by Sunil Shah

Changes 2016 will bring to the Indian fertilizer industry

Jan 27, 2016
Agriculture IndustryBusinessGovernment

There are big changes happening in the fertilizer sector as companies open B2C outlets and start selling farmer produce. 

Fertilizers are a key component in the growth of India’s agriculture sector, which accounts for about a seventh of the country’s GPD. Therefore it is only in keeping with the importance of the sector that India is the world’s second-largest consumer of fertilizers, (China is the first), and the world’s third-largest producer. In 2014-2015, the country produced 3083.6 thousand tons of fertilizers.

There are two primary fertilizer categories: Urea and non-urea. India’s produces about 80 percent of its Urea fertilizer needs. And the fertilizer industry has the capacity to indigenously meet 50 percent of the country’s phosphatic fertilizers. But India still depends heavily on imports for the raw ingredients for its phosphatic and potassium fertilizers.

2015 was a slow year for the sector. Demand for fertilizer has been soft and shrinking international prices saw imports rise. From April to august 2015, imports rose 54 percent.

Another challenge the industry faces is delayed subsidy payments from the government. Put together, these challenges are putting a strain on the working capital of fertilizer companies. Easing that problem is an area CIOs can focus on in 2016.

Another important area comes in the form of a relatively new initiative driven by the government.

The health of the fertilizer sector is tied closely to the health of the agricultural sector. So it’s apt that Makarand Sawant, GM-IT, Deepak Fertilisers and Petrochemicals Corporation, says that “The theme for the next few years is to find ways to make Indian farmers more profitable and globally competitive.”

Challenges in the fertilizer sector put a strain on the working capital of these companies. Easing that problem is an area CIOs can focus on in 2016.

To do that the Indian fertilizer industry is going to see large changes. Fertilizer companies have been asked by the government to buy back produce from farmers, thereby cutting out middle-men and making sure that farmers earn better profits.

“That is a huge change for the market because all fertilizer companies were B2B till recently. It’s actually going to change the business model for all of us. We used to be a B2B business and our customers were dealers. But now we’ve started talking to farmers directly. We now procure produce straight from farmers and sell on their behalf to ensure they get a fair price. This is from the PMOs desk to all the fertilizer companies. That’s the major push for the next few years,” says Sawant.

“We will have our own retail centers across India. These centers directly talk to farmers and offer consulting services to farmers. They will also buy back produce from farmers,” he says.

For Indian fertilizer companies that means creating a lot more retail outlets—and for IT departments it means opening up their networks to a significantly higher number of touch points.

“For me, in IT, the outreach has changed. Where we used to reach out to 600 dealers at one point, tomorrow that number will be based on how many retail outlets we will have. For me the network reach is going to increase.”

Additionally, he says, there will be lot of solutions around portals for farmers. And he sees a lot of predictive analysis and trend analysis to help farmers get most bang for their buck. 

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