STRATEGIC PLAN FOR DEPARTMENT OF FERTILIZERS, …

1

STRATEGIC PLAN FOR DEPARTMENT OF FERTILIZERS, MINISTRY OF CHEMICALS AND FERTILIZERS, GOVERNMENT OF INDIA

Contents

S

No

Topic Page No

1 Summary 2

Strategic Plan 17

1 Vision, Mission, Objectives & Functions 20-21

2 Assessment of the situation 22

3 Outline of Strategy 30

4 Implementation Plan 41

5 Linkage between strategic plan and RFD 48

6 Cross departmental & cross functional issues 50

7 Monitoring and reviewing arrangements 52

2

STRATEGIC PLAN FOR DEPARTMENT OF FERTILIZERS, MINISTRY OF CHEMICALS AND FERTILIZERS, GOVERNMENT OF INDIA

PART I: Summary

1. Ministry’s Vision, Mission, Objectives and Functions 1.1. Introduction

The Department of Fertilizers (DOF) is one of the three departments under Ministry of Chemicals and Fertilizers, Government of India. The main activities of the department include planning, promotion and development of fertilizer Industry, planning and monitoring of production, import and distribution of fertilizers and management of financial assistance by way of subsidy/concession for indigenous and imported fertilizers. In order to perform these activities, the Department is broadly divided into five divisions dealing with, (i) Fertilizer Policy, Projects and Planning, (ii) Fertilizer imports, movement and distribution (iii) Phosphatic & Potashic Fertilizers (iv) Administration and Vigilance, and (v) Finance and Accounts. Apart from the aforementioned internal organization, the Department also has nine Public Sector Undertakings (PSUs) and one Cooperative. 1.2. Vision

“Achieving fertilizer security for the country for sustainable agricultural growth supported by a robust fertilizer industry”

1.3. Mission

i. Ensuring adequate and timely availability of fertilizers to the farmers at affordable prices through planned production and imports and distribution of fertilizers in the country.

3

ii. Planning for self sufficiency in urea production

1.4. Objectives

i. Ensuring policy framework for indigenous production and import of fertilizers and their supply

ii. Assessing requirements, planning and arranging for production and import of fertilizers for meeting requirements

iii. Movement and distribution of fertilizers on coordination with States

iv. Disbursement and management of subsidy

v. Monitoring the performance of PSUs in terms of MOU

1.5 . Functions

i. Planning, promotion of Fertilizer Industry

ii. Management of financial assistance by way of subsidy/concession for indigenous and imported fertilizers

iii. Planning and monitoring of production, imports and distribution of fertilizer

iv. Administrative responsibility for CPSUs.

v. Administration of Fertilizers (Movement Control) Order, 1960

2. Assessment of the situation Proper assessment of situation both in terms of considering the availability of resources and the constraints is quite critical in the context of devising perspective work plan and formulating appropriate strategies. It determines the extent and approach to envisage the spectrum of potential strategies to develop plan to engage stakeholders, build knowledge and capabilities, identify and strengthen resource requirement plan to undertake specific strategies, prepare detailed implementation plan, lay out key priorities; and decide appropriate path to track, monitor and assess the progress of achievement. Assessment has to be from both demand side and supply side in order to frame effective strategy. From demand side, factors such as food security, low productivity, low level of consumption of fertilizers, low use efficiency, uneven consumption across States/geographical areas, unscientific application of nutrient mix etc. play important role. On supply side, constraint of feedstock in case of urea, non availability of viable sources of P&K, no long term tie up for securing finished fertilizers and raw material impinges on the availability and making country vulnerable to international cartels and price fluctuations.

4

2.1. Opportunities emerging from various external factors

Political Factors provide opportunity for forming transparent & efficient subsidiary regime , including rationalization of subsidy as required.

Improvement in income level and education status will be a great help in implementing the strategies

Technological advancements in terms of Supply Chain Management & ICT can increase efficiency of the entire system.

Balanced use of fertilizer will help in improvement of environment, soil etc .It shall help in better supply management, whereas excessive usage may threaten environmental stability.

Black marketing of fertilizer, diversion of fertilizer to non agriculture purpose, smuggling of fertilizer to neighboring countries are some of the threats in successful implementation.

New gas finds and alternate sources of energy like CBM and coal gasification will facilitate new investment in urea sector , making the country sufficient,

Joint Ventures in resources rich countries like Africa, South East Asia etc for inputs as well as finished fertilizers

Encouraging efficient fertilizer use in order to prevent soil degradation and preventing loss of nutrient content from the soil.

Conducive policies of government of India based on continuous interaction is held with the industry

Support of GOI for formation of JVs abroad or takeovers.

Development of innovative fertilizers based on soil and crop requirements and encouraging use of bio fertilizers along with chemical fertilizers.

Revival of closed fertilizer plants of FCIL & HFCL, having large land, banks and creation of production capacities in Eastern India, and restructuring of sick public sector units.

2.2. Threats emerging from various external factors

Due to heavy import dependence, especially in P&K sector, vulnerability to import prices including international cartels.

Unless and until immediate amendments are made in the investment policy, country will be dependent upon volatile international market leading to higher foreign exchange outgo. No new investments in urea sector has forced the

5

government to buy from abroad option on, leading to higher subsidy outgo. Moreover, the investment cost will go up as the years pass by.

Running units based on naphtha and FO/LSHS is not financially viable in long run. If early connectivity and availability of gas is not ensured, it will lead to higher subsidy outgo, may be higher than the cost of construction of pipeline.

Sudden export restriction by exporting countries on phosphatic or potassic fertilizers may adversely impact availability & hence food security making it vulnerable to international pressures.

No serious attempts were made to provide financial resources for acquisition of strategic assets abroad, however, liberal non plan budgets are provided for subsidizing imports implying enrichment of overseas producers. Other countries are exploring aggressively for long term buying of mines or off take arrangements. If all present resources are tied up, future contracts/tie ups will become more costly and difficult.

Over dependence upon straight fertilizers with no space for innovation or market driven fertilizers requiring for specific soil characteristics.

Continuous regulatory regimes have deincentivized industry from diverting investment to fertilizers vis a vis other sectors in the economy.

2.3. Stakeholders and their engagement

Department of fertilizers has interacted through various means of communication with its stakeholders and identified as how they can help/block the department in meeting its aspirations. Attempts were made to comprehend as what stakeholders expect from the department and vice versa. In order to implement the strategies, futuristic engagement as needed has also been identified.

2.3.1. Fertilizer Producing companies in Public Sector (PSUs and Cooperatives) & Private Sector

Both the sectors are responsible for improvement in productivity, efficiency through energy efficient means & optimum use of resources. On the other side, they expect department to provide industry friendly policies & environment.

2.3.2. Distributors - Primary cooperative societies of KRIBHCO, IFFCO, State Marketing Federations, Wholesalers, Retailers

etc play a vital role in timely availability of fertilizers in all parts of the country through transparent distribution system.

6

2.3.3. Importers for Urea, canalizing agencies like State Trading Agencies are responsible for timely contract (both long term &

short term) with importers.

2.3.4. Strategic alliances/partnership with producers of other countries can improve our relationship and can also minimize the possibility of cartelization.

2.3.5. States and UTs are responsible for monitoring timely availability of fertilizers to the farmers, projecting realistic demand,

ensuring qualities, fair sale, check on illegal usage/diversion/smuggling etc. 2.3.6. Port Authorities/Handling Agent can help Department by providing priority berthing, early evacuation of containers and by

providing proper storage facilities to avoid damage. Communication can be done through correspondence and meetings with JS- A & M.

2.3.7. Farmers are are expected to improve farm productivity by appropriate and efficient usage of balanced fertilizers, while department can help them by providing subsidized fertilizer at affordable price.

2.3.8. Department of Agriculture can support Department of Fertilizers by furnishing realistic & scientific demand projections,

appropriate policy for soil health & nutrient management, by making proper contingency planning, by supporting proposed fertilizer policy for making fertilizer available at affordable price at right time.

2.3.9. Ministry of commerce/DGFT/Tariff Commission are responsible for creating conducive trade environment by making

favorable Exim Policy, signing of bilateral/multilateral agreement, facilitation of off take trade/JVs, maintaining current position AOA(WTO) for fertilizer subsidy etc. Other than this, Tariff Commission can play important role in providing appropriate recommendations in time on fertilizers costing & freight etc.

2.3.10. Ministry of Petroleum & Natural Gas can help department by allocating gas at reasonable price, by tying up

transportation of gas at appropriate tariffs, by facilitating availability of Gas/LNG through domestic & aboard. Department is required to provide details related to appropriate projection to meet requirements of gas by fertilizer industry.

7

2.3.11. Ministry of Finance can support Department of fertilizers by allotting the required budgetary provision in cash, providing support for leveraging JV aboard through line of credit, by giving infrastructure status to fertilizers, support for conducive policy framework for fertilizer industry. On the other side, Department can is required to provide, timely & comprehensive proposals for various schemes, details related to utilization of allotted funds, proper communication in regard to financial & physical targets etc

2.3.12. Railways is expected to help by providing required rakes in time at indented locations, continuous operation of rake

time, adequate time for loading/ un loading, opening of rake points as far as possible in areas wherever rake points are not operational etc.

2.3.13. Ministry of Shipping & Surface Transport can help DOF by efficient chartering and quick waiver as well as modern handling facilities.

2.3.14. Non Fertilizer Private Sector can provide necessary input supports viz. HDP bags, Naptha, H2SO4, sulphur, Fuel oil,

various chemicals, and transportation logistics. At the same time they may require clear offer with well defined role and responsibilities, along with quick payment, and robust and impartial grievance redressal mechanism

2.4 Strengths and Weaknesses of the sector & DOF Strengths

Well structured and developed fertilizer industry

Global standard units for producing fertilizers, especially Urea and DAP, available in the country

Feedstock for production of almost 80% of urea currently being produced is available indigenously

Good network for distribution of fertilizers till block level exists

Import of canalized fertilizers through State Trading Enterprises cater to balance requirement of fertilizers, while decontrolled fertilizers are also available through various importers

Conducive policies have led to increase in indigenous production of fertilizers

Distribution of fertilizers monitored by FMS

Strong planning and budgeting skills for production & import and movement of fertilizers in the DOF

8

Functional skills in the field of monitoring & planning of various activities in the DOF

Excellent Coordination Skills in the DOF in the DOF

Good internal communication and transparency in the DOF

Receptive to suggestions and ready to take additional responsibilities

Appropriate pace of decision making especially in view of criticality in Fertilizer availability Weaknesses

Lack of indigenous resources in phosphatic and Potassic sector makes the fertilizer industry vulnerable to international prices as import by India is significant percent of international trade

Lack of commitment of feedstock (gas) for urea units on long term basis has restricted investment in urea sector

Issue of affordable pricing for farmers has made industry less lucrative as margins are low and MRP is fixed. Despite increase in MSP of foodgrains, MRP of fertilizers has not been increased significantly.

This has also led to higher outgo of subsidy in last few years as input prices are increasing. Further, imports are also increasing due to increasing demand of fertilizers at increasing prices.

Absence of targeted subsidy leading to inefficiency and unequitable subsidy spread.

Above has impacted fiscal management significantly

Consumption of fertilizer disproportionate vis a vis best international benchmarks.

Diversion of specially urea in non agricultural sector like paper, milk etc. including smuggling of subsidized urea to neighbouring countries like Pakistan, Nepal, Bangladesh, Sri Lanka etc.

Department of Fertilizers deals only with chemical fertilizers and not with bio fertilizers, compost fertilizers leading to lop sided vision on a compact basket of fertilizers.

There is no mandatory requirement of soil testing for obtaining and use of fertilizers.

Inadequate resources & budget provisioning

Inefficient management of price volatility due to changing international market

9

3. Outline of the Strategy

The required strategy should focus on:

Demand management

Supply Management

Resource optimization

Programme management efficiencies

Areas requiring strategic shift

Based on understanding of stakeholder`s expectations , analysis of external factors and internal capabilities, the department arrived at the following strategies

3.1 Potential Strategies with their initiatives

1. Achievement in self sufficiency in Urea and Ammonia and becoming a marginal exporter and securing resources for ensuring availability of P & K Fertilizer 1.1. Encouraging investment in fertilizer sector through conducive policy environment

Approval of the government on investment of policy for Urea

According infrastructure status to fertilizer industry

Providing necessary fiscal and exim policy impetus

Subsidy policy & rates for fertilizer

Freight policy for movement of fertilizer

Processing and allocation of adequate gas on priority basis

Effective pricing strategy for gas and transportation tariffs

1.2. Restructuring of poor performing PS Units

Financial Restructuring

10

Technical Restructuring

1.3. Revival of Closed unit through

Open bid process on revenue sharing model

Nomination basis to PSUs both fertilizer as well as non fertilizer

1.4. Securing of supply of Fertilizer as well as fertilizer inputs

JVs – in Urea, Ammonia, Phosphate, Potash

Off take – for short fixed term supply of fertilizer to India

JV & Off Take – JV in Urea & ammonia sector as well as P & K with guaranteed buy back arrangement

1.5 Developing innovative fertilizers for specific needs. 1.6 Conducive policy framework for balanced fertilization based on requirement of soil and crop.

2. A revamped Supply Chain (Distribution) Model:

There would be a study to assess the existing processes and an improved system design would be recommended for timely and adequate availability of fertilizers which would include; among others-

Flow charts;

Technologies for storage, inventory management, transportation and distribution management.

Responsibility matrix with clear measurable objectives at every stage of the process

A model for optimizing inventory and transportation systems along with a planning model.

A distribution model for fertilizers.

Logistics study and ways to maximize efficiency in the distribution of fertilizers. 3. A framework for engagement with manufactures , suppliers, importers, & farmers and using the feedback for

system improvements Engagement with stakeholders can be planned and calendarized. This will help DOF to get

11

feedback on the actual field level issues and take corrective action at the earliest. This arrangement is also an

opportunity to build confidence among stakeholders and involve them at every stage.

3.2 Prioritization of Strategies

Weight Age

Encouraging investment in fertilizer sector through conducive policy environment 20

Securing of supply of Fertilizer as well as fertilizer inputs 20

A revamped Supply Chain (Distribution) Model: 18

Restructuring of poor performing PS Units 15

Revival of Closed unit through 15

A framework for engagement with manufactures , suppliers, importers, & farmers and using the

feedback for system improvements

12

Total 100

3.3 Learning Agenda & Building Knowledge and Capabilities

In order to achieve the identified strategies, following skills and capabilities are required to be built up by the department:

In depth knowledge of Fertilizer Technology

International trading behavior & price volatility

Assessment of global resource base

Building on negotiation skills

Supportive Information Technology for monitoring, and tracking at the farm gate & payment of subsidy

12

4 Implementation Plan 4.1 Following is the list of potential strategies along with stakeholders responsible vis-à-vis resources required to carry out

respective strategy

Strategies Names of Stakeholders

When How Resources Required to Achieve Strategic Initiatives

People Money Infra

1.1 Encouraging

investment in

fertilizer sector

through

conducive policy

environment

MOF, DAC, PA & G, Planning, Fertilizer Industry & Inventors,

-At the time of formulation and finalization of the policies

Through dialogues, meetings, debates, inviting comments, conference, opinion papers -Approval of government -Clearance from BIFR

Requirement of funds to be estimated after receiving projections from DAC

-Up gradation of Ports -New railway rolling stocks -New gas pipelines highways

1.2 Restructuring of poor performing PS Unit

MOF, DAC, P& G, Planning Commission Dept of Commerce Public sectors

At the time of formulation of restricting proposals

Feasibility study with consultants Meetings, discussions etc -Approval of government

DOF shall approve additional manpower to the PSUs after due examination of DPR

Financial requirement as per DPR

Requirement of gas and other infrastructure to be finalized after the due examination of DPR

1.3 Revival of Closed unit

MOF, DAC, PA & G, Planning, Fertilizer Industry & Inventors, PSUs of the

At the time of formulation of revival plans

Same as above Consultants for bidding process

To be determined based on revenue sharing

-do-

13

government,

model and DPR

1.4 4Securing of supply of Fertilizer as well as fertilizer inputs

-Producers of fertilizers & owners of fertilizer resources -Indian manufactures of importers -Embassies -Planning Commission & Ministry of Finance -MEA

As per the roadmap outlined for securing these products

Meetings & correspondence Visits of delegation

Advisors in securing tie-up abroad

Based on the assessments of tie-ups projects


2.A revamped Supply Chain (Distribution) Model:

State government, DAC , manufacturers & distributors Railways Ports, handling agents S/W supplier Research institute Technology

At the system design schedule

Meetings & correspondence Visits of delegation, Entering into contracts Feasibility reports Formalization of work agreement

Consultants for doing studies in the areas of system design, study of logistics and working out a optimization model

25 crores

14

supplier

3.A framework

for engagement

with

manufactures ,

suppliers,

importers, &

farmers and

using the

feedback for

system

improvements

State govt, DAC , manufacturers, distributors, Fertilizer associations And experts in the field

Periodical Conf, seminars, advisory forum

Stakeholder co-ordination cell at DS level is to be created

As per government norms (salary etc)

4.2 Tracking and Measurement of Overall plan & Milestones

The details of Activities/Initiatives , measurable and observable parameters to assess progress, method of review, and methods of corrective action are given in Section 4.2 of the detailed report. For each initiative periodic review to assess the program has been planned and variance in performance shall be assigned for corrective action through respective divisions. The implementation plan is required to be made based on the targets to be achieved during each financial years. Time to time review is done internally so as to make out any shortfall in achieving the target, with appropriate reasoning. It has been seen above that the cost of subsidising the farmer by way of fertilizer subsidy has gone over Rs. 70,000 cr and about 2.6% of GDP. This is unlikely to be sustainable in the long run, especially seeing the prognosis of a higher demand and hence prices in the future. It may be advisable to set up a high level Regulatory Board to deliberate these issues and

15

smoothen implementation of the strategic initiatives. A suitable budget of Rs. 500 cr each year for this initiative does not appear too ambitious.

Stakeholder’s engagement would be achieved by continuous interaction and discussion with the producers, farming community and the intermediation community. The proposed Regulatory Board would have effective liaison with these besides building international outreaches, contact with agricultural extension infrastructure to propagate scientific fertilizer application, besides furthering the learning agenda.

5 Linkage between Strategic Plan and RFD

A link between strategic initiatives, objectives, actions and performance indicators is established and depicted in section 5 of Detailed Strategic Plan. Strategic Plan is a long term vision document out of which RFD will identify implementables along with deliverables for planning suitable actions in a specific timeframe of one year. Successive RFDs would be the action plans for implementing the Strategic Plan.

6 Cross Departmental and Cross Functional Issues

The Department of Fertilizers has to implement its strategy through various other agencies/departments of Government of India, and state Governments especially the Ministries of Agriculture, Finance, Planning Commission, Ministry of Petroleum & Natural Gas etc., specially Department of Agriculture and Cooperation (DAC) for assessment of requirement of Fertilizers, Department of Expenditure, Ministry of Finance (DOE) for seeking adequate budgetary provisions, and Ministry of Petroleum and Natural Gas (MoPNG) for allocation of Gas and other inputs.

Since all the departments are interlinked and are required to work together to achieve objectives of the ministries, identification and management of cross departmental issues are very important.

Their linkages, organizational roles & responsibilities with potential challenges is addressed in Section 6 of Part II.

The strategic plan has especially focused on challenges listed for the 12th Plan as given below:

16

The production capacity of Fertilizer and hence availability is planned taking into consideration the growth plans of the Agricultural sector and also the needs for the balanced nutrition for the Indian farms.

The growth in capacity and production of Fertilizer indigenously shall also result in increased employment.

The change in technology to Gas based plant shall lead to increased productivity, reduction in cost and also reduce ecological degradation and help environment protection.

Gas based plants are more energy efficient and shall in small way contribute to securing energy future of India.

7 Monitoring & Reviewing Arrangements

Reviews can be done of regular basis through meetings with stakeholders responsible for respective initiatives. Further details are given Section 7 of Part II. Existing monitoring and review arrangement through FMS, RFD targets will continue to play an important role.

17

PART II: Detailed Strategic Plan 1. Vision, Mission, Objectives & Functions 1A. INTRODUCTION

The strategic plan for the Department of Fertilizers, Ministry of Chemicals and Fertilizers, Government of India, is aimed at identifying and setting clear priorities and expected results for the next five years.

1B. BACKGROUND

The 10th Report of the Second Administrative Reform Commission (ARC 2) entitled, “Refurbishing of Personnel Administration – Scaling New Heights” was released on November 8, 2008. Taking into consideration the international experience and emerging best practices, the Report remarked that “Performance agreement is the most common accountability mechanism in most countries that have reformed their public administration systems. This has been done in many forms - from explicit contracts to less formal negotiated agreements to more generally applicable principles. At the core of such agreements are the objectives to be achieved, the resources provided to achieve them, the accountability and control measures, and the autonomy and flexibilities that the civil servants will be given.”

The Government has put in place a Performance Monitoring and Evaluation System (PMES) for all Government Departments on September 11, 2009 following an announcement in this regard made in the President’s Address to both the Houses of Parliament on June 4, 2009. Under this system, each Department, at the beginning of each financial year, is required to prepare a Results-Framework Document (RFD), with the approval of the Minister concerned, consisting of priorities and the corresponding action programme set out by the concerned Ministries to convert their vision into reality. RFD acts as an important instrument to monitor relevant activities defined in terms of success indicators in the RFD not only for the purpose of assessing the level of achievement vis-à-vis the targets but also to take necessary corrective steps in time to improve performance.

18

The Department of Fertilizers has also prepared RFD and the progress of achievement is monitored on a quarterly basis with reference to the success indicators specified in the RFD. The Mid-year review for RFD 2010-11 has been completed.

1C. ORGANIZATIONAL STRUCTURE

The Department of Fertilizers (DOF) is one of the three departments under Ministry of Chemicals and Fertilizers, Government of India. The main activities of the department include planning, promotion and development of fertilizer Industry, planning and monitoring of production, import and distribution of fertilizers and management of financial assistance by way of subsidy/concession for indigenous and imported fertilizers. In order to perform these activities, the Department is broadly divided into five divisions dealing with, (i) Fertilizer Policy, Projects and Planning, (ii) Fertilizer imports, movement and distribution (iii) Phosphatic & Potashic Fertilizers (iv) Administration and Vigilance, and (v) Finance and Accounts.

19

20

Apart from the aforementioned internal organization, the Department also has the following nine Public Sector Undertakings (PSUs) and one Cooperative, namely

Public Sector Units

(i) National Fertilizers Ltd. ( NFL),

(ii) Rashtriya Chemicals & Fertilizers Ltd.(RCF)

(iii) Fertilizers and Chemicals Travancore Ltd.(FACT)

(iv) Madras Fertilizers Ltd.(MFL)

(v) Brahamputra Valley Fertilizer Corporation Limited( BVFCL)

(vi) FCI Aravali Gypsums and Minerals India Limited(FAGMIL)

(vii) Projects and Development India Ltd.( PDIL)

(viii) Fertilizer Corporation of India Limited(FCIL)- ( closed since 2002, under examination for revival)

(ix) Hindustan Fertilizer Corporation of India Limited (HFC)-(closed since 2002, being revived)

(Another PSU namely Pyrites, Phosphates & Chemicals Limited( PPCL), under DOF has been liquidated.)

COOPERATIVES

(i) M/s Krishak Bharti Cooperative Limited (KRIBHCO)

DOF has one Attached Offices(AO) namely, Fertilizer Industry Coordination Committee (FICC).

1D. VISION OF THE MINISTRY

Achieving fertilizer security for the country for sustainable agricultural growth supported by a robust fertilizer industry

21

1E. MISSION

i. Ensuring adequate and timely availability of fertilizers to the farmers at affordable prices through planned production and imports and distribution of fertilizers in the country.

ii. Planning for self sufficiency in urea production. 1F. OBJECTIVES

1. Ensuring policy framework for indigenous production and import of fertilizers and their supply

2. Assessing requirements, planning and arranging for production and import of fertilizers for meeting requirements

3. Movement and distribution of fertilizers on coordination with States

4. Disbursement and management of subsidy

5. Monitoring the performance of PSUs in terms of MOU

1E. FUNCTIONS

1. Planning, promotion of Fertilizer Industry

2. Management of financial assistance by way of subsidy/concession for indigenous and imported fertilizers

3. Planning and monitoring of production, imports and distribution of fertilizer

4. Administrative responsibility for CPSUs.

5. Administration of Fertilizers (Movement Control) Order, 1960

22

2. Assessment of the situation Proper assessment of situation both in terms of considering the availability of resources and the constraints is quite critical in the context of devising perspective work plan and formulating appropriate strategies. It determines the extent and approach to envisage the spectrum of potential strategies to develop plan to engage stakeholders, build statistical knowledge and capabilities, identify and strengthen resource requirement plan to undertake specific strategies, prepare detailed implementation plan, lay out key priorities; and decide appropriate path to track, monitor and assess the progress of achievement. 2A. What External factors will impact us

Factors Opportunities Threats

Political Political support for transparent & efficient subsidiary regime

New policies could be construed as against the interest of the farmers

Economic Rationalization of subsidiary May result in price spikes

Socio-cultural -Improved education shall help in using balanced fertilizer -Reduce labor migration due to improved income level

Disturbed areas, particularly in the part of North-East and J&K, mainly to operational problems.

Technological Efficiency Increase – Scope for further improvements

in

Making the delivery mechanisms more efficient &

transparent through policy interventions. Efficient

Supply-Chain Management using Information and

communication technologies (ICT) so as to make

delivery system more inclusive and targeted in due

course of time.

Additional production facilities based on alternate

feedstock will improve domestic availabilities of

23

Factors Opportunities Threats

fertilizers

Environmental Balanced use of fertilizer will help in improvement of environment, soil etc & help in better supply management

Excessive usage of fertilizer could be a threat to soil, water, air etc at the same time puts undue stress on the supply management

Legal - Black marketing of fertilizer - Diversion of fertilizer to no agriculture purpose - Smuggling of fertilizer to neighboring countries

2B. Who are our stakeholders?

S. No.

Stakeholders in Priority

How can they help us? How can they block us?

What would they want from us?

What do we want from them?

1 Fertilizer Producing companies, In public Sector (PSUs and Cooperatives)

Timely, cost efficient & enhanced production of fertilizer

Inefficient Production may block us

Industry friendly policies & environment

Improvement in productivity, efficiency through energy efficient means & optimum use of resources

2 Fertilizer Producing companies in Private sector

Timely, cost efficient & enhanced production of fertilizer

Prolong inefficiency may block us

Industry friendly policies & environment

Improvement in productivity, efficiency through energy efficient means & optimum use of resources

3 Distributors- Primary cooperative societies of

Transparent Distribution System ensuring timely availability in all parts of the country

Manipulation of supply chain

-Timely supply of fertilizers -Adequate remuneration/commissi

Timely availability in all parts of the country

24

S. No.





KRIBHCO IFFCO State Marketing Federations Wholesalers Retailers

on for their work

4 Importers- Canalized Importers (State Trading Agencies viz MMTC, IPL, STC etc)

OGL-registered with the Department

-By entering into contract at right time & at right price through both long & short term arrangements

- Concentrating on short term procurement rather than having long term tie-up -By contracting at inefficient prices

-Timely indents for importation -Expeditious clearance of dues

By entering into contact at right time & at right price in both long & short term

5 Producers in the other countries

By entering into JV & long term contract

By cartelization Strategic alliances/partnership for long term sourcing Reasonable terms of long term contract

Reasonable terms of long term contract

6 States and UTs

-By projecting realistic demand -Monitoring of timely availabilities of fertilizers to the farmers. -Ensuring quality -Ensuring fairsale - Checks on illegal

-By not co-operating -By projecting unrealistic demand -By not ensuring commensurate supply to the retail point

-Adequate & timely supply

Monitoring of timely availabilities of fertilizers to the farmers. -By projecting realistic demand -Ensuring qualities -Ensuring fairsale - Check on illegal usage/diversion/smuggling

25

S. No.





usage/diversion/smuggling

7 Port Authorities/Handling Agent etc

-By providing priority berthing -Early evacuation -Proper storage facilities to avoid damage

By delaying & changing priority at last minute

-Certainty of departure/arrival time of ship -Meeting the time schedule for evacuation -Settling of bills of agent etc

-Priority berthing -Turnaround time should be minimum -Mechanized & Modernized facilities

8 Farmers Improving Farm Productivity by appropriate and efficient usage of Balanced Fertilizers

By inappropriate & indiscriminate use of fertilizers

-Availability of required types of fertilizers at the right time and near by location -Availability of subsidized fertilizer at affordable price

-Appropriate and efficient usage of Balanced fertilizers -Increased efficiency -Increased productivity of food grains

9 Department of Agriculture

-Realistic & scientific demand projection -Appropriate policy for soil health & nutrient management -Contingency planning -Continuous support for proposed fertilizer policy for making fertilizer available at affordable price at right time

-By projecting unsustainable demand -Indenting at last moment -By not responding positively to the policies

Adequate supply of fertilizers as per requirements projected

Proper demand projection, locations of supply and timelines

10 Ministry of commerce/DGFT/Tariff Commission

-Favorable Exim Policy making fertilizer available at optimum cost

Unfavorable Exim Policy etc

They want timely proposals & comments on them

Conducive trade environment

26

S. No.





-By entering into bilateral/multilateral agreement to enable to source material at preferential tariffs -Facilitate off take trade/JVs -By maintaining current position AOA(WTO) for fertilizer subsidy -Tariff Commission can provide appropriate recommendations in time on fertilizers costing & freight etc

11 Planning Commission

Timely approval of planned Schemes /comments on policy proposals

-By not providing adequate funds -By not providing supportive policy for fertilizer industry

Timely approval of planned scheme/policy framework

Co-operation in meeting aspirations of producers as well as consumers of fertilizers

12 Ministry of Petroleum & Natural Gas

-Priority allocation of gas at reasonable price for both existing & future units -Helping in tying up transportation of gas at appropriate tariffs -Facilitating transportation -Facilitating availability of Gas/LNG through domestic & aboard

Not allocating adequate gas and unaffordable pricing

-Appropriate projection of requirement/readiness to receive gas by fertilizer industry

Positive & conducive environment so as to help new units and also existing units to produce more based on cheaper feedstocks

27

S. No.





13 Ministry of Finance -By allotting the required budgetary provision in cash -Providing support for leveraging JV aboard through line of credit - Giving infrastructure status to fertilizers -Support for conducive policy framework for fertilizer industry

Not providing enough budgetary allocations, payments of subsidies through bonds, not supporting industry friendly environment

Timely & comprehensive proposals for various schemes. Utilization of allotted funds. Communication in regard to financial & physical targets. Proper utilization of funds by following the laid down procedures

Timely subsidy planning and approval of resources

14 Railways -By providing required rakes in time at indented locations -Continuous operation of rake time, adequate time for loading/ un loading -Opening of rake points as far as possible in areas wherever rake points are not operational

They can block us by re-scheduling or delaying essential fertilizer supply, not providing rakes They can impact us by increasing the freight charges or assigning poor quality wagons for transportation.

-Timely indenting rake time -Better coordination for efficient movement -Quick loading/unloading -Minimum turn around time

-Appropriate classification of fertilizer as commodity in freight table -Priority movement through optimal routing and adequate availability of rakes at indented places with sufficient time for loading/unloading

15 Ministry of Shipping & Surface Transport

-Helping in timely chartering of ships -Granting waiver for CFR consignment -Priority berthing

Delay in chartering -Proper Planning of imports -Advance demand assessment as well as assessment of infrastructure

Efficient chartering and quick waiver as well as modern handling facilities

16 Non Fertilizer -By providing necessary They can block us They may require clear To bring in investment and

28

S. No.





Private Sector input supports viz. HDP bags, Naptha, H2SO4, sulphur, Fuel oil, various chemicals, transportation logistics -Efficient environment

by creating disputes, lobbying, frauds, etc.

offer with well defined role and responsibilities, along with quick payment, and robust and impartial grievance redressal mechanism.

modern technologies in efficient and time bound manner and manage the infrastructure created through them professionally.

2C . What are our strengths and weaknesses?

Elements Strengths Weaknesses

1. Capabilities -Planning skills for production & import, movement of fertilizers -Functional skills in the field of monitoring & planning of various activities -Excellent Coordination Skills

2. Internal Communication Good

3. Resource adequacy Planning payment schedules in resource constraint environments

Inadequate resources provisioning ; lack of feed stocks and Raw Materials Inadequate budget provision

4. Transparency Good

5. Internal alignment Excellent

6. Open-mindedness Receptive to suggestions

7. Systems and processes Excellent Budgeting skills

Price volatility in international market and ability to manage that

8. Accountability Ready to take additional responsibilities

9. Databases Excellent

10. Speed of decision Appropriate pace of decision making

29

making especially in view of criticality in Fertilizer availability

11. Understanding of stakeholders

Excellent Farmers are generally very happy with the supply position of fertilizers

12. Track record of delivery Good

13. Controls Good

14. Knowledge Fertilizer Monitoring System In depth knowledge of fertilizer technology

15. Weather/Climate Depends on DAC

2D What do we need to learn?

LEARNING AGENDA

MOST IMPORTANT TO LEARN AND WE KNOW A LOT ABOUT

-Dynamics of indigenous fertilizer industry -Strong fertilizer monitoring system -Accountable & transparent subsidy disbursement

MOST IMPORTANT TO LEARN AND WE KNOW VERY LITTLE ABOUT

Critical Learning Agenda

-In depth knowledge of Fertilizer Technology -International trading behavior & price volatility -Assessment of global resource base -Build on negotiation skills -Supportive Information Technology for monitoring, and tracking at the farm gate & payment of subsidy

30

3. Outline of Strategy

3A. What are potential strategies?

Strategies Strategic Initiatives

1. Achievement in self sufficiency in Urea

and Ammonia and becoming a marginal

exporter and securing resources for

ensuring availability of P & K Fertilizer

1.1 Encouraging investment in fertilizer sector through conducive policy

environment








1.2 Restructuring of poor performing PS Units



1.3 Revival of Closed unit through



1.4Securing of supply of Fertilizer as well as fertilizer inputs




31


There would be a study to assess the existing processes and an improved system design would be recommended which would include; among others-

Flow charts;


Responsibility matrix with clear measurable objectives at every stage of the process



Logistics study and ways to maximize efficiency in the distribution of fertilizers.

3.A framework for engagement with

manufactures , suppliers, importers, & farmers

and using the feedback for system

improvements

Engagement with stakeholders can be planned and calendarized. This will help DOF to get feedback on the actual field level issues and take corrective action at the earliest. This arrangement is also an opportunity to build confidence among stakeholders and involve them at every stage.

32

3B How will we engage our stakeholders?

Stakeholders (from 2B

Questions we must ask Mode of interaction When Who will be responsible for doing it

Fertilizer Producing companies, PSUs and Cooperatives

Overall performance against MOU targets -Production performance -Feedstock efficiency -Inventory management -Cost Control -Projects Performance

Review Meetings

Quarterly Secretary

Fertilizer Producing companies in Private sector

Production performance JV & Long term off take

Production Reports Correspondence & Meeting

Daily As and when required

JS

Distributors- Primary cooperative societies of KRIBHCO IFFCO State Marketing Federations Wholesalers Retailers

Stock position Sales Performance

-Reports through state government as well as DAC , Companies - Fertilizer monitoring system (FMS)

Quarterly A & M

33

Importers- Urea through Canalizing agencies (State Trading Enterprises viz MMTC, IPL, STC etc)

P& K - OGL-registered with the Department

-Import Plan -Pricing & quantity -Mode of Contract

Details of contract including bill of lading, bill of entry & commercial invoice

In case of Urea – as and when contract is signed P & K – Monthly

Urea – JS(A & M) P & K- JS (P & P)

Producers in the other countries

-Details of production -Financial & Other details -Surplus Available with them -Willingness & terms to enter joint venture

-Through correspondence as well as diplomatic/officials channels

As and when required All JS

34

States and UTs

-Finalization of requirements for the season & for state at disaggregated level -Contingent plan for emergent plan -Uploading information on FMS -Providing certificate of receipt, quality of fertilizers

Through correspondence as well as diplomatic/officials channels -Report on smuggling & diversion (if any) -Report on MRP

As and when required JS – A & M through DAC

Port Authority of India

-Status on berthing & evacuation

Through correspondence and meetings

As and when required JS-A & M

Farmers Usage of fertilizers crop wise and productivity

Through state agriculture and dept of agriculture

As and when required JS-A & M

35

Department of Agriculture

-Demand projection -Special distribution of requirement of fertilizer over time -Inclusion of new grades of fertilizer as per the agronomic importance under subsidy -Ensuring quality of fertilizers in the country -Support for policy matters

-Through Zonal Conference -Through correspondence/meetings

-Seasonal - As and when required

- JS-A & M -Respective JS

Ministry of commerce

-Support on policy/proposals -Tariff concessions/policy on agriculture subsidy in WTO forum -Tariff Commission : Carry out study on costing

-Through correspondence/meetings

As and when required Respective JS

Planning Commission

-Approval of schemes



Ministry of Petroleum & Natural Gas

-Priority & adequate allocation of gas including prices & timeline


As and when required JS(F & P)

36

Ministry of Finance( Department of Expenditure)

-Information on budget allocation in cash -Concurrence on proposals


As and when required -AS & FA - JS

Railways -Status on rake availability -Route Planning

-Reports -Correspondence/ tele- conferences/meeting

-Periodic - As and when required

JS Director

Ministry of shipping & surface transport

Status on chartering of ships

-Through correspondence

As and when required JS – A & M

Non fertilizer Private Sector

Reports by exception for input support material

Through correspondence/ meeting with industry associations


37

3C How will we build our knowledge and capabilities?

What do we need to learn (from 2 D)

From where or from whom can we learn

How will we organize this Who is responsible


Industry(Companies & Associations) /Research Institute/Tech Suppliers

-International exposures -Technical workshops & conferences -specialized training through appropriate agency

Respective JS


Through International Fertilizer Industry Associations Technical Institute IPNI, IFDC WTO, FMB, Ferticon IIFT, IIM

-Training programs -Visits to Institutes & associations

JS – A& M

- Secretary


-Through Indian embassies overseas -Through internationally published databases & data available on net - Through IFA Paris - As per confidentially agreement & MOUs with various countries

Publications/Website/Embassies/Missions/Conferences/MOUs/Agreement

All JSs

38

Build on negotiation skills

IIM,IIFT,ISB Training Programs All Js


FMS S/W provider and other IT Companies

Discussions, Training, On the job training

JS – A & M

3D What are the priorities?

Initiatives Suitability (effectiveness & impact)

Feasibility (ease of implementation)

Acceptability (by stakeholders)

Overall priority

Weight Age

1.1 Encouraging investment in fertilizer sector

through conducive policy environment

Approval of the government on investment of policy of Urea


Providing necessary fiscal and exim policy

Subsidiary policy & rates for fertilizer


5 4 5 5 20

39






4 3 4 4 15




4 2 3 4 15





5 2 5 5 20

40


5 5 5 5 18

3.A framework for engagement with

manufactures , suppliers, importers, & farmers

and using the feedback for system

improvements

5 3 5 3 12

41

4. Implementation Plan

4A. Stakeholders Engagement Strategies Names of Stakeholders When How

1.1 Encouraging

investment in fertilizer

sector through conducive

policy environment




Subsidiary policy & rates for fertilizer



MOF, DAC, PA & G, Planning, Fertilizer Industry & Inventors,

-At the time of formulation and finalization of the policies

Through dialogues, meetings, debates, inviting comments, conference, opinion papers -Approval of government -Clearance from BIFR

42





MOF, DAC, P& G, Planning Comm Dept of Commerce Public sectors

At the time of formulation of restructuring proposals

Feasibility study with consultants Meetings, discussions etc -Approval of government




MOF, DAC, PA & G, Planning, Fertilizer Industry & Inventors, PSUs of the government,

At the time of formulation of revival plans

Same as above

43

1.4 Securing of supply of Fertilizer as well as fertilizer inputs




-Producers of fertilizers & owners of fertilizer resources -Indian manufactures of importers -Embassies -Planning Commission & Ministry of Finance -MEA

As per the roadmap outlined for securing these products

Meetings & correspondence Visits of delegation


State government, DAC , manufacturers & distributors Railways Ports, handling agents S/W supplier Research institute Technology supplier

At the system design schedule

Meetings & correspondence Visits of delegation, Entering into contracts Feasility reports Formalization of work agreement

3.A framework for

engagement with

manufactures , suppliers,

importers, & farmers and

using the feedback for

system improvements

State govt, DAC , manufacturers, distributors, Fertlizer associations And experts in the field

Periodical Conf, seminars, advisory forum

44

4C. Learning Agenda What When How


Periodic Programs -International exposures -Technical workshops & conferences -specialized training through appropriate agency


Periodic Programs -Training programs -Visits to Institutes & associations


Periodic Programs Publications/Website/Embassies/Missions/Conferences/MOUs/Agreement

Build on negotiation skills

Periodic Programs Training Programs


Periodic Programs Discussions, Training, On the job training

45

4D. Resource Required Strategies People Money Infrastructure

1.1Encouraging investment

in fertilizer sector through

conducive policy

environment








Requirement of funds to be estimated after receiving projections from DAC

-Up gradation of Ports -New railway rolling stocks -New gas pipelines highways


DOF shall approve additional manpower to the PSUs after due

Financial requirement as per DPR

Requirement of gas and other infrastructure to be finalized after the due examination of DPR

46



examination of DPR




Consultants for bidding process

To be determined based on revenue sharing model and DPR

-do-





Advisors in securing tie-up abroad



2.A revamped Supply Chain Consultants for doing 25 crores

47

(Distribution) Model

studies in the areas of system design, study of logistics and working out a optimization model

3.A framework for

engagement with




system improvements

Stakeholder co-ordination cell at DS level is to be created

As per government norms (salary etc)

4E. Tracking and Measurement of Overall plan & Milestones Strategies Measurable and

observables to assess progress

Method of review

Methods of corrective action

1.Achievement in self

sufficiency in Urea and

Ammonia and becoming a

marginal exporter and

securing resources for

ensuring availability of P &

K Fertilizer

Notification on various policies such as investment, freight policy, subsidy etc

Quarterly review meeting at the levels of Secretary based on key result areas/targets in RFD

Variance in performance to be assigned for corrective action through respective divisions

48


Milestones on the roadmap for study of improved system design and its implementation

Quarterly review of the project to be done at secretary level and identify slippages in terms of cost and timelines

Deviations wrt roadmap to be re planned and targeted with the completion of the projects

3.A framework for

engagement with




system improvements

A calendar for meeting with key stakeholders at national/zonal level to be prepared for eliciting feedback & suggestions

Review by JS on the progress of such meetings and actions on the feedback received

Actions as decided in the JS meeting to be followed up and reviewed in subsequent meetings

5: Linkage between Strat Section 5: Linkage between Strategic Plan and RFD an and RFD

An exercise has been done to evolve an RFD based on the prioritized strategic plan outlined above. Guidelines for developing and RFD based on these prioritized strategic plan are given in the following table:

Guidelines for a Results Framework Document based on the proposed Strategic Plan

S No

Objective flowing from strategic plan

Action Points Outcome

1 Achievement in self

sufficiency in Urea

1.1 Encouraging investment in fertilizer sector through conducive

policy environment

Policy pronouncements

49

and Ammonia and

becoming a

marginal exporter

and securing

resources for

ensuring availability

of P & K Fertilizer











proposals




Fully tied up Revival proposals

1.4Securing of supply of Fertilizer as well as fertilizer inputs




MOUs Agreements

2 A revamped Supply Chain (Distribution) Model:

There would be a study to assess the existing processes and an improved system design would be recommended which would include; among others-

Flow charts;


Responsibility matrix with clear measurable objectives

Implementable distribution model

50

at every stage of the process



Logistics study and ways to maximize efficiency in the distribution of fertilizers.

3 A framework for

engagement with

manufactures ,

suppliers,

importers, &

farmers and using

the feedback for

system

improvements

Engagement with stakeholders can be planned and calendarized. This will help DOF to get feedback on the actual field level issues and take corrective action at the earliest. This arrangement is also an opportunity to build confidence among stakeholders and involve them at every stage.

Meeting with the stake holders

6. Cross Departmental and cross functional issues

6.A Linkage with potential challenges likely to be addressed in the 12th Plan

The strategic plan has focused on challenges listed for the 12th Plan. The depts. has especially focused on the following

51

The production capacity of Fertilizer and hence availability is planned after taking into consideration the growth plans of the Agricultural sector and also the needs for the balanced nutrition for the Indian farms.

The growth in capacity and production of Fertilizer indigenously shall also result in increased employment.

The change in technology to Gas based plant shall lead to increased productivity, reduction in cost and also reduce ecological degradation and help environment protection.

Gas based plants are more energy efficient and shall in small way contribute to securing energy future of India. 6.B Identification and Management of Cross Departmental issues including resource allocation and capacity building issues

The department of fertilizers has to implement its strategy through various other agencies/departments of Government of India, especially the Ministries of Agriculture, Finance, Planning Commission, Ministry of Petroleum and Natural Gas etc, specifically Department of Agriculture and Cooperation(DAC) for assessment of requirement of fertilizers, Department of Expenditure, Ministry of Finance (DOE) for seeking adequate budgetary provisions and Ministry of Petroleum and Natural Gas (MoPNG) for allocation of gas and other inputs. The fertilizer policy and the fertilizer industry is mainly affected by following: The Department of Agriculture and Cooperation (DAC) provides the projected requirement of fertilizer by each state at the starting of the year. It is vital to make available the requisite quantity of fertilizers in two important different seasons of farming in the country i.e Kharif & Rabi. Based on the assessed production of indigenous fertilizers in the following year, the demand production gap is made. A complete production, import and movement plan of fertilizers (containing all three nutrient ie. N, P & K) are worked out in consultation with the state government and the industry. Then distribution plan is implemented and monitored using Fertilizer Monitoring System. Therefore, role of DAC is very important in projecting appropriate demand data of each state much before the starting of the season. In the new strategic plan, the role of the Agriculture Department is all the more enhanced in the context of evolving a scientific farming and fertilizer application programme. Department of Expenditure (DOE) – The department of expenditure appropriates the amount based on the budget requirements of DOF.

52

The budgeting should be done in each financial year based on estimate of sale of indigenous and imported fertilizers and periodic up gradation is required based on variability of international prices and actual sale of the fertilizer. The subsidy policies are formulated by the department of fertilizer in the interest of all the stakeholders’ viz. farmers, industry etc. and department of fertilizers are required to take DOE`s opinion while framing the policies. The proposed strategic plan might rouse the interest of the Finance Ministry in view of the stated goals of efficiency enhancement, reducing the subsidy burden, higher food grain production, industry restricting. Ministry of Petroleum and Natural Gas (MoPNG) - The feedstock required for fertilizer espically ammonia & urea in natural gas, RLNG, Naphtha, FO/LSHS etc are govern by policies of MoPNG, whether it pertains to the allocation of requisite quantities of gas or pricing. It is therefore always the intent of Dept to get the requisite quantities of gases allocated to the fertilizer units through MoPNG, which has direct impact on the cost of production and thus on subsidy outgo. Details mentioned above clearly depict the need of Dept to act in tandem with various ministries in formulation and implementation of the policies.

7. Monitoring and Reviewing Arrangements

To have efficient monitoring and reviewing arrangements following mentioned methods can be used.

7.1 Fertilizer Monitoring Arrangements (FMS) The Dept has in place a Fertilizer Monitoring Arrangements, which has an IT based network linking the Dept with the industries and distribution till district levels. FMS provides just in time information on availability of fertilizers at district level of each state vis-à-vis its requirements. It is a transparent system with readily available outputs. The subsidy disbursement mechanism is linked to the FMS and after certification of fertilizer availability at the requisite point in the state, the subsidy payout is done. Though the system is quite effective, efforts are being made to upgrade it to retail level through ICT linkage so as to able to monitor the availability of fertilizer at retails head.

7.2 Performance monitoring based on RFD targets.

53

A RFD document is prepared based on various parameters/milestones of the department keeping the target dates and allocating ratings according to the targets achieved. The progress on various milestones is reviewed time to time and efforts are to mitigate/overcome shortfalls, if any. The result framework is planned to achieve the objectives nad functions of the Dept keeping in vision & mission perspective in mind. It also gives direction of movement of strategies. Based on its regular evaluation, the timeframe of policy notifications and other relevant parameters are implemented in the interest of stakeholders.

7.3 Regulatory Board It is necessary to set up a Regulatory Board which would oversee timely demands/supply assessment, gap analysis on the long term and short term basis, production, transportation, distribution and targeting subsidy. This would function under the overall control of the Ministry.

STRATEGIC PLAN FOR DEPARTMENT OF FERTILIZERS, …

Documents