Fertilizer
Fertilizers (also spelled fertilisers) are compounds given to plants to promote growth; they are usually applied either via the soil, for uptake by plant roots, or by foliar feeding, for uptake through leaves. Fertilizers can be organic (composed of organic matter), or inorganic (made of simple, inorganic chemicals or minerals). They can be naturally occurring compounds such as peat or mineral deposits, or manufactured through natural processes (such as composting) or chemical processes (such as the Haber process).

Fertilizers typically provide, in varying proportions, the three major plant nutrients (nitrogen, phosphorus, and potassium), the secondary plant nutrients (calcium, sulfur, magnesium), and sometimes trace elements (or micronutrients) with a role in plant nutrition: boron, chlorine, manganese, iron, zinc, copper, and molybdenum.

In the past, both organic and inorganic fertilizers were called "manures," but this term is now mostly restricted to man-made manure.Though nitrogen is plentiful in the earth's atmosphere, relatively few plants engage in nitrogen fixation (conversion of atmospheric nitrogen to a biologically useful form). Most plants thus require nitrogen compounds to be present in the soil in which they grow.

Growth of Fertilizer Industry
The Indian fertilizer industry has succeeded in meeting almost fully the demand of all chemical fertilizers except for MOP. The industry had a very humble beginning in 1906, when the first manufacturing unit of Single Super Phosphate (SSP) was set up in Ranipet near Chennai with an annual capacity of 6000 MT. The Fertilizer & Chemicals Travancore of India Ltd. (FACT) at Cochin in Kerala and the Fertilizers Corporation of India (FCI) in Sindri in Bihar were the first large sized -fertilizer plants set up in the forties and fifties with a view to establish an industrial base to achieve self-sufficiency in foodgrains. Subsequently, green revolution in the late sixties gave an impetus to the growth of fertilizer industry in India. The seventies and eighties then witnessed a significant addition to the fertilizer production capacity.

Fertilizer Budget
The installed capacity as on 30.01.2003 has reached a level of 121.10 lakh MT of nitrogen (inclusive of an installed capacity of 208.42 lakh MT of urea after reassessment of capacity) and 53.60 lakh MT of phosphatic nutrient, making India the 3rd largest fertilizer producer in the world. The rapid build-up of fertilizer production capacity in the country has been achieved as a result of a favourable policy environment facilitating large investments in the public, co-operative and private sectors. Presently, there are 57 large sized fertilizer plants in the country manufacturing a wide range of nitrogenous, phosphatic and complex fertilizers. Out of these, 29 unit produce urea, 20 units produce DAP and complex fertilizers 13 plants manufacture Ammonium Sulphate (AS), Calcium Ammonium Nitrate (CAN) and other low analysis nitrogenous fertilizers. Besides, there are about 64 medium and small-scale units in operation producing SSP.

India is the third largest producer and consumer of fertilizers. The installed capacity of the fertilizer industry as on November 1, 2006 was 123 lakh MT of nitrogen and 57 lakh MT of Phosphatic nutrient. During April-October 2006, total fertilizer production grew by 6% over the corresponding period of the previous year. While phosphatic fertilizer production increased by 13%, urea production grew by 3%. The import of manufactured fertilizers during H1’07 compared to H1’06 also surged by about 39%.Some of the main issues confronting the fertilizer industry are with respect to pricing and availability of feedstock. With the industry competing with the power sector for gas and the Government favoring conversion of existing Naphtha based units to gas, shortages are expected in future as well.

The existing Naph based units have been given time till end of FY’2009 for conversion to gas. The government recently approved the Stage III of the Urea pricing policy based on the recommendations of the Dr.Y.K.Alagh Committee. The scheme will be effective from October 1, 2006 till March 31, 2010.  The policy seeks to encourage efficiencies in production and distribution of Urea. The government has also dispensed with the prior permission required for producing beyond 100% of the installed capacity. As per industry estimates, the total subsidies for the fertilizer sector in FY’07 would be around Rs.34,036cr including an amount of Rs.5,913cr carried over from the previous fiscal. However, the budget estimates for FY’07 were far lower at Rs.17,252cr. Even after accounting for two supplementary grants, a gap of Rs.11,583cr exists. Inadequate subsidies as well as delays in disbursement of allocated subsidies have added to the problems of the industry.

The budget lays emphasis on agricultural development with higher allocation under various programmes. The Bharat Nirman programme continues to be the  cornerstone of the Government’s policy and an additional 24 lakh hectare is to be bought under irrigation under this policy. Budgetary support for the programme has been increased from Rs.18,600 cr in 2006-07 to Rs.24,603 cr in 2007-08. Under the accelerated irrigation development programme, 35 new projects are to be completed and an additional irrigation potential of 9 lakh hectares is to be created. The outlay for the programme has increased from Rs.7,121 cr in 2006- 07 to Rs.11,000 crore in 2007-08. Customs duty on drip irrigation systems and agricultural sprinklers has been reduced from 7.5% to 5%. Subsidy outlay for the fertilizer sector has been increased from Rs.17,252 (B.E 2006-2007) to Rs.22,452 cr in R.E.2006-07. Department of Fertilizers is to work along with the industry in evolving a mechanism for administering subsides directly to the farmers. A pilot programme for the same is to be implemented in at least one district of each state in FY 2008.

Peak rate of customs duty on all fertilizers has been reduced to 7.5% which is likely to have an impact on the realizations of players manufacturing complex fertilizers and other secondary nutrients. At the same time, imports of Urea used for the manufacture of complex fertilizers will attract a lower duty of 5%. The main fertilizer products of Urea and DAP will continue to attract lower duties at 5%. In terms of subsidies, though the budget has increased the quantum of subsides for the sector, this is likely to be inadequate. It may be noted that the R.E 2006-07 and budgeted estimate for 2007-08 are similar and, with no change in the farmgate prices of fertilizer and rising feedstock costs, the  actual subsidy burden is likely to be much higher than the allocated amount. It is however expected that the government will continue to reimburse the industry with the subsidy component albeit with delays.

The focus on agricultural development is likely to benefit the fertilizer sector  indirectly. While the increased area under irrigation is likely to have a positive impact on fertilizer consumption, the ability of the domestic industry to take advantage of the same remains to be seen.