Demand for Fertiliser in India: Determinants and Outlook for 2020

Vijay Paul Sharma and Hrima Thaker

No WP2011-04-01, IIMA Working Papers from Indian Institute of Management Ahmedabad, Research and Publication Department

Abstract: Chemical fertilisers are key element of modern technology and have played an important role in agricultural productivity growth in India. However, the demand-supply gap of fertilisers in India has increased in recent times, thereby leading to increased dependency on imports. Indian imports, which were about 2 million tonnes in early part of 2000, increased to 10.2 million tonnes of fertilisers in 2008-09. In view of importance of fertilisers in agricultural growth and the possibility of an emerging demand-supply gap, there is need to forecast future demand. The paper begins with an overview of fertiliser consumption trends and then identifies important determinants of fertiliser demand and develops projects demand scenarios for fertilisers in India in 2020-21. India is the second largest consumer of fertilisers in the world after China, consuming about 26.5 million tonnes. However, average intensity of fertiliser use in India remains much lower than most countries in the world but is highly skewed, with wide inter-regional, inter-state, and inter-district variations. The results show that non-price factors such as irrigation, high yielding varieties, were more important than price factors in influencing demand for fertilisers. Of the two price policy instruments, affordable fertiliser prices and higher agricultural commodity prices, the former is more powerful in influencing fertiliser demand. The paper suggests that in order to ensure self-sufficiency in agricultural production in the country, availability of fertilisers at affordable prices should be prioritized over higher output prices. By 2020, fertiliser demand in the country is projected to increase to about 41.6 million tones and is expected to grow at a faster rate in eastern and southern region compared with north and west. To meet the increasing fertiliser requirements of the country, a conducive and stable policy environment, availability of raw materials, capital resources, and price incentives will play a critical role.

Date: 2011-04-21
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