A study by the Indian Institute of Management, Ahmedabad (IIM-A), suggests that availability of fertilisers at affordable prices should be prioritised over higher prices for agricultural produce in order to enable the country to achieve self-sufficiency in food production.
The study, "Demand for Fertiliser in India: Determinants and Outlook for 2020", was done by professor Vijay Paul Sharma of the Centre for Management in Agriculture, IIM-A, and Hrima Thaker of the same institute. It has projected that demand for fertilisers in India will increase to 41.6 million tonnes by 2020.
By estimating demand for fertilisers, one can understand the implications of the fertiliser price policy, including subsidies, agricultural product pricing and their inter-relationship, Sharma explained.
"The results clearly indicate that non-price factors such as irrigation, high yielding varieties and cropping intensity were more powerful in influencing demand for fertilisers compared with price factors," the study said.
"The price of fertilisers had an adverse affect on fertiliser consumption and was more powerful than the output price," it added.
"In order to ensure self-sufficiency in foodgrains production in the country, availability of fertilisers at affordable prices for the producers is of utmost importance," the study concluded.
"The high product price support policy benefits the large farmers who have net marketed surplus, while low input prices benefit all categories of farmers," the study said.
With regard to calculating the demand for fertilisers in the future, the study has made projections using annual time series data from 1976-77 to 2009-10 and a simple linear regression model using the ordinary least squares (OLS) method.
"By 2020, fertiliser demand in the country is projected to increase to about 41.6 million tonnes and is expected to grow at a faster rate in the eastern and southern region compared with North and West," the study concluded.
As per the data collected for the study, the overall consumption of fertilisers in the country has increased from 65.6 thousand tonnes in 1951-52 to 26.49 million tonnes in 2009-10.
Accordingly, per hectare consumption of fertilisers, which was less than 1 kg in 1951-52, has gone up to the level of 135 kg in 2009-10.
The average intensity of fertiliser use in India at the national level was still much lower than in other developing countries and there were many disparities in fertiliser consumption patterns both between and within regions of India, the study said.
"About 18 per cent of the districts in the country account for half of total fertiliser use, while the bottom half of the districts account for only 15 per cent of total fertiliser used in the country," an analysis of data from the Fertiliser Association of India and Agriculture department during the study indicated.
The study further said that India was the second largest consumer of fertilisers in the world after China.
"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 two million tonnes in early part of 2000, increased to 10.2 million tonnes of fertilisers in 2008-09," it said.
Therefore, in view of the importance of fertilisers in agricultural growth and the possibility of an emerging demand-supply gap, there is a need to forecast future demand, the study said.
The objective of the study was to understand the factors affecting fertilisers demand at the macro level and forecast demand for fertilisers in the country by 2020.