher nutrient
content and is meant for a wide geographical coverage shall only be allowed
instead of above mentioned grades.
1.7 Inclusion of additional grade of Single Super Phosphate
It is understood that while manufacturing SSP, P2O5 content of rock phosphate
should be minimum 30% to produce a quality 14% SSP conforming to
minimum prescribed standards. Since, India does not have sufficient
 indigenous quality deposits of rock phosphates and beneficiation is an
expensive proposition. Hence, a new grade of SSP may be introduced with 12
% water soluble P2O5. This may encourage usage of indigenous deposits
more efficiently. Looking to low phosphate fertilizer use efficiency and high
phosphate fixation under Indian conditions, this shall hardly make any
difference in nutrient uptake by plants.

1.8 Minimum specification of Neem Oil coating should be increased

In order to avoid usage of urea for non-agricultural usage and to have better
fertilizer use efficiency (FUE), coating of Neem oil was initiated. During initial
phase, the minimum standard of Neem oil coating was 750 ppm. But later on it
is reduced upto 350 ppm. The usage of Neem urea in some of the industries
such as fodder industry cannot be avoided at such low level of concentration of
Neem oil which defeats the basic purpose of its use. It is suggested that the
minimum specifications of Neem oil should be 500 ppm instead of 335 ppm,
which will lead to better FUE & shall minimize possible industrial use.

2. Legal/Policy intervention for better quality control

2.1 Differentiate non-standard and adulterous fertilizers
2.1.1 Clause 19 FCO imposes restriction to sell, offer for sale, stock or exhibit for
sale or distribute any fertilizer which is not of prescribed standard or
adulterated. Any contravention to the said clause would be treated as
contravention of FCO and call for action under Essential Commodity Act, 1955.
Under FCO, both non-standard fertilizers and adulterated fertilizers are treated
at par for the purpose of fixing liability.

2.1.2 There is a need to realize the distinction between non-standard fertilizers and
adulterated fertilizers, as there is sometimes no criminal intention is involved in
cases of non-standard fertilizers and minor variations occurs due to
environmental factors like moisture, lab errors, mishandling etc. However, in
case of adulterated fertilizers there is an element of malafide intent involved to
adulterate for undue economic benefits.

2.1.3 FCO in Clause 23 also recognises the distinction between non-standard and
adulterated fertilizers to some extent whereby it allows disposal of non-standard
fertilizers but not adulterated fertilizers. However, FCO does not differentiate for
establishing violation of FCO between non-standard and adulterous fertilizers.
Such provision is harsh in case of non-standard fertilizers where minor
variations in nutrient values and other physical parameters may occur due to
factors, as described above.

2.1.4 Hence, the punishment provisions in case of adulterated fertilizers and

nonstandard fertilizers may not be treated at par. A more lenient view need to
be taken in case of minor variations in nutrient content resulting into non-
standard fertilizer.
2.2 Classifying offences under FCO as non-cognizable and bailable
Any violation of the provisions of FCO is punishable under ECA, and has been
made cognizable and non-bailable offence. Being cognizable and non-bailable,
may lead to the arrest of nominated Nodal Officers causing great mental agony
and social stigma sometimes even for unintentional acts specially in case of
PSU employees. To mitigate the hardship, offence under FCO may be
categorized as non-cognizable and bailable one.
2.3 Moderate punishments like fine
2.3.1 The strict penalties prescribed under ECA /FCO in the form of imprisonment of
up to 7 ears with or without fine should be replaced by other moderate
punishments like fines. Such harsh punishments are discouraging potential
good quality manufacturers/ supplier/ dealers from entering the fertilizer
business.
2.3.2 The offences under FCO may be categorized into minor and major offences.
The minor may be dealt with administratively by the enforcement authorities
with imposition of fine only. Whereas, in case of major offences prosecution
may be launched. For this purpose, certain range of limits beyond the
permissible tolerance limits may be defined for which only minor penalties like
fine would be attracted. Beyond these defined limits, major penalty may be
initiated by filing prosecution before competent court.
2.4 Testing facility at every Port
As per Fertilizer (Movement Control) Order, imported fertilizers are allowed to
be distributed after testing only. Currently, imported fertilisers are tested by
Central Fertilizer Control and Quality Institute (CFC&QI), Faridabad and its
three regional laboratories which is required to give testing results within 15
days of drawal of sample. However, due to heavy burden on limited testing
facilities, testing results are delayed and consignment of imported fertilizers
gets stuck at port. Hence, each port facility needs to have separate laboratory
with sufficient testing capacity to have timely results.
2.5 iFMS needs to mandated under FCO
2.5.1 Under Aadhaar enabled Fertilizers Distribution System (AeFDS), it is
mandatory for the retailers to sell subsidized fertilizers through PoS devices
which is monitored through Integrated Fertilizer Management System (iFMS).
Further, iFMS is facilitating real time online tracking of fertilizer movement,
Fertilizer availability, sale of fertilizers at subsidized rates to farmers through
PoS devices. The manufacturers can claim the subsidy amount only on the
quantity sold through the PoS.
2.5.2 It is observed that retailers usually sell subsidized fertilizers without PoS
machine due to various reasons like faulty machines, non-availability of
AADHAR of farmers, non-seriousness of the matter, non-availability of
networks etc. As a result, notional stock gets accumulated over the period of
 time in their account which not only causes financial losses to supplier/
manufacturer but also disrupt the very purpose of iFMS i.e. monitoring of stock
of fertilizers to the last point. Hence, it is suggested that sale of fertilizers
mandatorily through PoS shall be prescribed under terms and condition in
Certificate of Registration “Form B” granted for carrying on the business of sale
of fertilizers.
2.5.3 With a fully functional iFMS, the requirement of maintaining stocks registers by
dealer/manufacturers/importer/pool handling agency in “Form N” is not required
anymore. Similarly, with a full trail of fertilizer available in iFMS right from the
level of manufacturing to retail consumer, the certificate of origin “Form O” has
become redundant. In view of this, the requirement of maintaining “Form N” and
obtaining of “Form O” should be dispensed with.
2.5.4 Further as mandated in Form “B”, the requirement of submitting report to
Registering Authority by wholesale dealers/retail dealers showing the opening
stock, receipts, sales and closing stocks of fertilisers in the preceding month
should be dispensed with.
2.6 Audit of Fertilizer Testing Labs
As per Clause 29 FCO, every fertilizer sample drawn by a fertilizer inspector
shall be analysed in a laboratory notified by State Government with the prior
approval of Central Government and every such laboratory is also designated
as referee laboratories under Clause 29B. However, there is no mechanism to
ascertain the standards followed during analysis, quality of chemicals and
equipment. Hence, a provision for laboratory audits by an independent agency
may be incorporated in FCO.

3. Suggested amendments in FCO

3.1 Delay in disposal of appeal
While filing of appeal is time bound, its disposal is open ended. This leaves
room for harassment and abuse of power by appellate authority. Hence,
suitable amendment may be brought in Clause 32 & 32 A FCO so as to make it
mandatory for appellate authority to dispose the appeal within 30 days.
3.2 Delay in communication of results of referee and third samples
Similarly, no time limit for communicating the result of analysis in case of
referee analysis and third analysis. Clause 30 FCO which prescribes the time
limit for analysis and communication of result is limited in its scope as it only
provides timeline for first sample. Hence, Clause 30 may be amended to apply
time limits on referee samples and third samples.
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