Urea Production Boom in India

India’s urea production has surged in recent years, despite challenges in the fertiliser sector. The government aims for self-reliance, known as atmanirbharta, which has driven investments in urea manufacturing.

Recent Developments in Urea Production

• From 2011-12 to 2023-24, India’s domestic urea production increased from 22 million tonnes to 31.4 million tonnes.
• During this period, imports decreased from 7.8 million tonnes to 7 million tonnes.
• The current fiscal year has seen a 31.7% drop in imports, potentially falling below 5 million tonnes for the first time since 2006-07.

New Urea Plants and Investments

The rise in production is attributed to six new plants established by major companies, including Hindustan Urvarak & Rasayan Ltd (HURL), Chambal Fertilisers, Matix Fertilisers, and Ramagundam Fertilizers. These projects represent investments between Rs 6,000-8,600 crore each, collectively producing 7.55 million tonnes in 2023-24. The new plants are energy-efficient, requiring only about 5 giga-calories per tonne of urea.

Location and Capacity of New Plants

The new plants are strategically located in eastern India, including Uttar Pradesh, West Bengal, Bihar, Jharkhand, and Telangana. This contrasts with older facilities primarily serving Punjab and Haryana. Matix Fertilisers, for instance, holds a 20% market share in Eastern India and is the sole urea producer in West Bengal.

Upcoming Projects and Innovations

A seventh plant is under construction in Talcher, Odisha, at an estimated cost of Rs 17,080.69 crore. This facility will utilise coal as feedstock, marking a shift from the natural gas-based plants. The project is about two-thirds complete and employs a unique coal gasification technology.

Economic Considerations – Make vs Buy

The total investment in these new plants amounts to Rs 61,575 crore. Currently, importing urea is cheaper at $370-403 per tonne compared to domestic production costs of around $493 per tonne. However, after accounting for tax exemptions, domestic production costs could drop to $427 per tonne.

Implications of Urea Consumption Trends

India’s urea consumption has increased from 29.6 million tonnes to 35.8 million tonnes between 2011-12 and 2023-24. The price of urea has remained frozen since 2012, leading to unsustainable consumption patterns. A more balanced pricing strategy could reduce pressure on both domestic production and imports.

1. HURL – Hindustan Urvarak & Rasayan Ltd, a key urea producer.
2. Atmanirbharta – India’s goal for self-reliance in various sectors.
3. GCal – A unit of energy measurement, crucial for urea production efficiency.
4. Talcher – Location of a major upcoming coal-based urea plant.
5. LNG – Liquefied Natural Gas, vital for urea production feedstock.

Future Directions for Urea Production

The establishment of LNG terminals and extensive pipeline networks has transformed the economics of urea production. This infrastructure supports a strategy where northern and eastern regions focus on domestic production while southern areas may rely more on imports. The shift towards more sustainable practices in urea consumption and production is essential for the long-term viability of India’s agricultural sector.

Month: Current Affairs - January, 2025

Category: Agriculture Current Affairs