Practically every soil scientist, economist and policymaker agrees that the Indian farmer injudiciously applies urea. The main reason is, of course, its super-subsidised price. At about Rs 5.40 per kg, urea today retails at a third of the rate of common salt. Many farmers also know they are using excess urea, which is harmful to their land. But they are unable to exercise restraint as the price is too attractive for that.
China has already embarked on a plan for capping its total chemical fertiliser consumption by 2020. The results are showing, with sales of nitrogenous fertilisers — mainly urea, which contains 46 per cent nitrogen — registering negative growth in 2018. Others, too, are putting restrictions: The European Union has stipulated that, after 2020, urea cannot be sold without incorporation of urease and nitrification inhibitor compounds. These are basically chemicals that slow down the rate at which urea is hydrolysed (which results in production of ammonia gas and its release in the atmosphere) and nitrified (leading to loss of nitrogen and its leaching into the groundwater). The objective is to reduce nitrate contamination of both air and water from excess urea use.
India has also been working at gradually cutting urea consumption, especially under the current government at the Centre. Since 2015-16, coating of urea with neem oil — which acts as a mild hydrolysis and nitrification inhibitor — has been made compulsory. From 2018-19 onwards, urea is getting sold only in 45-kg, as opposed to 50-kg bags. The intention, again, is to reduce consumption by farmers, who tend to measure urea application in terms of “bags”, as against “kilos”.
The above steps have had some, though not very significant, impact on consumption.
In 2015-16, India’s production as well as sales of urea peaked at 24.48 million tonnes (MT) and 31.97 MT, respectively. Since then, production has fallen marginally to 24.20 MT and 24.02 MT in the subsequent two fiscals, while sales have dipped to 29.61 MT and 30.32 MT, respectively. The gap has been filled by imports, which have plunged from a high of 8.75 MT in 2014-15 and 8.47 MT in 2015-16 to 5.48 MT and 4.56 MT in the following two years.
However, the focus of government policy in recent times has not really been about restricting consumption as much as increasing domestic production of urea. Chambal Fertilisers has just recently commissioned its Gadepan-III plant that can produce 1.34 MT of urea annually. Besides, the government itself is reviving five closed urea units at Talcher, Ramagundam, Gorakhpur, Sindri and Barauni by setting up new plants of 1.27 MT capacity each in the same location. If all of these fresh capacities come up as planned by 2022, India’s urea production will easily cross 32 MT — more than the peak consumption achieved in 2015-16.
How sensible is this strategy?
In 2015-16, when India’s urea production peaked, the average consumption of natural gas by its existing plants was 43.5 million metric standard cubic meters per day (mmscmd), of which only 24.6 mmscmd came from domestic sources. Once all the new units come on steam, their own requirement would be another 12 mmscmd, which will obviously have to be supplied mainly through imported liquefied natural gas (LNG).
Given that fertiliser itself can be imported, does it make sense to allocate more gas for urea production? Isn’t it better that this already scarce natural resource is used for generating power, which cannot be imported? Producing urea by using an expensive feedstock — imported regasified LNG — will, moreover, push up the government’s subsidy payout to the new units, which also have to be reimbursed their full capital cost.
The government should, instead, ask itself: How much urea does India need?
With the incorporation of urease and nitrification inhibitor chemicals — in addition to neem-coating — it is actually possible to reduce urea consumption, which will also help lower nitrate pollution and protect our soils from further deterioration. The extra cost of $25-30 per tonne, or Rs 1.75-2.10 per kg, can be partly recovered from the farmer and the balance subsidised. To the extent higher nitrogen usage efficiency leads to lesser number of bags being used, the farmer may even effectively not pay more
A 10 per cent drop in urea consumption from the peak 2015-16 level, which isn’t difficult to realise, works out to 3.2 MT. The value of that, taking a five-year average import cost of $250 per tonne, would be $800 million or Rs 5,680 crore at current exchange rates. This is almost the cost of coating 32 MT of urea with urease and nitrification inhibitor compounds (Rs 6,400 crore at Rs 2,000/tonne). And we are not factoring in here the benefits from reduced nitrogen leaching and volatilisation!
When the scope for such technology interventions exists, is it worthwhile for India to allocate precious natural gas towards manufacturing an additional 7-8 MT of urea? If urea can be imported at $250 per tonne, should these new units be extended subsidy at $425 per tonne in order to cover their higher feedstock as well as capital costs? The urea from the new plants obviously cannot be exported, since they would be using imported gas costing $8.5-9 per mmbtu (million metric British thermal units), as against the $ 2-3/mmbtu paid by Arabian Gulf manufacturers. Worse, if India does produce 33 MT or so of urea over the next 2-3 years, there will be little scope for reducing consumption, leave alone contracting cheaper imported material.
It’s high time for the government to revisit the idea of achieving so-called self-sufficiency in urea. Rather, it should aim at capping urea consumption at 30 MT and using imports as a balancing factor. This can be achieved through a mix of price rationalisation and technological interventions such as urease and nitrification inhibitors to boost nitrogen use efficiency. India could also explore the option of using urea super granules. As Bangladesh has shown, the placement of these large granules closer to the roots of paddy plant not only prevents urea from being washed away, but also enhances the soil’s nitrogen absorption capacity.
Reducing urea consumption is a goal worth pursuing for fiscal as well as environmental reasons. But it should also be viewed as a means to realise the ultimate objective of promoting soil health through balanced use of plant nutrients — which also include phosphorous, potassium, sulphur and likes of zinc, boron, iron, manganese, copper and molybdenum.
The writer is an agricultural chemistry specialist and fertiliser management consultant