Fertilisers

Industry Code (as per CMIE Prowess): 0101012015000000'

June 2022

Individual Parameters Contributing to the Score

Moderate Demand

Due to healthy growth in agriculture and horticulture sector along with higher sowing area and favourable weather conditions, demand for fertilizer is likely to remain strong. The industry has demonstrated a resilient demand on the back of agricultural activity in the country. Sales volumes of the industry increased by 32.6% from 3,539.4 thousand tonnes in April 2021 to 4,693.4 thousand tonnes in April 2022. For FY23, the additions in manufacturing capacity is expected to be around 2540 thousand tonnes. The gap between domestic production and demand is met through imports. The industry outlook is expected to be healthy.

Low competition/ Entry Barriers

Since it is largely a capital intensive industry, the number of players are limited, characterised by the presence of large public and private sector players. Leading players include National Fertilisers Ltd, Coromandel International Ltd & Chambal Fertilisers and Chemicals Ltd. Import dependence is expected to continue though some Government initiatives like Atma Nirbhar Bharat may spur some domestic capacity creation.

Stable Regulatory environment

Fertilizer subsidy is critical for this industry and the government continues to allocate budgetary funds for such subsidies. Prices of non-urea fertilisers like DAP (Diammonium Phosphate), MOP (Muriate of Potash) & NPK fertilisers are decontrolled, though Urea fertilisers continue to be controlled. Government has adopted a NBS (Nutrient Based Subsidy) policy for the fertiliser industry. The timely release of subsidy to the fertiliser units has an impact on the working capital requirements of the fertiliser units and their liquidity, especially the urea units where the subsidy component is high.

Largely predictable supply of inputs from diversified sources or Raw Materials with rare, occasional disruptions / fairly predictable price band

Lower crude oil and gas prices will help in maintain lower operating cost. Natural gas accounts for more than 60% of the cost of production of urea-based fertilisers, the largest consumption segment. As per government policy, the fertiliser units get priority in the allocation of natural gas. Certain segments like DAP and MOP are mostly imported.