Chapter 2. History of Fertiliser Industry in India and Profile of the Sample Industry and Area

Transcription

1 Chapter 2 History of Fertiliser Industry in India and Profile of the Sample Industry and Area

2 18 HISTORY OF FERTILISER INDUSTRY IN INDIA AND PROFILE OF THE SAMPLE INDUSTRY AND AREA History of Fertiliser Industry in India The fertiliser industry was recognized as a core sector for public sector investment in the industrial policy of Several public sector units came up during for producing ammonium sulphate, calcium ammonium nitrate (CAN), Di- Ammonium Phosphate (DAP) and complex NPK's even as private sector investment was also encouraged. Private sector units such as Duncan Industries, Shriram Chemicals, Auari Agro now called Auari Industries and Southern Petrochemical Industries Corporation (SPIC) came up in the late 1960s and the mid 1970s. Of the 26 urea plants commissioned during , seventeen were in the public sector, seven in the private sector and two in the cooperative sector. In 1944, the Government of India established the "Central Fertiliser Pool" as the official agency to ensure equitable distribution of all available fertilisers at fair prices all over the country. All fertilisers whether produced within the country or imported were "pooled" together a distributed through state agencies. Domestic producers were not the marketers of their

3 19 products to the end users and the pool acted as a super wholesaler. There was little incentive for promoting sales as far as the producers were concerned. In 1965, the Sivaraman Committee made a number of recommendations which were to have a far reaching impact on Indian fertiliser sector. In a way, this Committee laid the policy foundations regarding production, promotion, distribution and consumption of fertilisers. In 1966, a new policy was announced which liberalized fertiliser marketing. The manufacturer were given the freedom to market up to 50 per cent of their production whole of which till then they were required to sell to the pool. This new policy, by promoting direct selling by manufactures to the farmers in essence restored the link between promotion, market development and selling which was served 22 years earlier. The year can rightly be called as watershed, year in the development of fertiliser use in India. It helped to bring fullfledged marketing complete with promotion, extension and advisory services into the mainstream of agricultural activity. By 1969, domestic manufacturers were given complete freedom in marketing, but this was short-lived. Fertiliser shortages in the early 1970's led the government to pass the fertiliser movement control order in 1973 which brought fertiliser

4 20 distribution and its inter-state movement under government control. From the middle of 1970s supply and distribution has been regulated under the Essential Commodities Act when the concept of half-yearly zonal conferences was bom. With the introduction of the Training and Visit (T & V) system of extension, the direct involvement of the state departments of agriculture in fertilisers selling also declined. Since one of the key features of this system was that extension workers should only concentrate on extension work and their multifarious functions should be cut to the minimum. As regards imported fertiliser, up to 1978, Food Corporation of India was the sole agency for handling and storing these for the central pool (except MOP). Potash has traditionally been handled and distributed by the Indian Potash Supply Agency (IPSA) which is now the Indian Potash Ltd (IPL). Since 1978, certain domestic companies, including IPL have been allowed to handle imported non-potash fertilisers as well.' Indian Fertiliser Industry The Indian Fertiliser industry had been consistently meeting a substantial portion of the ever increasing demand of fertilisers. It ' Bhant Corener - Fertiliser in India Agriculture past Present and future ( ) fertiliser Development and Consultation or organisation. Page No. 204 Bhanat Ramposh, endave, New Delhi (India)

5 21 Started as a small industry with a capacity of 89,000 tonnes of nitrogen and 28,000 tonnes of P2O5 which has now grown to a capacity of 11 million tonnes of nitrogen and 3.93 million tonnes of P2O5 in India however does not have any production capacity for potash and the requirement is met by imports. The Indian fertiliser industry has also achieved good efficiency in capacity utilization of 98 per cent for nitrogen and 88 per cent for Phosphatic fertilisers. As a consequence of substantial increase in domestic capacity of supplies, the consumption of nitrogen has increased from only 58,700 tonnes in to million tonnes in The consumption of P2O5 has increased form tonnes to million tonnes. Where as K2O consumption which is 100 per cent imported fertilisers increased from 3300 tonnes to million tonnes. Though the capacity and production of both nitrogen and phosphatic fertilisers have continuously increased in India, the demand still outpaces the availability, resulting in the dependence on imports. Fertilisers are substances that supply plant nutrients or amend soil fertility. Modem fertiliser practices, first introduced more than a century ago and based on chemical concept of plant nutrition, have contributed widely in the immense increase in

6 22 agricultural production and have resulted in better quality food and fodder. As a beneficial side-effect, the fertility of soils has been improved resulting in more stable yield levels, as well as in better (nutrition-induced) resistance to some diseases and climate stress. Further, the farmer's economic returns have increased due to more effective production. Plants contain practically all (92) natural elements but need only 16 for grow^th. Thirteen of these are essential mineral nutrient elements, commonly referred to as 'nutrients'. They must be provided either by the soil or by animal manure or mineral fertiliser. Some other mineral nutrient elements, such as Na, Si, Co, have a beneficial effect on some plants but are not essential^. Growth of Fertiliser Industry in India - During Five Year Plans The First Plan reviewed the past development of the fertiliser industry (separately for nitrogenous, phosphatic and potassic fertilisers), the position of the industry at the advent of the Plan, and the programmes of expansion expected by the end of The installed capacity (1951) of the 13 factories regularly engaged in the production of superphosphate had ^ Gahlaut. P.S. Indian Potash Limited, New Delhi, Fertiliser Policy in India and International Trade p. 5, Fertiliser News, September 2002.

7 23 increased from 82,300 tonnes in 1949 to 148, 190 tonnes by Production had also increased from 14,015 tonnes in 1947 to 34,214 tonnes during the first nine months of The requirements were estimated at 325,000 tonnes of P2O5 (equivalent to million tonnes of 16 per cent superphosphate) per year at the minimum. First Five Year Plan ( ) The First Plan targets of expansion of capacity for nitrogenous fertilisers were not fulfilled. The Sindri Fertiliser Factory started production of the iron oxide catalyst required in the water gas shift reaction for the generation of hydrogen needed for ammonia synthesis. Another development at Sindri was the construction of a coke-oven batter with a daily capacity of 610 tonnes and equipped with an up-to-date recovery system for the by products from the coke oven gas. The Government appointed a team of technical experts with the aid of TCA to examine the possibilities of stepping up fertiliser production at Sindri on the basis of the coke-oven gases expected to be available at the rate of 10 million cubic feet per day as a byproduct from the coke-ovens.

8 24 The technical team after visiting fertiuser factories manufacturing ammonium nitrate, urea and other fertilisers in various countries, recommended the desirability of production ammonia by reforming coke-oven gas and further converting it to sulphate-nitrate and urea. These recommendations were accepted by the Government, and work on the project commenced only during As regards FACT, the construction of a plant for the production of 8,128 tonnes of ammonium chloride per annum was completed by the end of But doubling of the capacity was considerably delayed because preliminary studies were needed in order to decide the types of nitrogenous fertilisers to be produced and the processes to be adopted with a view to improving the economics of the plant. A Technical Committee appointed by the Government reported on the expansion scheme in , and suggested that (a) a part of the output amounting to about 18,289 tonnes should be produced in the form of ammonium phosphate (N 16 per cent and P2O5 per cent) (b) the production of ammonium sulphate should be expanded from 48,770 to 60,963 tonnes; and (c) while in the first instance only the hydrogen required for the expanded production of ammonia need to be produced electrolytically, the entire

9 25 requirements should before the end of the Second Plan, be obtained by this process with a view to reducing the cost of production. Government accepted the suggestions and a loan from the Industrial Finance Corporation of India were arranged for financing the expenditure during the Second Plan. Second Five Year Plan ( ) In 1954, a Standing Committee on Manures and Fertilisers set up by the Government framed estimate of fertiliser consumption in the country for the period of to

10 26 ESTIMATION AND CONSUMPTION OF FERTILISERS to (tonnes) Year Nitrogen P2O5 K2O ,605 12,193 60, ,167 18,289 81, ,809 25,401 10, ,371 40,642 12, ,013 60,963 15, ,815 86,364 20, , ,926 25, , ,408 30,482 Source: Report of the Fertiliser Production Committee, At the same time, the Ministry of Food and Agriculture has estimated the requirements of nitrogenous fertilisers during the period of the second plan. Apart from ammonium sulphate, the Ministry of Food and Agriculture has accepted nitro limestone (20.5 per cent nitrogen), sulphate limestone (26.5 per cent nitrogen), and urea (44.46 per cent nitrogen) as by and large suitable.

11 27 However, their application had to be restricted to certain level based on the suitability of soils for their application and on methods of improving storage conditions. The Ministry of Food and Agriculture had estimated the requirements of phosphatic fertilisers (including bone meal) by the end of the second plan at 121,926 tonnes of P2O5 or 731,556 tonnes as Superphosphates. However, for the second plan, a capacity of about 50 thousand tonnes was visualized in terms of superphosphate and the balance in other types of phosphatic fertilisers. Further expansion of synthetic phosphatic fertilisers industry during the period of the Second Plan would not be necessary if the deficit could be made good by bone meal. Otherwise, various alternative fertilisers like dicalcium phosphate, and concentrated phosphatic fertilisers like double and triple superphosphate would have to be considered. Manufacture of dicalcium phosphate would provide a means of utilizing the chlorine resulting from the manufacture of caustic soda by the electrolytic process. Hence, the Food and Agriculture Ministry should take early steps to popularize dicalcium phosphate as a fertiliser. The National Fertiliser Association of India should also take up a concerted drive for popularising the use of phosphatic

12 28 fertilisers, as also balanced fertiliser mixtures. The manufacture of concentrated fertilisers not requiring the use of sulphuric acid should be encouraged. To keep the costs low, future development should envisage substantially bigger plants, with a minimum daily capacity of not less than 100 tonnes. The Development Council for Heavy Chemicals (Acids and Fertilisers) was set up in 1953 under provisions of the Industries Development and Regulation Act, The Council was expected to make recommendations regarding the targets of production, norms of efficiency, measures of securing fuller utilisation of installed capacity and better economy in the cost of production, etc. The representative of Government, Industry and Labour were the members of the Development Council. The Council met four or five times each year and made recommendations to the Government on different aspects of the fertiliser industry. Thus in , the Council recommended the establishment of the production of phosphorous by the electro-thermal process by at least one unit with 25 tonnes capacity per day and popularising by the Ministry of Food and Agriculture of dicalcium phosphate as fertiliser.

13 29 In , the Council recommended (i) enhancement of the target for nitrogenous fertilisers in view of the raising of the food grains target, (ii) measures for increasing the off take of superphosphate, and (iii) indigenous production of dicalcium phosphate. During , the Council drew up programmes of development for phosphatic fertilisers and nitrogenous fertilisers in connection with the preparation of the annual plan for by the Planning Commission. It was considered advisable to spend foreign exchange on the production of nitrogenous fertilisers rather than spending the same on its import. The Council also recommended that in the initial stages the product of Nangal and Rourkela be marketed with 26 per cent N instead of the dilution of ammonium nitrate with limestone containing 20.5 per cent nitrogen. The Second plan envisaged expansion of capacity for nitrogenous fertilisers from 86,365 tonnes of nitrogen in to 388,131 tonnes in and the production from 77,220 tonnes of nitrogen in to 294,655 tonnes in This increase was expected to be achieved by the expansion of the Sindri Fertiliser Factory and FACT and the establishment of new fertiliser factories at Nangal, Neyveli and Rourkela.

14 30 It was also expected that additional quantities of ammonium sulphate would be obtained as by-product at the steel plants and that ammonium chloride would be produced by Sahu Chemicals in conjunction with the production of soda ash. The expansion scheme of Sindri envisaged the production of urea and ammonium sulphate nitrate or double salt. This scheme was completed in 1959 as against the end of 1957 set as the target date. Even, so, no extra output was achieved at Sindri in the remainder of the Plan period for several reasons such as the low performance of the lean gas plant, shortage of coal of suitable quality, lack of spare parts as well as the caking characteristics and acidic nature of the double salt produced. Third Five Year Plan ( ) The fertiliser industry fell under Schedule B of the Industrial Policy Resolution of April In the Third Plan, it was ranked on par with iron and steel which was given the 'core' status in the Second Plan. It was proposed that in addition to the completion of fertiliser projects carried over from the Second Plan, further

15 31 capacity for nitrogenous fertilisers should be established in the public sector. Among the new Central Public sector projects were (a) The Trombay Fertiliser Project which was planned for utilizing refinery gases and naphtha, with a capacity of about 91,444 tonnes of nitrogen. The pattern of production was to be that half of the available ammonia would be converted into urea by a partial recycle process and the balance of ammonia would be utilized for the manufacture of nitrophosphate by nitric acid treatment of rock phosphate. The phosphate content of the complex fertiliser would be rendered partially water soluble by the use of sulphuric acid. (b) The Assam Fertiliser Project which was to be set up at Namrup in Assam based on 'associated gas' available from the Naharkatiya oil fields. The overall capacity of the plant was scheduled for 33,000 tonnes of nitrogen based on the production of 50,800 tonnes of urea and 50,800 tonnes of ammonium sulphate by the acid neutralization process, the acid being produced from imported sulphur. (c) The Gorakhpur Fertiliser Project with a capacity of 81,284 tonnes of nitrogen per annum and the end-product was to be urea produced by the total recycle process. The raw material for this factory was to be petroleum naphtha from the refinery at Barauni, a distance of 200 miles from the fertiliser plant.

16 32 There was also the scheme for further expansion of FACT by about 30,500 tonnes of nitrogen, to produce ammonium sulphate/ammonium phosphate and ammonium chloride. Additional production of by-product ammonium sulphate was expected with the expansion schemes of the steel plants. One more public sector nitrogenous fertiliser factory with a capacity of about 81,000 tonnes of nitrogen was also included. Annual Plans ( to ) The fourth plan which was to commence in was delayed due to the rigorous drought in and the dislocation caused by the Indo-Pakistan conflict in that year. In its place, there were three annual plans. The drought in was followed by a second year of poor monsoons in As a result the levels of fertiliser consumption, as targeted, were not achieved. Fourth Five Year Plan ( ) Consumption of fertiliser for the Fourth Five Year Plan, were fixed at 3.2 million tonnes of N, 1.4 miuion tonnes of P2O5 and 0.9 million tonnes of K2O by these quantities implied more than trebling the level of fertiliser consumption. The targets for the fertiliser industry were

17 33 (a) to establish a capacity of about 4 million tonnes of nitrogen and 1.9 million tonnes of P2O5 by ; (b) to distribute the additional capacity throughout the country (c) to determine the capacity of each unit with due regard to economies of scale, the imperatives of modem technology and the economies of transport to the likely markets; and (d) to fix for each unit such product mix as will maximize its cost efficiencies as well as lower the cost per nutrient of its products to the farmer. Fifth Five Year Plan ( ) Based on the programmes approved in the public and private sectors, it was expected that a capacity of 4.1 million tonnes of nitrogen and 1.2 million tonnes of P2O5 would be achieved in the early years of the plan. In addition, the Fifth plan programmes envisaged the establishment of five new fertiliser projects in the public sector, three of them at inland locations and two on coastal locations. These projects were estimated to contribute an additional capacity of 1.3 million tonnes of nitrogen and 0.6 million tonnes of P2O5. Provision was also made for the production of phosphoric acid at Kandla and Madras. It was expected that additional

18 34 capacity of the order of 0.6 million tonnes would be set up in the private sector. Advance action would also be taken on projects, amounting to a capacity of one million tonnes of nitrogen, which were required to be completed in the initial years of the Sixth Plan period. A capacity target of 7 million tonnes of N inclusive of the capacity on advance action projects, and 1. 7 million tonnes of P2O5 was envisaged in the Plan. Because of change in Government, the Fifth plan ( ) was wound up in and a new draft plan was presented for the period The main shift in emphasis in the fertiliser strategy was much greater attention to organic manures, minimising pollution and reducing costs of providing key nutrients. A substantial step-up in basis research and extension activity in the production and application of organic manures was envisaged in the Plan. Organic manures, would, however, need to be supplemented with chemical fertilisers. Expansion of capacity for production of chemical fertilisers was therefore also necessary. The demand for nitrogenous and phosphatic fertilisers was estimated at 52.5 lakh tonnes and 16 lakh tonnes respectively for the year and at 73.3 lakh tonnes of nitrogen and 25 lakh tonnes of P2O5 by Considering the time-lag in establishing new capacity, the attainable levels of production were

19 35 estimated at 39 lakh tonnes of N and lakh tonnes of P2O5 by Substantial imports would therefore be necessary even at the end of the Plan period. Sixth Five Year Plan ( ) In the Sixth Plan ( ), greater attention was to be devoted to creation of indigenous production capacities for both nitrogenous and phosphatic fertilisers, maximizing to the extent possible, the utilization of indigenous raw material resources like gas, pyrites, rock phosphate, etc. The capacity of the fertiliser industry stood at 38.9 lakh tonnes for nitrogenous fertilisers (nutrient content) and lakh tonnes for phosphatic fertilisers by The demand for nitrogenous and phosphatic fertilisers was estimated at 60 lakh tonnes in Considering the time lag inherent in the establishment of new capacity, the attainable levels of production in were estimated at 42 lakh tonnes of nitrogen and 14 lakh tonnes of P2O5. Substantial imports would, therefore, be necessary even at the end of the plan period". Seventh Five Year Plan, ( ) The Seventh plan has envisaged a target of consumption of fertilisers between 13.5 and 14.0 milhon tonnes by the consumption of fertilisers during the first three years of the Seventh Plan fell short of targeted levels due to unfavourable

20 36 weather conditions and an unprecedented drought during The fourth and fifth years of the Plan were very good years and consumption of fertilisers increased both in the rabi and kharif seasons to about million tonnes during By the end of the Seventh Plan Period (1990), there were 55 manufacturing units for nitrogenous fertilisers with a capacity of 8.44 million tonnes and 87 units manufacturing phosphatic fertilisers with a capacity of 2.75 million tonnes. Eight more fertiliser projects were under implementation, of which five were for manufacture of nitrogenous, and three for phosphatic fertilisers. The production of phosphates suffered during due to the storage of imported phosphoric acid. Imports continued to meet the gap between production and demand. The level of imports had declined from 3.4 million tonnes in to 1.6 milhon tonnes in Fertilisers Actual in Target for (In million tonnes) Actual in Estimated for Capacity Nitrogen Phosphates * Production Nitrogen Phosphates Source: Annual Report, , Department of Fertilisers, Ministry of Agriculture, New Delhi.

21 37 However, shortfall in the indigenous production of phosphatic fertilisers in , resulted in increased imports to 3.44 million tonnes. All potassic fertiliser are imported'^. Fertiliser Policy in India In order to provide fertiliser to farmers at affordable prices, the fertiliser policy in unaffordable prices, the fertiliser policy in India was based on state subsidy, where till 1992 production of N+P+K fertilisers was covered under Retention Price Scheme. The movement and distribution was also controlled by the Government under EGA allocation. However, the MRP fixed by the Government did not keep pace with the increasing cost of production, resulting into the increasing subsidy burden to the Government. In August, 1992 the Government of India decontrolled the phosphatic and potassic fertilisers, which was followed by decimalisation of imports. Initially, all controls on price and movement were removed. The immediate fall out of decontrol was sharp increase in selling price of phosphatic and potassic fertilisers leading to unaffordability by marginal farmers and substantial drop in consumption. Appreciating the need to promote ' Wadia, M.S.F.K., Indian School of Political Economics, Pune. Journal of Indian School of Political Economic, Oct - Dec 1990, P. 18

22 38 use of P + K fertilisers and to improve the NPK ratio, the Government had to intervene and grant ad-hoc concession on indigenous / improved P + K fertilisers. The Government also introduced MRP of P + K fertilisers but the movement and distribution was left outside Government control. In order to avoid shortage of decontrolled P + K fertiliser in remote / hilly area, the Government also remote / hilly areas, the Government also started buffer stocking scheme for DAP and MOP in , through Indian potash limited. Presently, import of DAP and MOP are lowed under OGL whereas urea imported are only through designated STEs. Through the indigenous urea production has widely grown to the level of self sufficiency, the cost of production and subsidy burden the government has also been ballooning every year. The total fertiliser subsidy on fertiliser was corers , which has increased to 9481 crores in i.e., approx 100 per cent increase. The fertiliser industry has also shown improved efficiency in capacity utilization and consumption of indigenous urea invariably has been higher than the farm gate price of imported urea.

23 39 The indigenous urea capacity can be broadly classified in following categories. i. Natural gas based ii. Naphtha based iii. Others including fuel oil, LSHS, mixed feed coal The gas based plants have lowest cost production but still higher than the present cost of imported urea"^. Recent Developments in Fertiliser Policy The Government of India has clearly expressed its intentions to bring out a new urea policy, which aims to remove all distribution control on urea and withdraw subsidy by In 1997, a High Powered Fertiliser Pricing Policy Review Committee (HPC) under the chairmanship of Professor C.H. Hanumantha Rao, was set up, which submitted report on The committee recommended replacing existing unit wise RPS by LRMC based uniform normative referral price. However no decision was taken on this report. For reassessment of urea capacity of existing plant, the Government had set up an Expert Committee in April, The '' Gahlaut. P.S, Fertiliser Policy in India and International Trade, Fertiliser news, September p. 117

24 40 committee pointed out, under statement of capacity of various urea plants and recommended five different methods to reassess tlie capacity. As per the recommendations of expert committee, Government of India constituted another committee under the Championship of Dr. Y.K. Alagh on The committee has since given report in March, In the meantime, vide notification dated downward revision in retention price of 11 urea manufacturing units on a provisional basis was made, as a result of interim re-assessment of the capacity. In September, 2000 the Expenditure Reforms Commission (ERC) submitted its report proposing a four phase programme to eventual decontrol of urea over a period of six years as below: First stage ( ) adaption of uniform concession for each of five groups i.e. pre 1992 gas based plants, post 1992 gas based plants, naptha based plants, fuel oil/lshs based plants and mixed feed plants. Concessional rate to be determined taking weighted average RP of plants in each group as on The second stage ( ) further reduction in concession on naptha fiiel oil / LSHS and mixed feed plants based on reduction of energy consumption and lowering of capital related charges (CRC).

25 41 Third stage ( ) - concession on naptha and mixed feed plants on basis of assumed switch over to LNG. Fourth stage (with effect from ) - reduction in number of groups from five to two viz. naptha based plants having entitled for FDCR of Rs.l900/- per tonne, for all other plants, concession to be Nil. Selling price of urea is to be increased at the rate of 7 per cent per annum from 2001 to Rs.6900/- per tonne as on , which would also likely to be import parity price of urea. The ERC recommendations are still under consideration of the Government. Present System of Fertiliser Marketing and Distribution Indigenous fertilisers are distributed through institutional channels, company outlets and private dealers. Out of the imported materials, potash is handled by Indian Potash Limited (IPL). Non-potassic fertilisers are distributed by various agencies such as cooperative, domestic producers and also IPL through their usual channels. In order to encourage the opening of fertiliser retail outlets away from the railheads, and in the heart of rural areas, the government started the block delivery scheme in Under this scheme, the Government is now bearing the cost of

26 42 transporting fertilisers up to each of the 5,000 and odd block head quarters, instead of the railheads only. The programme for allocating different fertilisers to different states which started in the 1970s continues. Season-wise supply plans are formulated by the government in consultation with the state departments of agriculture and the fertiliser industry during what are known as the 'zonal conferences'. These are held twice a year. The allocation plans spell out the quantity of each fertiliser which is to be sold by a company in a state in the coming season. Some of the objectives of these exercises are to minimise transport distances, avoid criss-cross movement of material, and to ensure that no area remains completely neglected. These ECA allocation plans normally start by allotting the domestic production first to ensure that it is fully utilized and gets a preference over imported fertilisers. Once these are utilized and 10 per cent pipeline stocks are provided for, the gap between demand and supply is met from the pool which now contains only imported material. However, during the last few years, there was deviation in this policy and pool (imported) material was released at the cost of indigenous material.

27 43 Until 1970s the entire non-potassic imported fertilisers were handled by the Food Corporation of India and distributed through institutional agencies. Since handling and marketing operations were undertaken by different agencies this system was not efficient or cost-effective. Towards the late 1970s, the Government therefore progressively inducted IPL and several other companies to handle imported N and P fertilisers. At present, the FCI has no role to play in the fertiliser business. The new system led to a reduction in handling charges, improved efficiency in port operation, storage and distribution. It also encouraged the manufactures to create additional infrastructure to market larger volumes which arose from expansion of existing facilities and production from new plants. A survey of fertiliser dealers conducted in showed that 72 per cent dealers represented 6-10 fertilisers companies and 23 per cent dealers sold the material of companies. Out of the states surveyed, the number of companies represented by a dealer was highest in Andhra Pradesh where no dealer represented less than 5 companies and 43 per cent of them represented more than 10 companies. The fertiliser use in India has shown a consistent growth from 66,000 tonnes of plant nutrients in to million

28 44 tonnes in The increase in fertiliser use coupled with irrigation facilities, better quality seeds, improved agronomic practices, have resulted into substantial improvement in crop productivity. The food grain production during the same period has correspondingly increased from 52 million tonnes to million tonnes. However, the productivity of food grain as yield per hectare of 1697 kg in is far below the world average. Profile of the Selected Fertiliser Companies in Tamil Nadu Madras Fertiliser Limited (MFL) MFL was incorporated in December 1966 as a Public Sector Undertaking with authorised share capital of Rs.l4 crores in December 1966, with Government of India (GO!) and AMOCO India Inc. (AMOCO - a wholly owned subsidiary Standard Oil Company of USA) holding 51 per cent and 49 per cent of shares respectively. MFL commenced commercial production in November Subsequently in 1972 as per the Formation Agreement, National Iranian Oil Company (NIOC - a multi billion State owned Petrochemical Company of Iran) was inducted as shareholder acquiring 50 per cent of AMOCO shareholding in MFL. In 1985, AMOCO pursuant to their world wide strategy

29 45 disinvested their shares which were in turn acquired by GOI and NIOC. The current shareholding pattern is GOI per cent NIOC per cent PubHc per cent The paid-up Equity Capital of the Company as on is Rs Crores. MFL is engaged in the manufacture of Ammonia, Urea, Complex Fertilisers and Bio fertilisers. MFL's activities include the marketing of these fertilisers and trading in Agro Chemicals in accordance with the corporate objective. MFL has been striving to develop and maintain an Organizational environment, that motivates the individual, encourages personal initiative, innovation and creativity. MFL has its plant facilities and head quarters located on a sprawling 350 acres at Manali, about 20 kilo meters north of Chennai City. In order to make its products available closer to the farmer, MFL has developed a dealer network of over 7000 dealers and also appointed Cooperative Marketing Federations of respective States, Agro Industries Corporations and other Institutions as marketers.

30 46 Thus, MFL has well sold retail outlets encompassing private, cooperatives and Agro Kendras for wider reach and better market penetration of its products. Madras Fertilizers Limited manufactures ammonia, urea and complex fertilizers. The company is also engaged in the manufacturing of bio-fertilizers and in marketing fertilisers and agro chemicals under the brand name 'Vijay'. The company markets manufactured fertilisers NPK, DAP and urea supplemented by imported urea and nitrite of potash. EID Parry Limited Thomas Parry, a young Welsh trader who came to Madras in 1788, founded Parry & Company. Now called EID Parry (India) Ltd., the company is well diversified with interests in fertilisers, pesticides, sugar and ceramics. The fertiliser and sugar businesses contribute to about 70 per cent of revenues. EID Parry belongs to the south based Murugappa group. He was the force behind the company until his death in The company started its sugar operations in 1803 with a cane sugar plantation near Chidambaram. The first sugar distillery at Nellikuppam in Tamilnadu came up in In 1906, it set up the Presidency Manure Works to manufacture superphosphates in

31 47 Ranipet. It got into ceramics when it began making acid jars in 1908 for the sulphuric acid produced in the superphosphate factory. In 1975, the company was registered under the Companies Act as BID Parry (India) Ltd. From the late sixties onwards, the company started showing signs of decline. The financial institutions invited M. V. Arunachalam of the Murugappa group to takeover the company, which he did in That is how EID Parry became a part of the Murugappa group. In 1984, M.V. Subbiah younger brother of Arunachalam, was brought in as Vice-Chairman and Managing Director, EID Parry is a part of the Murugappa group headed by M.V. Subbiah. The family is reported to hold about 40 per cent of the equity. Southern Petrochemical Industries Corporation Limited (SPIC) SPIC has diversified interests in fertilisers, pesticides, and bio-technology, chemicals, petrochemicals, shipping, LPG and petroleum. The fertilisers business, comprising largely urea and di-ammonium phosphate, accounts for about sixty per cent of revenues. SPIC was promoted by the M. A. Chidambaram group

32 48 of companies and the Tamil Nadu Industrial Development Corporation. SPIC was incorporated in 1969 to set up a nitrogenous fertiliser plant at Tuticorin in Tamil Nadu. The company was set up as a joint venture between the M.A. Chidambaram group and the Tamil Nadu Industrial Development Corporation. Its plant was commissioned in June Diversification began in 1985 when a shipping division was set up. In 1986, SPIC entered into the chemicals business by taking over two sick units, producing caustic soda, liquid chlorine, soda ash and fertiliser grade ammonium chloride. Following this, two new units to make propylene glycol, propylene oxide were setup. SPIC's in-house engineering division landed its first turnkey contract in In 1993 it ventured into LPG bottling. In 1995 it set up a Penicillin-G plant in Cuddalore. Over the years it diversified into pharmaceuticals, LPG, tissue culture, hybrid seeds. Backward integration moves were initiated by to produce inputs for its fertiliser plant. SPIC has also promoted several companies such as Tuticorin Alkali Chemicals & Fertilisers, SPIC PHI Seeds, Indo-Jordon

33 49 Chemical Company, SPIC Fertilisers & Chemicals, Tamilnadu Petro Products, Manali Petrochemicals Ltd., SPIC petrochemicals and Technic Petro India. SPIC's fertiliser business comprises of manufacture and sale of urea, di-ammonium phosphate and aluminium fluoride. To provide marketing support to its dealers the company also deal in pesticides and high grade seeds. SPIC owns and operates three ships which bring imported raw material to its fertiliser complex. Its bio-technology division produces and markets hybrid seeds for cotton and vegetable crops. It also has a tissue culture plant and exports cut-flowers to major European markets. Its pharmaceutical division has antibiotic and bulk drug plants at Cuddalore in Tamil Nadu. It is a major producer of Penicillin-G in India. It also produces formulations such as Centchroman, L-seleno, Methioine and Diltiazen. The company entered into a joint venture with Jordan Phosphate Mines Company to set up a company in Jordan to manufacture 224,000 torme per annum of phosphatic acid. The joint venture company Indo-Jordan Chemicals Company started commercial production in April 1997.

34 50 Kothari Industrial Corporation Limited In 1935, Mr. Chandual Kothari started the Kothari Industrial Corporation limited. In 1940, they started the fertiliser department. Now the company is produced 55 tonnes in NPK complex granulated mixture and are having 16 branches in all over the Tamil Nadu, Kerala and Kamataka. The plant operation has been smooth throughout the year, with a consistent production every month. The on stream hours of the plant improved in the same year. The plant service factor was 96.2 per cent this year indicating improved reliability of plant operations. The operating efficiency too remained higher this year. The current efficiency of 95.3 per cent in the fifty year of operation is reported to be very good due to membrane performance. The efficiency of rectifier as well as chlorine liquefier operations remained at about 97 per cent levels. Consumption of raw materials, utilities and chemicals were better than the designed norms during the year. The input costs, in terms of specific consumption as well as unit cost of materials were continuously monitored to have an effective control on cost of production. The average sales realisation improved during last quarter of last year and remained at a good level till December

35 Subsequently due to crash in international prices of caustic, the domestic market price has started falling from January Nearly 60 per cent of the production was covered with organized sectors during the year for a better capacity utilization of plant. Planning has been made for the remembranes of the electrolysers, as the membranes are at the end of their optimum mechanical life. The international prices for caustic soda and fertiliser's lye during the beginning of last financial year were very much on the higher side and in view of these major aluminium producers in the country sourced caustic soda lye from the domestic market. This has resulted in rise in demand for the product and in turn it realised better price. Again from Dec 2001 onwards, the market started showing a down trend, and the international prices have come down. The major consumers like aluminium industries have tied up their annual CST requirement with overseas suppliers. This has resulted in a low realization in the cost quarters of the year. For understanding the geography and profile of the area the researcher has given some basic information in the following pages.

36 52 The profile of the sample district and it is presented it the table TABLE 2.1 PROFILE OF THE SAMPLE DISTRICT as on SI. Sample districts Particulars No. Cuddalore Erode Madurai Tiruvarur 1 Area (sq. km) Population Male Workers Female Workers Rural Workers Urban Workers Cultivators Rural Population Urban Population Number of Agricultural Blocks Temperature (centigrade) Maximum Minimum Agriculture Total Cropped area (in 000 hectares) 13 Net Area (in 000 hectares) Area and Production of 14 Principal Crops in 000 tonnes Rice Net Area Irrigated (00 hectares) Gross area in hectares (000 hectares) Rain Fall (normal) in millimetre Actual Rain Fall

37 53 Cropping Pattern in the Sample District The cultivator cannot choose to grow any crop on any type of land. There are two sets to determine of the cropping pattern in relating to environmental constrain like water availability, soil type, irrigation etc., and other set relating economic, social and cultural factors. There are two types of cropping patterns recognized by the agricultural department i.e., Kharif and Rabi, month of June, July and August is said Kharif period and September, October, November and December is the Rabi period Another cropping period is called as Thaladi, which changes as state to state. In Tamil Nadu, the period of Thalady is from the mid January, February and March.