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Top 5 Challenges Fertilizers Industry Will Face In 2018

Top 5 Challenges Fertilizers Industry Will Face In 2018

Chemicals | Apr, 2018

India fertilizers market is anticipated to witness robust growth during the forecast period, owing to continuous growth of population which is resulting in more demand for food, coupled with increasing demand for agricultural products in the country. India is one of the leading producers of agricultural products such as pulses, wheat, rice, groundnut, potatoes, onion etc., thereby leading to high demand for fertilizers in the country. Moreover, expansion of fertilizers production capacities in India along with increasing government initiatives towards the reduction of imports of fertilizers are further anticipated to boost the growth of India fertilizers market in the coming years. However, manufacturers are bound to witness some major challenges in 2018 which would force them to rethink their strategy.

Challenge 1 – Heavy Imports-Lack of Domestic Production

India is a large agricultural hub around the globe and majority of the total population is dependent on the agricultural sector for meeting their demand. Agriculture is the major end-user sector for fertilizers and the demand for fertilizer is growing significantly. India imports fertilizers such as Muriate of Potash (MOP) and other specialty fertilizers due to limited availability in the country.

In the FY2016-17, approximately 2.86 million MOP was consumed, out of which the majority was imported. Calcium Nitrate (15.5-0-0-18.8) grade, which holds 20% of the total share of the water-soluble fertilizers market in India, meets 75% demand for is by imports. The water-soluble fertilizers are anticipated to grow at the highest rate in the fertilizer industry. The import of water-soluble fertilizers is higher as compared to the domestic production, with more than 80% Potassium Nitrate (13-0-45), 95% Potassium Sulphate (0-0-50) and Mono-Ammonium Phosphate (12-61-0) being imported. Only 16% of the total demand of water-soluble fertilizers is met through domestic production in the country, while a major portion is being imported because there haven’t been any breakthrough advances in the technologies used in the industry coupled with high production cost.

However, TechSci Research has been working extensively with multiple fertilizer manufacturers in mapping the flow of fertilizer’s industry by analyzing the installed capacity, utilization rate, imports, exports and re-exports which has helped fertilizer manufacturers in understanding the trade flow of the industry by providing detailed analysis on the insights on rising imports, difference in domestic and imported prices, differentiation between key technical properties of domestically produced and imported fertilizers, analysis on production cost in India with comparison to the country of import and information on national and International technology licensors and their technology. This is how many manufacturers are able to bridge the demand supply gap.

 Challenge 2 – Low Yield Due to Wrong Usages of NPK

The way Government is advancing farming, it is entirely unexpected from natural farming. It has turned into a round of just three chemicals-NPK (nitrogen, phosphorus and potassium). Plants require at least than 17 components for their development. Government is stating that it is advancing organic farming for this situation, appropriation is being given to compound composts and there are immense inconsistencies in the usages of fertilizers. The proportion of NPK use ought to be 4:2:1. However, in Punjab, this proportion is 61:19:1. Urea is modest to buy so farmers utilize it increasingly that makes irregularity because of which the yield goes down. The entire system of subsidy should also investigate overall benefits to agriculture. The greatest challenge in agriculture is the over usage of fertilizers. In 1950, with the utilization of less NPK, the yield was more. Presently, with the utilization of more NPK, lesser yield is being delivered. There is a need to enhance the organic element of the soil through natural farming.

TechSci Research with its in-depth understanding of usage pattern of fertilizers has helped manufacturers in identifying the right products with technical specifications which has helped in identifying the correct NPK resulting in high yield.

Challenge 3 – Raw Material Availability and Pricing

The Indian fertilizers industry faces some serious challenges in the form of availability and fluctuating prices of raw materials required to produce fertilizers. The primary cause of fertilizer price fluctuations is related to the supply and demand factors. India also faces a handicap due to lack of natural resources required to produce fertilizers. In case of urea, there is not enough natural gas available in the country.

TechSci Research also provides raw material procurement intelligence to sustain a competitive advantage which allows access to real time, pro-active information on the cost and market dynamics of raw materials. In raw material assessment, TechSci has provided information on sources of the raw material, procurement prices at both domestic and import level and margins at procurement level, etc. which has ensured that manufacturers remain competitive in the market.

Challenge 4 –Lack of Long Term and Stable Policy

The government of India continues to ignore the difficulties faced by the fertilizer industry related to fertilizer certifications and proper standards. At present, the import duty on both imported raw materials and finished products is same, whereas raw materials should attract lower custom duty than finished products to encourage the production in India. Also, there is no mandatory certification exists in the market.

TechSci Research with its global footprint serves various international as well as domestic clients from the fertilizer industry which gives access to information on all the mandatory certifications required for fertilizer products.

Challenge 5 – Distributors and Retailers-Key Influencers in Specialty Fertilizers Industry

The demand for specialty fertilizers is growing at a very fast rate. Distributors play a crucial role in the sales of water soluble fertilizers. The overall sales for various grades of water soluble fertilizers is growing at a significant pace, yet some companies in the Indian market are facing major challenges due to the decline sales in the respective grade. TechSci also conducted customer (distributor/dealer/end customer) satisfaction survey, wherein, the pain points of the customers are analyzed, and a possible solution was generated which has helped manufacturers in winning channel partner loyalty.

Author: Mr. Rishi Mohan, Research Manager, TechSci Research

Mr. Rishi Srivastava has overall experience of over 5 years in chemical and agrochemicals industry. He has over 6 years of experience in business consulting and market research. He has provided research and consultancy support to clients in chemical and agrochemical domain which primarily included Market Size; Market Share, Estimation & Forecast; Time Series Analysis; Moving Average & Regression Analysis, Econometric and Judgmental Analysis, Financial Analysis (Balance Sheet, P&L Statement, Ratios etc.). He has worked on projects ranging across the value chain of the chemical industry.

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