Box Feedstock for Indias Fertilizer Industry

The government has in the past heavily subsidised fertilizer use in India, because of its importance in maintaining food self-sufficiency. The recent surge in oil prices, however, has increased the financial burden on the government, prompting it to reduce provision for payments to fertilizer producers in the 2007/08 budget. But fertilizer prices have not been allowed to increase and now the producers are facing large losses. The share of energy in the total cost of ammonia production in India is currently about

6. See Karangle, Rashtriya Chemicals & Fertilizers (2007) for more details. 470 World Energy Outlook 2007 -

80%. Past subsidies eliminated incentives to invest in more efficient technologies or in research and development in order to cut costs. The producers are now making efforts to reduce costs, particularly those related to energy use, but these efforts are limited by controls on their product prices.

Many fertilizer companies are switching to gas as feedstock. This move will save energy as converting gas into fertilizer is considerably less energy-intensive than converting other feedstocks. Gas availability to meet expected demand growth and gas pricing are, however, matters of concern (see Spotlight in Chapter 15). LNG imports and indigenous output from recently discovered fields are expected to contribute.

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