Indian fertiliser units have significant import dependence. 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. This acts as an effective barrier restricting easy entry of new players. Key success factors Capacity utilization - fixed costs are high hence maintaining a high capacity utilisation is a key to achieving profitability. Collective farming - Farmers should undertake collective farming to rationalise the use of fertilizer and slow down soil degradation.