Chambal Fertilizers and Chemical Limited

A
PROJECT REPORT
ON
CHAMBAL FERTILIZERS AND CHEMICAL

LIMITED
Submitted by:
Surendra kumar
Roll n. dbs/0810/w223
Semester 4th
Email Id: surendramehta08@gmail.com
CHAMBAL FERTILIZERS Delhi Business School New Delhi
Delhi Business School New Delhi
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ACKNOWLEDGEMENT
Success in any endeavor can never be achieved single handedly. It requires guidance, co-
operation and support by many individuals. A number of people have contributed
towards making this project a success. Some have contributed to this work by their
valuable suggestions and advice while others were our pillars of support from which we
drew our inspiration and strength.
We are extremely thankful to our institution to provide us such a great opportunity. It has
been a great learning experience on our technical as well as personal aspects. Our sincere
thanks to Ms. Rajni Gujral , delhi Business School New Delhi for his great support and
guidence.
We are thankful to each and every person who has contributed his surplus for the
completion of this project and also for the completion of this report. Working on this
wonderful project was a unique experience. Knowledge, experience and confidence
gained by this project will be useful for my career.
Surendra kumar
3
PREFACE
Beginning of the system project is entirely creative. This does not come all of a sudden,
but it comes by result of discussion, consultation and contemplation. Problem unsolved
here can never be satisfactory eliminated later. It is therefore a slow process.
Moreover practical training is an important part of management courses. The

theoretical studies are not sufficient to get into the corporate world. Only practical
knowledge can help us to understand the complexities of large scale organizations.
To develop healthy managerial and administration skill in potential managers, it is

necessary that theoretical knowledge must be supplemented with exposure to the real
environment. Actually, it is life for, a management itself is realized.
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TABLE OF CONTENTS
1. INTRODUCTION............................................................................ 7
1.1 Fertilizer production...................................................................................................7
1.2 Demand - Supply Scenario in Fertilizer.....................................................................7
2. MAJOR SEGMENTS IN FERTILIZERS.....................................8
2.1 Nitrogenous Fertilizers...............................................................................................9
2.1.1 Urea.....................................................................................................................9
2.1.2 Other Nitrogenous Fertilizers...........................................................................12
2.2 Phosphatic Fertilizers...............................................................................................12
2.2.1 DAP (Di-Ammonium Phosphate).....................................................................12
2.2.2 SSP (Single Super Phosphate)..........................................................................13
2.3 Potassic Fertlizers....................................................................................................14
3. ENHANCEMENT IN FERTILIZER AVAILABILITY............15
3.1 Economic Reforms and Its Impact...........................................................................15
3.2 Investment in fertilizer industry -Public, Private and Cooperative sectors.............15
3.3 Imports of fertilizers................................................................................................15
3.4 Distribution of fertilizers..........................................................................................16
3.5 Fertilizer promotion.................................................................................................16
3.6 Quality Control of Fertilizer:...................................................................................17
3.6.1 Agencies involved in Quality Control of Fertilisers.........................................17
4. POLICY INITIATIVES................................................................18
4.1 Pricing policy...........................................................................................................18
4.2 Fertilizer subsidy......................................................................................................18
4.3 Fiscal concessions....................................................................................................18
4.4 Transport infrastructure...........................................................................................19
4.5 Setting-up New Capacities.......................................................................................19
4.5.1 Addition to Domestic capacities.......................................................................19
4.5.2 Joint ventures abroad........................................................................................20
6. TOWARDS NEW FERTILIZER POLICY.................................21
7. CHAMBAL FERTILISERS AND CHEMICALS LIMITED....23
7.1 Company Profile .....................................................................................................23
7.2 Manufacturing..........................................................................................................24
7.2.1 Manufacturing Process......................................................................................25
7.3 Operations and Supply Chain Management............................................................27
7.4 Environmental Protection........................................................................................27
7.5 Awards ....................................................................................................................28
REFERENCES................................................................................... 31
BIBLIOGRAPHY..............................................................................31
ANNEXURE....................................................................................... 32
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TABLES.............................................................................................. 33
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1. INTRODUCTION
1.1 Fertilizer production
The Indian fertilizer industry in the past 50 years has grown in size and stature and
presently ranks third in the world. In the planned economic development of the country,
self sufficiency in food grain production was considered as the prime priority. Increase in
fertilizer use along with irrigation facilities, use of improved seed and adoption of better
agronomic practices paved the way for increasing crop productivity and production.
Fertilizer use in India increased from 66 thousand tons of major plant nutrients in 1951-
52 to 22.7 million tons in 2003-04. Fertilizer contributes 40-50% increase in food grain
production and they have vital role to play in any strategy to meet the challenges of rising
demand of food, fiber, forage and fuel.
Fertilizer consumption of plant nutrients per unit of grossed cropped area in India is still
very low average being 91.5 kg/ha. Productivity of food grain crops in the country is also
quite low, around 1.6 t/ha, which can certainly be doubled by enhancing per unit average
fertilizer use. Fertilizer consumption has to increase substantially in order to achieve the
food grain requirement of 220 million tons by the year 2002.
1.2 Demand - Supply Scenario in Fertilizer

The Demand-Supply scenario in fertilizers has been worked out by the Working Group
on Fertilizers for the Ninth Plan (1997-98 to 2001-02) on the basis of the estimated
demand and production projections in terms of N and P2O5 nutrients (Table-2). The
increase in production (supply) will be 4.86 million tons, most of it is confined to
nitrogen resulting from the commissioning of the expansions, new plants or joint ventures
abroad. Production of N is expected to increase from 9.7 million tons in 1997-98 to 25.0
million tons in 2007-08. The Group estimated that the available phosphate supply will
increase from 2.8 million tons of P2O5 in 1997-98 and reach 7 million tons in 2007-08.
The demand for N, P2O5, K2O has also been estimated upto 2006-2007 (terminal year of
tenth plan) at 16.35, 6.65 and 2.60 millions tonnes, respectively.
The Group also considered the details of estimates made by various agencies like
Fertilizer Association of India (FAI), National Informatic Centre (NIC) and Department
of Agriculture and Cooperation (DAC), Government of India and concluded that in the
terminal year of Ninth Plan there is likely to be a surplus of N supplies to the extent of
0.63 million tons. However, it may be worthwhile to note that some of the projects have
not materialised and finally N supplies might also show a deficit. There would be a short
fall in phosphate to the extent of 1.34 million tons. The entire demand of 1.83 million
tons of potassic fertilisers would be met from imports.
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2. MAJOR SEGMENTS IN FERTILIZERS

The Indian fertilizer industry is broadly divided into nitrogenous, phosphatic and
potassic segments. In addition to these, nutrients are combined to produce several
complex fertilizers. To express the nutrient constitution of fertilizers, the grade of a
fertilizer is expressed as a set of three numbers in the order of percent of Nitrogen (N),
Phosphate (P) and Potash (K). The straight nitrogenous fertilizers produced in the country
are urea, ammonium sulphate, calcium ammonium nitrate (CAN) and ammonium
chloride. The only straight phosphatic fertilizer being produced in Sector Report:
Fertilizer Industry India /Economics the country is SSP. The complex fertilizers include
DAP, several grades of nitrophosphates and NPK complexes. Urea and DAP are the main
fertilizers produced indigenously.
8
2.1 Nitrogenous Fertilizers

The total installed capacity of nitrogen in India as of 31st March, 2005 is 12 mtpa. This
includes the nitrogen capacity corresponding to the urea capacity of 20.2 mtpa. The use
of urea dominates nitrogenous fertilizer consumption in India, consuming almost 85
percent of the total nitrogen capacity. DAP consumes about 5 percent of the nitrogen
capacity, CAN - 2 percent and other complexes the remaining 8 percent. The production
of nitrogen increased from 10.08 million tonnes (m.t.) during FY2000 to 12 m.t. during
FY05. This was led by the increase in the production of urea, which increased, from 18.6
m.t. in FY98 to 20.2 m.t. in FY05.
INDUSTRY STRUCTURE
2.1.1 Urea
Currently, the urea capacity is about 20.2 m.t. while consumption is about 21.7 m.t. The
demand is expected to grow at a CAGR of 4 percent and by next few demand would
grow to around 23 m.t. while the estimated production would be about 21 m.t. The top six
producers of urea in India are
1. Indian Farmers Fertilizers Co-operative Ltd. (IFFCO)

2. Krishak Bharati Co-operative Ltd. (KRIBHCO)
3. National Fertilizer Ltd. (NFL)
4. Rashtriya Chemicals and Fertilizers Ltd. (RCF)
5. Nagarjuna Fertilizers and Chemicals Ltd. (NFCL)
6. Tata Chemicals Ltd. (TCL).
Urea, the most widely used fertilizer, is under government control, as urea manufacturers
are reimbursed on a cost plus basis under the RETENTION PRICE SCHEME. The farm
gate price of urea is fixed at INR 4,600 per tonne w.e.f February 29th, 2000, excluding
local levies, which is amongst the lowest in the world and is heavily subsidized.
9
The production of urea involves the production of ammonia, which is then converted to
urea. Ammonia can be synthesized using any of the following feedstock: natural gas
(NG), naphtha, low sulphur heavy stock (LSHS), fuel oil and coal. The urea segment of
the industry is likely to be affected by significant changes in Government policy in the
medium term. These changes can be broadly categorised into two types—those that affect
profitability by modifying the current rules of competition and the more fundamental
ones that replace the existing rules themselves.
Imports
Imports of urea significany lower due to large carry over stock at the beginning of
the year and increased production in the domestic sector
Urea is imported by designated State agencies based on estimates of domestic demand

and production. The international price of urea is currently quite low. The c.i.f. cost of
urea in July 2000 was around USD 140 per tonne. This implies that the import cost of
urea is about INR 7000-7500 per tonn e at the current exchange rate after accounting for
port handling and freight charges whereas the retention price of manufacturers varies
roughly between INR 5,000 and INR 11,000 per tonne. In case the import of urea is
decanalised the viability of Indian producers is likely to be threatened. However, one
must keep in mind that the current low international price of urea is partly because of the
reduced imports by India and China.
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Price movement of urea

Urea Price Once India
350
enters the
international
300
market, urea
250 prices are likely
Price $/MT FOB
200 to rise again. It

is estimated that
150
a purchase of 2
100 to 3 million
50 tonnes of urea
0
from the
international
1981
1971
1991
2001
1966
1968
1969
1974
1977
1987
1989
1994
1999
2002
1964
1976
1979
1983
1984
1985
1996
1997
2004
1965
1978
1963
1967
1970
1972
1973
1975
1980
1982
1986
1988
1990
1992
1993
1995
1998
2000
2003
market by India,
Till Oct 2004
Y ear the purchase
price of
imported urea
would jump between 150 and 250 percent. However in the medium term the international
price of urea is expected to remain depressed and the removal of quantitative restrictions
(QRs) can hurt the industry.. A logical outcome of this demand could be the concurrent
removal of pricing and distribution controls. The fertilizer ministry has already decided to
decontrol urea completely in three phases by FY07. The transition period will be used to
gradually reduce subsidy by increasing the selling price at regular intervals thus making
the cost competitiveness of domestic urea units critical.
Sector Report: Fertilizer Industry India /Economics
11
2.1.2 Other Nitrogenous Fertilizers
The other nitrogenous fertilizers — CAN, ammonium sulphate (AS) and ammonium
chloride (AC) — were decontrolled in 1991. They were brought back under the
RETENTION PRICE SCHEME in 1992 but decontrolled again in 1994. As there are no
subsidies on these fertilizers, the profitability of their manufacturers has been hit by the
recent increases in feedstock prices. The total installed capacity of CAN in the country is
942,500 tonnes per annum (tpa). The major CAN producers in the country are NFL, Steel
Authority of India Ltd. (SAIL) and Gujarat Narmada Valley Fertilizers Company Ltd.
The total installed capacity of AS is 864,500 tpa. AS contains about 21 percent nitrogen
and 24 percent sulphur. It has traditionally been popular in some parts of the country. The
principal raw materials for its manufacture are ammonia, sulphuric acid and gypsum. The
major manufacturers of AS are Fertilizer Corporation of India (FCI), Hindustan Fertilizer
Corporation Ltd. (HFCL) and Gujarat State Chemicals and Fertilizers (GSFC). AC is
used as a fertilizer for rice and some other crops. It is manufactured in India by Tuticorin
Alkali Chemicals & Fertilizers, and Punjab National Fertilizers and Chemicals (PNFC).
2.2 Phosphatic Fertilizers

The total production of phosphate in the country was 3.36 mtpa in FY00 – a 6 percent
increase over production in FY99. DAP consumes nearly 42 percent of this capacity and
SSP around 32 percent while the remaining 26 percent is consumed by other complexes.
DAP and other phosphatic fertilizers were decontrolled in 1992 following which their
prices shot up. This resulting price differential between urea and phosphatic fertilizers led
to the excessive use of urea, which resulted a distorted NPK ratio. Following the
decontrol the consumption of phosphatic fertilizers fell from 3.32 m.t. in FY92 to 2.67
m.t. in FY93. To rectify the imbalance, the Government started announcing ad hoc
subsidies on these fertilizers. While phosphatic fertilizers are officially decontrolled, in
reality, the Government controls both the selling price and the level of concession on it.
2.2.1 DAP (Di-Ammonium Phosphate)
The top five producers of DAP in the country are Paradeep Phosphates, IFFCO, GSFC,
SPIC and Godavari Fertilizers. Together with the domestic production of 4 m.t. and an
opening stock of 0.9 m.t., the total availability of DAP in the country in FY04 was 8.2
m.t. with highest ever DAP imports of 3.3 m.t. in the country. The estimated sales of
DAP in FY04 was 6.4 m.t. Thus, there was an excess supply of around 1.8 m.t. The DAP
capacity of the country is expected to increase by 2.80 mtpa by the end of FY06 and the
demand for DAP is estimated to grow by 10 to 12 percent. The subsidy is INR 4,450 per
tonne on indigenous DAP and INR 1050 per tonne on imported DAP. With the selling
price for DAP fixed at INR 8,700 per tonne, total realization for DAP manufacturers is at
INR 13,100 per tonne. DAP is manufactured using phosphoric acid (PA) and ammonia.
PA is either imported or manufactured. The manufacture of PA requires rock phosphate
(RP) and sulphuric acid. Thus DAP units are either PA based or RP based. Also units can
either produce ammonia in-house or purchase imported ammonia. In India, 69 percent of
DAP capacity is based on PA, and 80 percent of this PA requirement is met through
12
imports. The balance 31 percent of DAP capacity meets its requirements of RP and
sulphur largely through imports. Since phosphatic fertilizers are not subsidised on a cost
plus basis, escalations in raw material prices have a major impact on the profitability of
the manufacturers. The subsidy on phosphatic fertilizers is set on the basis of the
prevailing international prices of ammonia and PA. Earlier, the subsidy calculation was
ad hoc and subsidised only the P component. Under the new subsidy structure, both the N
and the P component are subsidised. The subsidy on DAP is ascribed to both the nitrogen
and phosphate content. With the new policy, it makes sense for DAP manufacturers to
import ammonia, given the low prevailing international price. Since the subsidy is linked
to international prices of ammonia, units using indigenous ammonia have suffered, as
they do not get compensated for the increase in the costs of production. DAP is imported
by India in significant quantities. The concession on indigenous DAP is higher than that
on imported DAP, which keeps the Indian industry competitive. The differential
concession acts as a kind of import duty. In the past the differentials were about INR
1000 and INR 1500 a tonne. In the first two quarters this year, they were INR 3400 a
tonne and INR 2350 a tonne respectively. However, even this differential cannot prevent
DAP imports from being relatively more profitable when the international prices fall
sharply. Since DAP imports are decanalised and with the international price of DAP in
FY00 falling by USD 50 per tonne in two months led to a glut of imports and an ensuing
price war in the domestic market on account of large imports competing with local
supplies.
2.2.2 SSP (Single Super Phosphate)
The total installed capacity of SSP in the country is 6.48 m.t. per annum. Unlike urea and
DAP, the concentration of major players in SSP is low, with the top five players
contributing to barely30 percent of the total production. At present, about 79 medium and
small scale units are engaged. The major raw materials for SSP are RP and sulphur. The
current level of subsidy on SSP is INR 700 per tonne.
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2.3 Potassic Fertlizers

In the absence of potash deposits of commercial significance in India, the entire
requirement of potassic fertilizers is imported. The major potassic fertilizer consumed in
the country is Muriate of Potash (MOP). The major importers of MOP in India are Indian
Potash Ltd. (IPL), Paradeep Phosphates Ltd. (PPL), Southern Petrochemical Industries
Chemical Ltd. (SPIC), IFFCO, and Hind Lever Chemicals. The quantity of imports is
governed by the international price of MOP and the subsidy given by the Government to
MOP traders. In FY99, 2.58 m.t. of MOP was imported compared to 2.38 m.t. in FY98.
The increase in subsidy on MOP announced in December 1998, from INR 2000 per tonne
to INR 3000 per tonne, triggered this growth. The growth would have been higher had
the subsidy been announced earlier in the financial year. Concession on MOP was
increased from INR 3000 to INR 3250 per tonne in FY00, which would provide a further
impetus to MOP imports.
14
3. ENHANCEMENT IN FERTILIZER AVAILABILITY

3.1 Economic Reforms and Its Impact
When the Indian Economic Reforms Programme was launched, the liberalization and
macroeconomic stabilization was high on the Government’s Agenda. The Fertilizer Sector was
also affected because of these reforms which resulted in increased prices of fertilizers initially and
decontrol of P&K fertilizers subsequently. With effect the Government implemented three major
policy decisions
(i) decontrol of ammonium sulphate and ammonium chloride

(ii) increase in the selling prices of all other fertilizers by 40% and
(iii) introduction of a subsidy ceiling on SSP.
However, within a span of three weeks the Government revised the extent of the price hike to
30% w.e.f. 14th August, 1991 and exempted the small and marginal farmers from it completely.
With effect from 25th August, 1992 the Government decontrolled all phosphatic and potassic
fertilizers and abolished the RETENTION PRICE SCHEME covering the former, brought back
ammonium sulphate, CAN and ammonium chloride within the purview of the control and subsidy
and reduced the selling price of urea by 10 per cent while retaining this under control of the
RETENTION PRICE SCHEME. These policy changes were expected to achieve
(i) reduction in subsidy

(ii) continued growth in foodgrain production and
(iii) keeping healthy soil intack. Unfortunately none of these could be achieved.
3.2 Investment in fertilizer industry -Public, Private and

Cooperative sectors
The Indian fertilizer industry has witnessed a phenomenal growth in the eighties.
However, the growth has tapered off in the nineties and in the recent past only public and
cooperative sectors have made major investments in this industry. Presently public,
private and coop. sector share 45, 33 and 22 percent of N capacity, respectively, whereas
their share in P2O5 capacity is 26, 64 and 10 per cent respectively . New proposals to
government for setting-up fresh capacities in country are mainly from Public and
Cooperative sectors.
3.3 Imports of fertilizers

The fertilizer consumption in India has always exceeded the domestic production both in
case of nitrogenous and phosphatic. The entire requirement of potassic fertilizers is
imported, as there are no indigenous raw materials available. India has been a net
fertilizer importer and the volume of fertilizer imports is also substantial. India mainly
imports Urea, Di-Ammonium Phosphate (DAP) and Muriate of Potash (MOP). Imports
constitute about 20% zof the total fertilizer consumption. Import of nitrogenous fertilizer
in India is in the hands of Multi-import state agencies, although the government is
attempting to coordinate buying based on the demand, international prices and
warehousing capacity etc. The Government efforts would be to increase indigenous
15
capacity in such a way that about one million tons of nitrogen could be met from
imports.With the decontrol of phosphatic and potassic fertilizers in 1992, import of DAP
and MOP has been freed. Import of raw materials like rock phosphate, phosphoric acid,
sulphur and ammonia has been also decanalised since then.
3.4 Distribution of fertilizers

In the beginning, Government of India established the "Central Fertilizer Pool" as the
official agency to ensure equitable distribution of all available, imported and indigenous,
fertilizers at fair prices all over the country. In 1965, the Shivaram Committee laid the
policy foundation regarding production, promotion, distribution and consumption of
fertilizers. In 1966, the manufacturers were given the freedom to market upto 50% of
their production to the farmers. Fertilizer shortages in the early 1970s led the government
to pass the Fertilizer Movement Control Order in 1973 which brought the fertilizer
distribution and its interstate movement under government control and supply and
distribution was regulated under the Essential Commodity Act (ECA). In order to
encourage the availability of fertilizer in interior areas, the Government started the block
level delivery scheme in 1980-81 in which the transportation cost upto block
headquarters ,is borne by the government. Under ECA, supply plans were formulated by
the government in consultation with the state departments of Agriculture and fertilizer
industry during 'Zonal Conferences' held twice a year. The objectives of such exercises
were to minimize transportation cost, avoid criss-cross movement of material and to
ensure availability as per requirement all over the country.
In August, 1992 phosphatic and potasssic fertilizers were decontrolled and their
distribution is- over taken by the manufacturer or importers. Government is, however,
keeping a close watch and any imbalance is brought to the notice of the industry. Urea
continues to be under control and its distribution is governed by ECA allocation.
3.5 Fertilizer promotion

The ideal NPK ratio, aggregated for the country as a whole, is 4:2:1. Prior to decontrol of
phosphatic and potassic fertilizers NPK ratio was 5.9:2.4:1, however, after decontrol in
1992-93 NPK consumption ratio distorted to 9.5:3.2:1 and continued to remain quite
wide at 10.0:2.9:1 till 1996-97. With measures like Centrally Sponsored Scheme on
"Balanced and Integrated use of Fertilizers- and "National project on Development of
Fertilizer use in Low Consumption and Rainfed Areas" and Concession on P&K have
helped in restoring NPK ratio to some extent and during 1997-98 NPK consumption ratio
of 7.7 : 2.7 : 1.0 was achieved. Fertilizer Industry has also contributed to a great extent in
the promotion of balanced fertilizer use. Farmers' meetings, field days, crop seminars,
farmers' training, field demonstrations and soil testing campaigns are organised to
educate farmers on efficient and balanced use of fertilizers. Special efforts are made to
promote the concept of balanced fertilizer application using mass communication
techniques involving Radio, TV, Films and Printed Literature. Certain special projects
were also launched for transfer of technology in dryland agriculture, tribal and backward
areas. Use of bio-fertilizers and integrated plant nutrient management is being promoted
by Government of India and the Industry.
16
3.6 Quality Control of Fertilizer:
To ensure that supply of good quality fertilizers to the farmers, strict check is exercised
over the quality of fertilizers in the State, under fertilizer Control Order, 1985. All the
Agricultural Development Officers (B.Sc.Agri.)/Agricultural Officers, Chief Agricultural
Officers. Joint Director of Agriculture (Admn. Wing) have been declared Fertilizer
Inspectors under FCO 1985 to check stocks of fertilizers and draw samples in their
respective jurisdiction large number of fertilizers samples are taken every year from the
stocks of fertilizers dealers, especially of those fertilizers which are more prone to
adulteration i.e. DAP, SSP Complex fertilizers, Zinc-Sulphate and Ferrous Sulphate etc.
Quality control campaigns are also organized in the State during peak consumption
period of Kharif and Rabi seasons. There are two Fertilizer Quality Control Laboratories
situated at Ludhiana and Faridkot with analyzing capacity 2000 and 1500 samples per
annum respectively. The legal as well as administrative action is being taken against the
defaulters whose samples are declared Non-Standard
3.6.1 Agencies involved in Quality Control of Fertilisers
• Department of Fertilisers, MOCF

• Central Fertiliser Quality Control & Trg Institute, Faridabad
• Regional Fertiliser Control Laboratories (Chennai, Kalyani (Kolkata), Mumbai)
• State Agricultural Departments
• State Govt Quality Control Laboratories - 62
17
4. POLICY INITIATIVES
4.1 Pricing policy
The fertilizer policy is aimed at increasing consumption to meet the food and fiber
requirement of growing population through setting up required production capacities,
ensuring that quality fertilizers are made available to the farmers throughout the country
at uniform and affordable price. It was also recognized that fertilizer use should be
profitable to the farmers for which he must get a certain minimum return for the produce.
This led to the announcement of procurement prices and minimum support prices for
several crops from 1970 onwards. The Marathe Committee was assigned the task of
resolving the issue of keeping Farm Gate Prices (FGP) of fertilizers at an affordable level
in the face of rising production/import costs. Its recommendations in 1977 led to the birth
of the Retention Price Scheme (RPS). This scheme was intended to ensure that both the
fertilizer producers as well as the farmers should find it worthwhile to produce and use
fertilizers. The policy aimed that each manufacturer is able to get 12% post-tax return on
investment on efficient operation regardless of the location, age, technology and cost of
production. In addition, the government agreed to reimburse the cost of transportation
from factory gate to railhead and also take care of the distribution margin. The
RETENTION PRICE SCHEME is now restricted to urea only.
4.2 Fertilizer subsidy

The RPS system helped in achieving the objective of increased indigenous availability
and supplying it to farmers on affordable and uniform price. The difference between
FARM GATE PRICES and RPS is paid to the industry as subsidy. With the growth in
fertilizer production along with escalation in price of raw material and plant cost, the
subsidy amount swelled to huge proportions over the years. In an attempt to reduce the
burden of subsidy, the government has increased urea price by 10 % w.e.f February 2005.
As a result, domestic urea prices have risen from Rs3320/t (US$ 83/t) to Rs3660/t (US$
91/t) for bagged deliveries to farmers. The average subsidy pattern of urea is around US$
84/t. Prior to decontrol of phosphatic and potassic fertilizers (in the year 1992) subsidy
was available to all domestic and imported fertilizers. The fertilizer subsidy increased
from US$ 418 million in 1999-00 to US$ 2446 million in 2004-2005. However, the
subsidy bill after the decontrol of phosphatic and potassic fertilizer declined and
remained below 1990-91 level.
4.3 Fiscal concessions

Government of India announced a series of concessions as recommended by the PC to
bring down the production cost of phosphatic fertilisers. These were :
1. Removal of custom duty on import of phosphoric acid w.e.f. August, 2002
2. Lowering railway freight on phosphatic fertilizers (except SSP) from September, 2002
which amounted to 35% reduction in rail transport.
18
4.4 Transport infrastructure

The increased fertilizer production has also necessitated development of infrastructure to
facilitate smooth distribution of the material. The modem plants producing between
2500-4000 tons of fertilizers require at least one and ideally two goods trains per day.
Transportation through trucks can not be a substitute for railways at it is costly and
inadequate. Moreover, roads are primarily used for passenger traffic, it will also add
pressure to the availability of diesel. The wagon fleet which stood at 480 thousand at the
beginning of eighth plan is around 470 thousand, at the end of the eighth plan, whereas
80 thousand wagons were to be added during the plan period to carry the estimated 418
million tons of freight. The Government of India has opened participation from users by
way of 'OWN YOUR WAGONS' scheme. Scheme is now becoming popular. Besides,
imports of urea, DAP and MOP, the major intermediaries in the production of phosphatic
and complex fertilizers viz. ammonia, phosphoric acid and potash are also imported. The
congestion at the ports often leads to berthing delays. Government of India is also keen to
create additional facilities at the major ports in the country and also opening this sector
for privatization.
4.5 Setting-up New Capacities
4.5.1 Addition to Domestic capacities
Government of India has encouraged investment in domestic fertilizer industry to reduce

over dependence on imports. The Eighth Five Year Plan Working Group had
recommended that the gap between the indigenous production and demand of
nitrogenous fertilizers should be kept at the minimum. The ceiling suggested for imports
was one million tons of N. During the Seventh Plan period (1985-90) the raw material for
the production of nitrogenous fertilizer was natural gas. During the Eighth Plan period
with the installation of new capacities, stagnation in gas supplies and diversion of gas to
power sector, dual feed and fuel capacities had to be adopted. New capacities were set
using naphtha as raw material. In Ninth Plan period (1997-2002) dependence on naphtha
would continue until LNG facilities are set up. However, concerted efforts would be
made for use of LNG as feed stock. The plants would be designed to use either LNG or
naphtha. Hence, the new capacities would be encouraged to be set up in deficit or other
feasible regions, based on naphtha but with specific provision to change over to LNG on
its availability. The new capacities which have been set up recently and are under
implementation during the Ninth Plan period are expected to yield an additional capacity
of 3.9 million tons of urea .The Sixth and Seventh Plan Working Group on fertilizers had
envisaged 75% self sufficiency through indigenous production of phosphatic fertilizers.
The Working Group on fertilizers for Eighth Plan had recommended reduction of the
dependence on imports to 15% of total demand of finished products (0.85 million tons
P2O5 in 2001-2002). This Group also proposed that additional capacities to manufacture
DAP should be based on imported phosphoric acid. For this purpose Indian companies
should be encouraged to set phosphoric acid plants in countries where cheap raw
materials are available.
19
4.5.2 Joint ventures abroad
Lack of availability of natural gas in the country has prompted investors to collaborate for
joint ventures abroad. Gulf countries, due to abundant availability of gas, nearness to
Indian shores and investment friendly environment, are becoming the first choice for
joint ventures. In the phosphate sector also, increase in domestic capacity has to be
supplemented by supplies from joint ventures abroad. It is heartening to note that apart
from the operating plants for phosphoric acid in Senegal and Jordan, some more such
joint venture projects and expansions are being contemplated by the Indian companies. 5.
UREA IMPORT BY CHINA AND ITS IMPLICATIONS FOR INDIA
SINCE late 1970s, both China and India have emerged as dominant forces in the world fertiliser
market. Between 1978-79 and 1984-85, they together accounted for 50 to 55 per cent of growth
in the world consumption and imports of fertilisers, and nearly one-third of growth in the world
fertiliser production. India and China have been major importers of urea. But the imports of urea
to the two countries have fluctuated considerably from year to year. In recent years, the two
countries together have accounted for more than one-third of the world imports of urea.
Fluctuations in the imports have largely been due to varying rainfall in the two countries, as both
the countries still largely depend on the rains for the irrigation. Political factors, like statal fixing of
the prices of various fertilisers, have also contributed to skews in demand of urea in the two
countries. While the issue of food security to meet the food requirements for the growing
population has dictated the need to increase crop production in both the countries, emotions
rather than the objective decision-making in the two countries have influenced many decisions.
The long-term goal of self-sufficiency in supply through development of domestic industry has not
received sufficient attention. Fertiliser import policy has been governed, more often than not, by
short-term and ad hoc considerations such as clearing inventories, savings in foreign exchange,
and such other institutional and infrastructural constraints. This has had influence on fertiliser
production in both the countries. Recently China has embarked upon a strategy of achieving self-
sufficiency in fertiliser production to attain food security, and replace some of its old plants of
complex fertilisers with large-sized plants of urea. This means that China would vacate a large
demand of import of urea from the international market. A portent to this has been in evidence as
the volume of fertiliser imports by China during the last two years went down considerably. It is
relevant in this context, therefore, to examine issues which have implications for a new orientation
of fertiliser policy in India.
World capacity for the production of urea in 1995 was 102 million mts. This capacity is expected
to rise to half a billion mts by the year 2010. But the world capacity has never been fully utilised
mainly due to reasons of market. Technical reasons have also been responsible for this. In fact
historically, the capacity utilisation of the world urea industry has been at an average of 87 per
cent. In fact, in the past the domestic consumption has been only up to three-quarters of the
world production. The domestic consumption of the world production in 1996 was 74 per cent,
leaving a significant 26 per cent for international trade. The oil crisis of 1970s and 1980s saw a
substantial growth in export-oriented urea capacity at low cost locations. This new capacity was
largely built in the Arab Gulf, the former Soviet Union (FSU), central Europe, Indonesia, Malaysia,
and Caribbean Gulf. All these locations have vast reserves of natural gas at low cost.
International trade of urea as percentage of world production remained consistently between 25

to 28 from 1970s onwards. Though early 1990s experienced a temporary fall in the trade
following India’s absence from the import market and China’s reduction of the imports, from 1994
onwards there was a jump in the international trade by over 6 per cent due to buoyant demand by
India. Another boost to international trade came in 1995 when Chinese imports expanded by
almost three-folds. In absolute terms, it was imports close to 6 million mts. But the trade in 1996
once again fell by 2 per cent, as there was fall in imports both by India and China. The falling
20
trend in the urea import demand continued even in 1997 and 1998. The fall in demand during this
year is likely to be around by 10 per cent. This fall in import demand is largely due to lower
imports by India and China.
The prospect for total fertiliser demand in India and China in the coming years depends on many
factors which are not only economic and political but also climatic, given the rain dependency of
the bulk of the agriculture.
6. TOWARDS NEW FERTILIZER POLICY

With the beginning of the economic reforms in early 1990s, there has been policy shifts
with relation to fertilizer sector. Some of the major changes are as under:
 Delicensing of Fertilizer Industry

 Decanalisation of imports of raw materials like phosphoric acid, sulphur,
ammonia, and rock phosphate.
 Decontrol of phosphatic and potassic fertilizers
 Decanalisation of DAP and MOP imports at zero duty
 Decontrol of naphtha
The Government also felt the need for review of the existing system of subsidisation of
urea under the Retention Price Scheme (RPS) existing since the year 1977. For this
purpose and with a view to suggest an alternative broad based scientific and transparent
methodology, the Government of India constituted in January 1997 a High Powered
Fertilizer Pricing Policy Review Committee under the Chairmanship of Prof. C.H.
Hanumantha Rao, former Member of the Planning Commission. The Committee
submitted its report on 3rd April, 1998. The Committee has recommended the
discontinuance of the unit wise Retention Price Subsidy Scheme, which is presently
applicable to the urea units and has suggested an alternative uniform Normative Referral
Price based on the economic principle of Long Range Marginal Cost for the industry as a
whole. The Committee has also recommended that in the interest of sectoral
cohesiveness, phosphatic and low analysis nitrogenous fertilizers may also be brought
within the ambit of this scheme. According to the Committee, this methodology would
ensure enhanced efficiency in the production of fertilizers without affecting most of the
existing units and would also encourage creation of new capacities. The
recommendations of the Committee are towards phased deregulation and for progressive
market oriented system.
The main features of the recommended framework are as follows:
(a) Government to fix maximum Farm Gate Price (FGP) based on its perception of urea
prices considered 'affordable' by farmers. Fertilizer units will be allowed to fix retail
prices subject to ceiling of FARM GATE PRICES.
(b) Subsidy levels would be determined with reference to Normative Referral Price
(NRP) which will be determined on the economic principle of Long Range Marginal Cost
21
(LRMC). Difference between NRP and FARM GATE PRICES would be given as
subsidy to the industry.
(c) Feedstock Differential Cost Reimbursement (FDCR) for use of naphtha and fuel oil
be given for a transition period of 5 years only over and above the NRP which would
relate to gas based plants only.
(d) New Pricing methodology should be extended to phosphatic fertilizers.
Note: Figures for NRP and FDCR as on January, 98 have been indicated by the
Committee to be as follows:
Per ton
NRP Urea
Rs.6050 (US$ 151) DAP Rs. 11900 (US$ 297)
FDCR for Urea
Naphtha/coal Rs.1750 (US$44)
FO/LSHS Rs 1300 (US$ 32)
(e) Ending the present practice of allocating stocks to the states and monitoring their
distribution under the Essential Commodities Act. However, additional freight and
inventory cost to be reimbursed in respect of fertilizers distributed in remote and
inaccessible places.
(f) Canalisation of urea import to continue for five years.
(g) Initiatives to set up Joint Ventures abroad near source of abundant availability of
feedstock be encouraged as a matter of policy in the coming years due to the gas
shortages in India and growing demand of fertilizers.
(h) Setting of a 'Fertilizer Policy Planning Board' to prepare policy options for the
Government in order to provide a long term perspective for the industry. The Department
of Fertilizers has initiated an intensive process of inter-Ministerial consultation and
dialogue with the industry for assessing the impact of the recommendations of this
Committee. The new fertilizer policy, which would seek to harmonies the interest of food
security with growth and efficiency up gradation in the industry, would be formulated in
light of this consultation exercise.
22
7. CHAMBAL FERTILISERS AND CHEMICALS LIMITED

7.1 Company Profile
Chambal Fertilisers and Chemicals Limited was promoted by Zuari Industries Ltd. in
1985. It is located at Gadepan, 35 kms. from Kota, on the Kota - Baran National Highway
No.76. Kota is the hub of industrial activity in the state of Rajasthan. Chambal operates
two hi-tech nitrogenous fertilizer plants and is the largest fertilizer complex in private
sector in India.The two mega fertilizer plants having a total re-assessed capacity of
1.7292 million tons of urea per annum. Both Gadepan-I & Gadepan-II phases represent a
total investment of over Rs. 2,500 Crores. Gadepan-I was commissioned in December
1993 and its commercial production commenced in January 1994. It is designed to
produce 1,350 MT of Ammonia by Haldor Topsoe, Denmark technology and 2,348 MT
per day urea based on Snamprogetti, Italy process. Commercial production at Gadepan-II
started in October 1999. Its Ammonia plant is based on Kellog (USA) technology and the
Urea Plant is based on ACES process of TEC, Japan. The Ammonia Plant is a single
stream, having a design capacity of 1,350 MT ammonia per day, like Gadepan-I. The
Urea Plant is designed to have twin streams, each with the design capacity of 1,175 tons
of urea per day. Gadepan-I is based on natural gas as the feed stock while the fuel
demand is met by naphtha. Gadepan-II is designed both for naphtha and natural gas as
feed stock. Toyo Engineering India Ltd. has designed the Off-sites of both for Gadepan-I
& Gadepan-II.
23
7.2 Manufacturing
Chambal operates two hi-tech nitrogenous fertilizer plants and is the largest fertilizer
complex in private sector in India. The two mega fertilizer plants having a total re-
assessed capacity of 1.7292 million tons of urea per annum. Both Gadepan-I & Gadepan-
II phases represent a total investment of over Rs. 2,500 Crores. Gadepan-I was
commissioned in December 1993 and its commercial production commenced in January
1994.
7.3 Technological Advancements
It is designed to produce 1,350 MT of Ammonia by Haldor Topsoe, Denmark technology

and 2,348 MT per day urea based on Snamprogetti, Italy process. Commercial production
at Gadepan-II started in October 1999. Its Ammonia plant is based on Kellog (USA)
technology and the Urea Plant is based on ACES process of TEC, Japan. The Ammonia
Plant is a single stream, having a design capacity of 1,350 MT ammonia per day, like
Gadepan-I. The Urea Plant is designed to have twin streams, each with the design
capacity of 1,175 tons of urea per day. Gadepan-I is based on natural gas as the feed
stock while the fuel demand is met by naphtha. Gadepan-II is designed both for naphtha
and natural gas as feed stock. Toyo Engineering India Ltd. has designed the Off-sites of
both for Gadepan-I & Gadepan-II.
24
7.2.1 Manufacturing Process
Manufacturing process for organic compound fertilizer made from

composted livestock manure
25
Manufacturing process for organic compound fertilizer
26
7.3 Operations and Supply Chain Management
Chambal Fertilisers and Chemicals Limited caters to the Northern and Western regions of
India and supplies urea to nine states. The company markets urea under the brand name
‘Uttam Veer’. With ten regional offices, Chambal has a 1,000-strong dealer network and
14,000 village level outlets to assist distribution. Besides urea, other agri-inputs as other
fertilisers, plant protection chemicals, seeds and bio-fertilisers are being made available
to the farmers under the ‘single window’ concept. These products are being sourced from
reputed suppliers and sold under the ‘Uttam’ umbrella brand.Extensive promotion
activities are undertaken to promote ‘Uttam Veer’ by our dedicated team of field officers.
Today, Chambal is India’s largest urea unit in the private sector. The soil testing facilities
at Sri Ganga Nagar and Agra use sophisticated testing tools.
Chambal's website uttamkrishi.com, a website dedicated to the Indian farmer, has been
launched by Chambal. It is both area and crop specific and is an endeavour to help
improve farm productivity by providing online information on various agricultural
practices. It answers queries that a farmer may have and provides information on market
prices of farm produce as also the weather forecast. In order to assist the farmers access
it, the company has set up kiosks and has an arrangement with Agriculture Universities,
Agriculture Research Stations and Krishi Vigyan Kendras.
Growing rapidly with the best technology, proven systems and procedures, ‘Uttam Veer’
is positioned as a new age fertilizer for the new-age farmers. Chambal aims to be a
partner in providing India’s food security and the Zuari-Chambal vision is to be one of
the largest fertilizer combine in the world.
7.4 Environmental Protection
Chambal is deeply committed to environmental protection, pollution control and

maintenance of ecological balance. A corporate conscious of its responsibilities, the
Company have consistently taken upon itself major environmental projects. Zero affluent
discharge, (the first in the fertiliser industry), afforestation programme to transform large
stretches of barren terrain into strips of green, wild life protection are a part of its
enterprise. Chambal Fertilisers has been certified as an ISO14001 Company as a result of
its environmental practices.
27
7.5 Awards
Chambal Fertilisers and Chemicals Limited
Name of Presentation
Year Achievement
Award Institute
1. 2006 Golden MWorls The Eco-
Peacock Eco Environment innovation
Innovation Forum award was
Award recieved for the
bio-fertiliser
Vriksha Mitra
that activates
the dormant
soil nutrients
and increases
resistance in
the plants
against drought
and disease.
2. 2005 Five Star M/s British Our Safety
Safety Safety Council, Management
U.K. System was
awarded with 3
star
rating(82.62%
points) in Five
star audit
conducted by
M/S British
Safety
Council ,U.K. in
Nov 2004
3. 2005 OHASA18001: M/s Det Norske Occupational
1999 Verits Health and
Safety
Management
System was
successfully
implements at
Gadepan site.
In recognition
of this,Gadepan
fertiliser
complex was
award "OHSAS-
18001:1999"
certification by
DNV
4. 2005 Greentech Greentech Gold Award
28
Environment Foundation
Excellence
Award
5. 2005 Global Amity Business For making
Corporate School, Noida indelible impact
Excellence on the Indian
economy
Award
6. 2005 Golden World Award in the
Peacock Environment category of
Environment Forum (WEF) Large Industry
(Fertilisers) for
Management its Environment
Award 2005 Management
Systems .
Environmental The best
The Fertilisers environmental
Protection
7. 2004 Association of protection in
Award in India ( FAI ) the nitrogenous
2003-04 fertilisers group
Best Overall
performance of
Best Overall any operating
The Fertilisers
Performance fertiliser unit
8. 2003 Association of
Award in for Nitrogen
India ( FAI )
2002-03 (Ammonia)
Plant awarded
to Gadepan -II
Best Technical
Innovation
Best
[Improvement
Technical The Fertilisers
in Energy
9. 2003 Innovation Association of
Efficiency of
Award in India ( FAI )
High Pressure
2001-02
Boiler Feed
Water Pump]
The Institute of
Best Annual Chartered
Best Annual
Report Accountants of
10. 2002 Report/
(2000-01) India
Management
Award (Rajasthan
Chapter )
Western Freight
Golden Railway Payment
11. 2002 Customer (Divisional beyond Rs.50
2001-2002 Railway Crores in 2001-
Manager, Kota) 02
12. 2001 Environmenta Det Norske Being
l Veritas, revalidated
Management Netherlands continuously
System and
Certificate improvements
29
(ISO
Cerification : being achieved.
ISO 14001)
For giving
recognition to
Shreshtha production
National
Pramanpatra performance in
13. 2000 Productivity
(Certificate of Fertiliser
Council, India
Excellence) Industry
(Nitrogenous)
category.
1st prize
1st Prize in among the
The Fertilisers
Production/T papers
14. 2000 Association of
echnical published
India
Discipline during Sep’ 98
– Aug’ 99
Prize for best District level
work in forest award for best
Department of
development work in forest
15. 1999 Forest, Kota
and forest development
Division.
safety 1998- and forest
99 safety.
Ist Position in
'Highest Tax Tax
the category of
16. 1998 Payer in Department,
Highest Tax
Rajasthan’ Rajasthan
Payers
30
REFERENCES
http://business.mapsofindia.com/national-fertilizers/
www.osti.gov/servlets/purl/764326-cYI5RI/webviewable
www.eetd.lbl.gov/EA/IES/iespubs/41846.pdf
www.osti.gov/energycitations/product.biblio.jsp?osti_id=5173008
www.fertilizer.org/ifa/publicat/PDF/2001_sydney_awashti.pd
www.fertilizer.org/ifa/publicat/PDF/1998_biblio_56.pdf
www.catalogs.indiamart.com/category/chemicals-fertilizers.html
BIBLIOGRAPHY
1. Annual Review (1997-98, 1998-99). The Fertiliser Association. of India, New Delhi.
2. Fertiliser Statistics, various issues, The Fertiliser Association of India, New Delhi.
3. Narayan, Pratap and Gupta, Uttam (1996). Paper presented at the Seminar on
“Agricultural
4. Development Perspective for the Ninth Five Year Plan, Ahmedabad 13-16 June, 1996.
5. Paroda, R.S. (1999). The Hindu Survey of Indian Agriculture, New Delhi.
6. Annual Review (2003-04, 2004-05). The Fertiliser Association. of India, New Delhi.
7. Sunil Chopra and Peter Meindl. Supply Chain Management: Strategy, Planning, and
Operation. Pearson Education Asia, 2001.
8. David Simchi Levi, P. Kaminsky, and Edith Simchi Levi, Designing and Managing the
Supply Chain, Irwin-McGrawHill, 2000
9. W.J. Hopp and M.L. Spearman. Factory Physics: Foundations of Manufacturing
Management, Irwin-McGrawHill, 1996
10. N. Viswanadham . Analysis and Design of Manufacturing Enterprises, Kluwer, 2000
11. N. Viswanadham and Y. Narahari. Performance Modeling of Automated Manuafacturing
Systems, Prentice Hall, 1992
31
ANNEXURE
32
TABLES
33
34
35
36
37

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CHAMBAL FERTILIZERS AND CHEMICAL

Delhi Business School New Delhi

Moreover practical training is an important part of management courses. The

To develop healthy managerial and administration skill in potential managers, it is

1.2 Demand - Supply Scenario in Fertilizer

2. MAJOR SEGMENTS IN FERTILIZERS

2.1 Nitrogenous Fertilizers

1. Indian Farmers Fertilizers Co-operative Ltd. (IFFCO)

the year and increased production in the domestic sector

Urea is imported by designated State agencies based on estimates of domestic demand

Price movement of urea

200 to rise again. It

Sector Report: Fertilizer Industry India /Economics

2.1.2 Other Nitrogenous Fertilizers

2.2 Phosphatic Fertilizers

2.2.1 DAP (Di-Ammonium Phosphate)

2.2.2 SSP (Single Super Phosphate)

2.3 Potassic Fertlizers

3. ENHANCEMENT IN FERTILIZER AVAILABILITY

(i) decontrol of ammonium sulphate and ammonium chloride

(i) reduction in subsidy

3.2 Investment in fertilizer industry -Public, Private and

3.3 Imports of fertilizers

3.4 Distribution of fertilizers

3.5 Fertilizer promotion

3.6 Quality Control of Fertilizer:

3.6.1 Agencies involved in Quality Control of Fertilisers

• Department of Fertilisers, MOCF

4.2 Fertilizer subsidy

4.3 Fiscal concessions

1. Removal of custom duty on import of phosphoric acid w.e.f. August, 2002

4.4 Transport infrastructure

4.5 Setting-up New Capacities

4.5.1 Addition to Domestic capacities

Government of India has encouraged investment in domestic fertilizer industry to reduce

4.5.2 Joint ventures abroad

UREA IMPORT BY CHINA AND ITS IMPLICATIONS FOR INDIA

International trade of urea as percentage of world production remained consistently between 25

6. TOWARDS NEW FERTILIZER POLICY

 Delicensing of Fertilizer Industry

The main features of the recommended framework are as follows:

(d) New Pricing methodology should be extended to phosphatic fertilizers.

Rs.6050 (US$ 151) DAP Rs. 11900 (US$ 297)

FDCR for Urea

Naphtha/coal Rs.1750 (US$44)

FO/LSHS Rs 1300 (US$ 32)

(f) Canalisation of urea import to continue for five years.

7. CHAMBAL FERTILISERS AND CHEMICALS LIMITED

7.3 Technological Advancements

It is designed to produce 1,350 MT of Ammonia by Haldor Topsoe, Denmark technology

7.2.1 Manufacturing Process

Manufacturing process for organic compound fertilizer made from

Manufacturing process for organic compound fertilizer

7.3 Operations and Supply Chain Management

7.4 Environmental Protection

Chambal is deeply committed to environmental protection, pollution control and

Chambal Fertilisers and Chemicals Limited

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