Deepak Fertilisers & Petrochemicals Corp. Ltd.

For interested readers and analysts, this page provides a look at what's happening in the industries that we operate in. We will keep adding to the list of articles and links, so be sure to bookmark this page.

The size of the Indian Chemical industry is estimated at US$ 28 billion (including Pharma and Fertilizers) in FY00. The industry contributes 7% to GDP, 10% of total exports of the country, 13% to total manufacturing output and 15% to the total value added in manufacturing sector.

In terms of volume, the Indian chemical industry ranks 12^th in the world, and has grown twice as fast as the rest of the Asian chemical sector in the last 5 years, and over 5 times the world growth rate.

However, the industry is highly fragmented with more than 6000 firms. Some of the major segments within chemicals are Petrochemicals, Organic Chemicals, Inorganic chemicals, Fine & Specialty chemicals, Bulk Drugs, Agro chemicals, Paints and Dyes. Western India accounts for almost half the chemical industry.

Labour reform

The need to build economies of scale

Investment in Research & Development

Poor infrastructure

High cost structure

Dependence on imported oil and fuels

Cheap imports thanks to falling import tariffs and WTO

Should the fertiliser industry be decontrolled?, March 18, 2003, Economic Times.
Fertiliser subsidies remain a political minefield for successive finance ministers who have tried to increase fertiliser prices on rational grounds. Jaswant Singh too walked into the booby-trap and had to roll back the hike in urea prices. What is the solution?

Pre-Budget Memorandum by the INDIAN CHEMICAL MANUFACTURERS ASSOCIATION for the Union Budget, 2003-2004.
Summary: This note talks about the current status of the Indian chemical industry and highlights the key issues and concerns. It analyses the factors constraining this vital sector, and provides recommendations that would go a long way in ensuring that the Indian chemical industry achieves global competitiveness.

Report Of The Task Force On Chemicals, February 2002, Department of Chemical and Petrochemicals, Govt. of India.
Indian Chemical Industry is highly science based and provides valuable, inputs to various end products required in almost all walks of life. While it forms the backbone of the industrial and agricultural development of India and provides building blocks for several downstream industries, its competitiveness in the international market needs substantial enhancement. Its profitability has reduced from 6.3 % in 1994-95 to 0.8 % in 1998-99. Growth in the creation of gross fixed assets has also reduced from 21.8 % to 9.5 % over the same period...

Chemical Industry in India, Department of Chemical and Petrochemicals, Govt. of India.
Summary: The chemical industry in India is well established, and has been among the faster growing segments of Indian industry. The Indian chemical industry had a turnover of around Rs.1200 billion in 2001-2002, and accounted for more than 16.20% of the total Indian exports during the year.

Indian Chemical Industry - An Overview, by Dr. Ranjit Singh, indianpurchase.com
Summary: The Indian chemical industry has innate strengths with strong sectoral inter-linkages and one of the largest end-consuming markets. There are also large export opportunities.

Interview - Deepak Mehta, Managing Director, Deepak Nitrate Limited: On Improving competitiveness in the Indian Chemical Industry (Chemical Weekly - August 6, 2002)
Summary: In a freewheeling interview with Chemical Weekly, Mr. Deepak Mehta goes beyond the concerns of running his group of companies to discuss two major issues that affect the chemical industry. The first issue is related to the impact of tariff reductions on fuels and other inputs such as furnace oil, naphtha, etc. According to him, the policymaker's priority should be to reduce duties on feedstock first and then reduce the duties on chemicals subsequently, as this will help domestic industry's competitiveness. The second major problem facing Indian chemical manufacturers is power! The biggest cost disadvantage Indian industry faces today is in energy. The major concern is how to ensure that energy / power resources are available consistently and at a price comparable to that in other countries.

Organic Chemicals - Segment Overview, Indiamarkets Online
Summary: A quick look at major organic chemicals, production, market share and related statistics - from Feedback Marketing Services Pvt. Ltd. and www.indiamarkets.com
indiamarkets.com

India is today, the third largest producer and consumer of fertilisers in the world. Typically, the industry is divided into the Nitrogenous, Phosphatic and Potassic segments, or NPK. These and other nutrients are combined to produce a range of complex fertilizers.

Urea (nitrogenous) is the most widely consumed in India. Current urea capacity is 20.2 million tpa against a consumption of 21.7 million tpa, growing at about 4% p.a. The Urea segment is subsidised under the Retention Price Scheme. However, the fertilizer ministry has 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.

The total production of phosphate 3.36 was million tpa in FY00. The main phosphatic fertilizers produced in India are Diammonium Phosphate (DAP) and Single Super Phosphate (SSP). However, the entire requirement of potassic fertilizers is imported (mainly Muriate of Potash (MOP))

Fertilizer production is highly energy intensive with the cost of feedstock and fuel combined accounting for 55% to 80% per cent of the cost of production. Plants in India are based on three types of feedstock - naphtha, fuel oil/LSHS and natural gas. Rising feedstock costs coupled with demand growth have bloated the fertilizer subsidy.

Natural Gas: The Cost Of High Pricing, September 15, 2003, Indian Express
Due to the policy of encouraging industrial use of natural gas, the fertiliser, power and steel industries today account for more than 85% of total natural gas consumption in India.

Fertilizer Production Statistics, Ministry of Fertilizers
Summary: There are 64 large sized fertilizer units in India, manufacturing a wide range of nitrogenous and phosphatic/complex fertilizers. Of these, 39 units produce urea, 18 units produce DAP and complex fertilizers, 7 units produce low analysis straight nitrogenous fertilizers. Several of these produce ammonium sulphate as a by-product. Besides, there are about 79 small and medium scale units producing single superphosphate. The total installed capacity of fertilizer production in the country has risen to 110.71 lakh tonnes of nitrogen and 36.48 lakh tonnes of phosphate as on 29.2.2000.... Find out more.

Sector Info on Fertilizers, equitymaster.com
Summary: India is the third largest producer and consumer of fertilizers in the world... more.

Fertilisers: Options beyond Retention Pricing, equitymaster.com
Summary: The retention pricing policy in the fertiliser industry has led to a situation where the efficient subsidise the inefficient. Serious reform is required to compete in the post WTO era.

We have a road map for disinvestment" - Interview, icicidirect/moneycontrol.
Summary: In an interview, Nripendra Misra, Secretary, Fertilisers and PS Grewal, CMD, National Fertilisers talk about the future fertiliser policy

A Note on Gas Pricing
Summary: The fertiliser and power industries consume around 80% the natural gas from Bombay High, while petrochemicals accounts for 15-17%. The remaining is consumed by other manufacturing sectors. A decade back, the prices of natural gas were fixed with a flat annual increase of Rs. 100, but this has not prevented constant price revisions. Naturally, and change in natural gas prices directly impact the fertiliser industry. A major problem is that there is no clear-cut future policy for pricing of gas, which creates uncertainty for consumers. Debate still continues as to whether gas prices should be linked to EU/ US rates or to Middle East prices. Also, a policy on imports needs to be clearly defined.

Gas Chokes fertiliser output - Economic Times, 17 November 2002
Summary: Production of both, nitrogenous and phosphatic fertilisers, was less than target in September 2002 on account of less supply of natural gas and its lean quality.

Natural gas shortage to clip fertiliser industry - Business Standard, January 07, 2003
Summary: Indian fertiliser industry will face serious shortage of natural gas in the next five years in spite of the recent gas finds in the country, as a result of which the gap between demand and supply of fertiliser in the country will widen significantly.

In the pipeline: growth - Indian Express, 25 November, 2004
Summary: The proposed India-Iran gas pipeline is vital to India. A large number of industries, including fertiliser units, are dependent on natural gas, and appetite for gas in northern and western India is expected to grow by over 8 per cent per annum.