Indian fertiliser units have significant import dependence, with most basic raw materials, such as rock phosphate, sulphur, and ammonia being imported. This is not a matter of major concern for urea manufacturers, as all variable cost fluctuations are compensated under the Retention Pricing Scheme. However, the vulnerability of phosphatic fertiliser manufacturers to exchange rate fluctuations is high. Building the requisite raw material linkages therefore assumes critical importance. The feedstocks used for the manufacture of fertilizers are mainly naphtha, furnace oil and natural gas.
Natural gas is more economically viable than alternative feedstocks, such as naphtha.
However with the increasing use of natural gas in other industries such as power and steel, the non-availability of adequate feedstock has been a serious operational bottleneck in the fertiliser industry. Given this, units in India are commissioning dual feed lines so that the shortages of gas supplies do not impact plant utilization. While over the years we have built up remarkable engineering capabilities including plant and equipments fabrication, we have lagged behind in mastering process know how. Subsidy on fertilizers - The earnings of all fertilizer companies depend on government regulations, which have in the recent past been inconsistent and lacking direction. Efforts have been made at various stages to reduce subsidy on fertilizers at various stages but due to strong agriculture lobby this has not been possible.