Agro Phos India Ltd Management Discussions

SSP:

During the year 2023-24, company recorded 71471.60 of sales for all variant of SSP Product which is 62,918.92 MT more as compared to last F.Y. 2022-23. Our pre- dominant product is SSP.

NPK:

Sale of NPK was decreased during the period under review as consolidated sale of NPK for Both 12:32:06 and 12:12:12 variants are recorded as 140 MT which was 2432.80 MT In last Financial Year due to tough competition in the Indian Market and Company is mainly focusing on SSP.

PROM:

PROM sale during this year recorded is 65 MT due to less market demand.

Calcium Sulphate

During the year, there was sale of calcium sulphate of 130.50 MT due to less market demand of the Calcium Sulphate in the Indian market.

Traded Quantity

Company apart of the manufacturing of fertilizers products also engaged in trading of the many fertilizers and agri- products the total quantity traded of such products recorded as 28527.94 MT as the trading of the products is completely depends on the un-availability of some products in company‘s stock and market demand of particular products so company may have earn more profit from trading also.

Financial Performance of company during the period under review

The company‘s performance during this year was recorded at 10714.28 Lakhs as compared to the last year Turnover as 13101.70 Lakhs while the other income was increased from 33.70 Lakhs to 62.57 lakhs this year, accordingly the Profit after tax of company was recorded as (525.58) Lakhs as compared to 500.36 Lakhs in last financial year due to reduction in subsidy allocation by the Government of India for the fertilizer industry and the lack of adequate rainfall during the current financial year. Management in upcoming year ensure to keep maintain the profitability from company‘s products for which whatever be the efforts management will be ensure to do all in future.

Indian Fertilizer Industry & Companys Contribution toward the same

The global fertilizer market size reached US$ 176.4 Billion in 2023. Looking forward, IMARC Group expects the market to reach US$ 236.9 Billion by 2032, exhibiting a growth rate (CAGR) of 3.2% during 2024-2032. The burgeoning population expansion, surging food demand, economic development in emerging markets, rising income levels, government policies and subsidies, rising research and development (R&D) activities, and rapid advancements in agricultural technology are some of the factors supporting the market growth.

INDIAN FERTLIZER MARKET

India is the second-largest consumer and the third-largest producer offer Fertilizers globally. The Indian fertilizer ecosystem comprises the private, Government and cooperative sectors. Over the years, the fertilizer sector in India has played a major role in shaping the Indian farms and driving agricultural prosperity.

The Indian fertilizer industry is on a robust growth trajectory, expected to reach a market size of Rs 1.38 lakh crore by 2032, with a Compound Annual Growth Rate (CAGR) of 4.2 per cent from 2024 to 2032, according to the latest report by IMARC Group. This growth underscores the sectors vital role in supporting Indias agricultural productivity and food security.

In 2023, the Indian fertilizer market size stood at Rs 94,210 crore, driven by growing population, rapid urbanization, increased agricultural demands and strategic governmental interventions.

Other than this, the expanding income levels of individuals in rural India, in confluence with the easy availability of credit, is positively influencing the market growth. Besides this, contract farming is gaining popularity across the region in which farming inputs in terms of technology and training are provided to the farmer by the contractor. Along with this, governments and non-governmental organizations (NGOs) of various nations are formulating awareness programs and workshops to spread awareness among farmers about the usage and advantages of fertilizers. Furthermore, the advent of nano-fertilizers (NFs) that help maintain flat green grounds and fields is creating lucrative growth opportunities for the key players operating in the industry. The government has emphasized producing nano liquid urea domestically, aiming to stabilize fertilizer prices. The geopolitical landscape has further influenced Indias fertilizer market.

Also, Indias position as the worlds second-largest producer of fruits and vegetables, next only to China, underpins the fertilizer industrys growth.

Government initiatives like direct income support schemes from both central and state governments have also bolstered farmer liquidity, enhancing their ability to invest in fertilizers.

It has always been in the agenda of the Government to ensure food and nutritional security to the teeming population.

Leading this charge is Urea, spearheading the fertilizer production with a monumental output of 31.4 million tons. closely trailing behind are the essential NPKs, contributing 9.5 million tons, and DAP, with a notable contribution of 4.3 million tons.

During Fiscal Year 2023-24, India experienced a notable growth in sales across key fertilizers, with Urea, DAP, MOP, and NPKs boasting impressive increases of 2%, 6%, 2%, and an outstanding 12%, respectively, compared to the previous year. Notably, NPK sales surged significantly, showcasing excellent growth compared to the preceding year.

*(Quantity in Lac Tonnes)

In Fiscal Year 2023-24, Indias fertilizer import dynamics experienced notable shifts, marked by a discernible decline of 7% in Urea, 22% in DAP, and 21% in NPKs imports compared to the preceding year. Conversely, MOP surged with an impressive growth rate of 52%. This trend seamlessly aligns with the governments vision under the Aatma Nirbhar Bharat initiative, emphasizing reduced dependence on imports and the promotion of indigenous alternatives. Indias urea imports have also come down with the coming up of new production plants.

This shift in import patterns reflects a concerted effort to bolster domestic production and promote self-sufficiency in the fertilizer sector. It underscores Indias commitment to harnessing its vast agricultural resources and leveraging indigenous capabilities to meet the nations fertilizer requirements. As India continues to prioritize local production and reduce reliance on imports, such developments pave the way for a more resilient and self-reliant agricultural ecosystem, in line with the overarching goals of sustainable development and economic sovereignty.

Indias fertilizer industry is thriving, not just marking increases in production and sales, but serving as a testament to the nations steadfast dedication to bolstering agriculture, meeting growing demands, and nurturing a future of prosperous farms.

Comparing season-wise consumption of fertilizer products in 2023-24, it has been observed that all the products have shown higher consumption during kharif 2023 compared to kharif 2022. However, in rabi 2023-24, consumption of all fertilizers has been showing a downward trend compared to rabi 2022-23.

As of January 31, 2024, the Indian government had provided a total of 1,70,923 crore in fertilizer subsidies for the 2023-2024 fiscal year, which is more than the revised estimates. The total estimated outlay for the period between 2022-2023 and 2024-2025 is over 3.68 lakh crore.

Urea subsidy

On urea, the minister said urea is provided to the farmers at a statutorily notified price. The price of a 45 kg bag of urea is Rs 242 per bag (exclusive of charges towards neem coating and taxes as applicable). the expenditure incurred on subsidy on fertilizers for the last five years stood at Rs 73435.21 crore in 2018-19, Rs 83,466.51 crore in 2019-20, Rs 131229.50 crore in 2020-21, Rs 157640.63 crore in 2021-22 and Rs 2,54,798.88 crore during 2022-23 fiscal year.

Subsidy on urea went up to over 1.30-lakh crore as against RE of 1.29-lakh crore. However, it is still lower than the Budget Estimate of over 1.35-lakh crore.

News and Developments into the Market:

Programs such as PM-KISAN and PM-Garib Kalyan Yojana have received endorsements from the United Nations Development Programme for their contributions to food security. Union Minister of Health and Family Welfare Minister Mansukh Mandaviya announced plans to increase the number of nano liquid urea production plants from nine to thirteen by 2025.

These plants are projected to produce 44 crore bottles of 500 ml nano urea and di-ammonium phosphate (DAP). Aligning with the Atmanirbhar Bharat initiative, Indias dependency on fertilizer imports has decreased markedly. In FY24, urea imports declined by 7 per cent, DAP by 22 per cent, and NPKs by 21 per cent. This reduction is a significant step towards self-sufficiency and economic resilience. The government has mandated 100 per cent Neem coating on all subsidized agricultural grade urea to enhance nutrient efficiency, improve crop yield, and maintain soil health, while also preventing the diversion of urea for non-agricultural purposes. India has also established itself as a global leader in nano agricultural inputs, including nano fertilizers and micro-nutrients, promoting environmental sustainability without compromising crop yields. The Indian government aims to achieve self-sufficiency in urea production by 2025-26 through increased local production of nano urea. Additionally, the Paramparagat Krishi Vikas Yojana (PKVY) promotes organic farming, offering Rs 50,000 per hectare for three years, with INR 31,000 directly allocated to farmers for organic inputs. The potential market for organic and bio fertilizers is poised for expansion. Climate change poses a significant challenge, with projections suggesting a potential 19.3 per cent reduction in wheat yields by 2050 and 40 per cent by 2080. To address this, the National Mission for Sustainable Agriculture (NMSA) is implementing strategies to make Indian agriculture more resilient to climate change. The government is also focused on reviving closed fertilizer plants in Talcher, Ramagundam, Gorakhpur, Sindri, and Barauni, and on educating farmers about balanced fertilizer use, crop productivity, and the benefits of cost-effective subsidized fertilizers. Urea Subsidy Scheme: DOF vide its publication dated 13.07.2023 informed about Continuation of ongoing Urea subsidy scheme until March 31, 2025. Total estimated outlay pegged at over 3.68-lakh crore. The actual expenditure is expected to vary based on the prices of natural gas and other inputs used for the production of urea. 2024 Interim Budget: The Indian Budget for the fiscal year 2024-25 (FY25) sets aside 1.64 trillion for fertilizer subsidy. This allocation reflects a decline from the revised estimate of 1.88 trillion allocated in FY24, this cut is part of a larger subsidy bill reduction of 7.8%. signaling a focused approach towards fiscal discipline while ensuring continued support for the agricultural sector.

Continuous research and innovation are essential for developing new types of fertilizers and improving existing ones.

Indian fertilizer market can be categorized into complex fertilizers, DAP, MOP, urea, SSP, and others. Among these, Di-Ammonium Phosphate (DAP) is currently dominating market growth. DAP is a widely used fertilizer due to its high nutrient content, particularly phosphorus, and nitrogen, which are essential for enhancing crop yield and plant health, thus influencing the market growth. The popularity of DAP can be attributed to its versatility, making it suitable for various crops and soil types across different regions of India.

The Indian fertilizer market has several major players, including Chambal Fertilisers and Chemicals Limited, Coromandel International Limited, Gujarat Narmada Valley Fertilizers & Chemicals Limited (GNFC), Gujarat State Fertilizers & Chemicals Limited (GSFC), Indian Farmers Fertiliser Cooperative Limited (IFFCO), National Fertilizers Limited (NFL), Rashtriya Chemicals and Fertilizers Limited (RCFL) and Yara Fertilisers India Private Limited.

Indian Fertilizer Market Trends/Drivers:

Population growth and increased food demand: With a burgeoning global population, the agricultural sector faces the challenge of producing more food using limited arable land. As a result, the demand for fertilizers continues to surge to boost crop productivity and ensure high food security has heightened the demand for food, compelling farmers to adopt modern agricultural practices to maximize crop yields. The emerging technological advancements: Advancements in agricultural technology, including precision farming, are revolutionizing the industry. In addition, farmers can precisely apply fertilizers based on specific soil conditions and crop needs, reducing wastage and maximizing efficiency. Moreover, innovations in fertilizer formulations, such as controlled-release fertilizers, enable gradual nutrient release, resulting in improved nutrient absorption by plants and reduced environmental impact. Besides this, the incorporation of drones to identify specific areas that require fertilizer application optimizes fertilizer usage and minimizes environmental impact

The implementation of government initiatives: GoI is providing financial support and incentives to farmers to encourage the adoption of modern agricultural practices, including the use of fertilizers. Moreover, subsidies lower cost for farmers, making them more accessible and affordable, implementing programs that promote the balanced use of fertilizers to prevent over-application, investing in research and development (R&D) initiatives to support the development of new and improved fertilizer formulations, technologies, and farming practices.

Challenges (Risks and Concerns):

Government policies and subsidies significantly influence the fertilizer market. Changes in government policies, such as the reduction or elimination of fertilizer subsidies, can have adverse effects on the fertilizer market by impacting demand and profitability. The interplay between government regulations and subsidies can shape the usage and production of fertilizers on a regional and global scale. The international market is quite volatile and ups and downs in prices of raw materials and finished products are observed from time to time. About 80% of feedstock i.e. natural gas for production of urea is imported. More than 90% of phosphatic fertilizers is met by import either in the form of raw materials or finished products and 100% demand of MOP is met by import. While India strides towards achieving self-sufficiency in urea production, it remains reliant on imports to fulfill its demand for rock phosphate, a vital ingredient for manufacturing DAP and NPK fertilizers. Despite domestic advancements, the nation imports approximately 5 million tonnes of phosphate rock, 2.5 million tonnes of phosphoric acid, and 3 million tonnes of DAP annually. Notably, around 60% of the diammonium phosphate supply and a significant portion of urea and NPK fertilizers 25% and 15%, respectively are sourced from international markets, highlighting Indias ongoing dependence on imports to meet its agricultural needs. Fertilizer demand and purchases: Demand, in turn, is driven by fertilizer prices, crop economics, currencies, cycles, economic activity, and macro factors like subsidy programs. Crop economics consist of factors like crop inventory, crop demand and supply, and crop prices, which depend on economic activity, food consumption, diet patterns, crop yields, nutrient application, weather, plantation, and energy consumption. The cost of raw material input: Expenses generally depend on changes in mining costs and fluctuations in raw material prices, which vary by location. Fluctuations in raw material prices or input prices depend on supply and demand dynamics for the specific raw material, which are affected by macro-economic activity, weather, and industry-specific trends. Movements in input price can impact fertilizer prices and therefore demand too. The fertilizer business is highly seasonal and such seasonality may affect our operating results. We are subject to various laws and regulations relating to the handling and disposal of hazardous materials and wastes and bio-medical wastes. We require a number of approvals, NOCs, licenses, registrations and permits in the ordinary course of our business and any failure or delay in obtaining the same in a timely manner may affect our operations. Our Company is dependent on third party transportation providers for the delivery of our goods and any disruption in their operations or a decrease in the quality of their services could results of operations. On number of occasions, the government has admitted about problem of over-application of urea in the country and that the consumption of nitrogen in India is much higher than many other countries in the world.

Government measures to address the hassle

PM PRANAM scheme: PM Programme for Restoration, Awareness Generation, Nourishment and Amelioration of Mother Earth (PMPRANAM)” was launched to incentivize States/ Union Territories to promote trade fertilizers and balanced use of chemical fertilizers.

Neem-lined urea: The government has delivered 100% Neem Coating on all backed agricultural grade urea in the country with the intention to boost nutrient efficiency, crop yield, soil health and check the diversion of agricultural grade urea for non-agricultural activities. Sulfur Coated Urea (Urea Gold) was brought to overcome the sulfur deficiency in the soil and decrease the enter value of the farmers. Nano Urea: It is a liquid fertilizer advanced by IFFCO. It is an alternative to conventional urea.

Way Ahead

There is a need to inspire farmers to adopt balanced nutrient management practices through awareness campaigns, training programs, and extension services. Providing statistics on soil health, crop nutrient necessities, and the adverse outcomes of overuse can help farmers make informed decisions about fertilizer application. Encouragement of the manufacturing and use of opportunity and eco-friendly fertilizers which include biofertilizers, green manure, compost and so on can reduce dependency on imports and make contributions to sustainable agricultural practices.

FUTURE OUTLOOK

As per the government trend over fertilizer sector of India in the form of increase in subsidy scheme over fertilizers products we may see a positive growth in production and sales of fertilizers in India also the governments encouragement toward foreign joint ventures will probably make a good result in future and India will become one of the most fertilizer producer in world economy, apart of that Indian culture is closely related with farmers and their dependency is on agriculture sector which Indian government always want to empowered so it keep always a scope for all fertilizers manufacturers in India toward the more productions and sales.

NUTRIENT BASED SUBSIDY (NBS) SCHEME

Under the NBS regime fertilizers are provided to the farmers at subsidized rates based on the nutrients (N, P, K & S) contained in these fertilizers.

Government provided nearly Rs 1.71 trillion as fertilizer subsidy till Jan in 2023-24.

In Fiscal Year 2023-24 (FY24), the fertilizer subsidy has exceeded Revised Estimates (RE) by over 6,500 crore.

Government had implemented nutrient-based subsidy policy w.e.f. April 1, 2010 all over the country, which has now been extended till 2025-26.

Under the NBS policy, a fixed rate of subsidy (in per kg basis) is announced on nutrients namely nitrogen (N), phosphate (P), potash (K) and sulphur (S) by the government on annual/bi-annual basis. The per kg subsidy rates on the nutrient N, P, K, S is converted into per tonne subsidy on the various P&K fertilizers covered under NBS policy.

Any variant of the fertilizers covered under the subsidy scheme with micronutrients namely boron and zinc, is eligible for a separate per tonne subsidy to encourage their application along with primary nutrients. At present 25 grades of P&K fertilizers namely DAP, MAP, TSP, MOP, ammonium sulphate, SSP, PDM and 18 grades of NPKS complex fertilizers are covered under the NBS Policy. Under the NBS regime, MRP of P&K fertilizers has been left open and fertilizer manufacturers/marketers are allowed to fix the MRP at reasonable rates.

Updates in connection with the NBS policy:

Online Submission of Audited Cost data from 2023-13 onwards to examine and monitor the reasonableness of MRPS under the NBS Scheme Nutrient Based Subsidy (NBS) rates for Phosphatic and Potassic (P&K) fertilizers for Rabi 2023-24 (from 1 Oct 2023 upto 31 March 2024) under NBS Scheme: An expenditure of Rs.22,303 crore was expected on NBS. The subsidy on P&K fertilizers will be provided based on approved rates for Rabi 2023-24 (applicable from 01.10.2023 to 31.03.2024) to ensure smooth availability of these fertilizers to the farmers at affordable prices and Rationalization of subsidy on P&K fertilizers in view of recent trends in the international prices of fertilizers and inputs. Nutrient Based Subsidy (NBS) rates for Phosphatic and Potassic (P&K) fertilizers for Kharif 2024 (from 1 April 2024 upto 30 September 2024) under NBS Scheme: The tentative budgetary requirement for Kharif season 2024 would be approximately Rs.24,420 crore. This landmark announcement encompasses adjustments in subsidy rates for Phosphatic and Potassic (P&K) fertilizers, along with the introduction of three new fertilizer grades under the NBS scheme. The subsidy would be provided to the fertilizer companies as per approved and notified rates so that fertilizers are made available to farmers at affordable prices. For the 2024 Kharif season, the subsidy rates have been set as follows: Nitrogen (N) at 47.02 per kg, phosphatic (P) at 28.72 per kg, potassic (K) at 2.38 per kg, and Sulphur (S) at 1.89 per kg. The subsidy on phosphatic fertilisers has been raised to 28.72 per kg from 20.82 per kg in the 2023 Rabi season. Meanwhile, the subsidy rates for nitrogen (N), potassic (K), and Sulphur (S) remain unchanged.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has clearly laid down policies, guidelines and procedures that form a part of the internal control system which provide for automatic checks and balances. The Audit committee reviews the effectiveness and efficiency of these systems to ensure that all the assets are protected against loss and that the financial and operational information is complete and accurate, in addition of external audit, company has also appointed Internal Auditor to list out any deficiency or loop halls in companys Internal Control and financial reporting, Audits are finalized and conducted based on the internal risk assessment. Significant findings are brought to the notice of the Audit committee of the Board and corrective measures recommended for implementation. Our work opportunities and competitive compensation policy helps us in attracting and retaining our personnel.

Apart of the same company was also conducted with PDIL (Project Development India Limited a Govt. authorized unit for Audit) which conducted audit for company‘s overall production process report to the concerned department.

HEALTH, SAFETY, SECURITY AND ENVIRONMENT

Health, safety, security and environment have always been an integral part of our value system, we always having concern about Health safety and security of our Employees, workers at their work place, we are aiming at "Zero Accident" as goal of our company, when the matter is about health and safety, company always follow these some important measure Identification of hazard and risk present in work environment and its rectification.

Continuous monitoring of unsafe condition and unsafe acts through safety inspection.

Safety induction training for all employees and specific job safety awareness programs on a continuous basis.

Our factory are well equipped with required facilities including machinery, crane, conveyor belt, other handling equipments to facilitate smooth manufacturing process and easy logistics. We endeavor to maintain safety in our premises by adhering to key safety norms. We are having enough greenery at our plant location and also having modern and efficient system to dispose of factory waste, mainly we focus on re- made process of waste and scrap and we always keep in mind about optimum use of energy resources and conservation of natural resources, company is continuously visited by pollution control officers and, we will do it good, if they found any lack of safety measure and other element to protect the surrounding environment of the company.

CAUTIONARY STATEMENT:

Statements in the Management Discussion and Analysis Report describing the Companys objectives, projections, estimates, expectations may be forward looking statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include, among other things, economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which the Company operates, changes in Government regulations, tax laws and other statutes and incidental factors.