With reference to chemical fertilizers in India, consider the following statements: 1. At present, the retail price of chemical fertilizers is market-driven and not administered by the Government. 2. Ammonia, which is an input of urea, is produced from natural gas. 3. Sulphur, which is a raw material for phosphoric acid fertilizer, is a by-product of oil refineries. Which of the statements given above is/are correct?
Contents13
- A1 only
- B2 and 3 only
- C2 only
- D1, 2 and 3
Show answer
Answer: (B) 2 and 3 only
Statement 1 (Fertilizer prices are market-driven, not government-administered) — NOT CORRECT:
The Indian government heavily controls fertilizer prices.
Under the New Urea Policy (2015), the government fixes the price of urea.
For Phosphorous and Potassium fertilizers, the Nutrient Based Subsidy (NBS) scheme provides subsidies.
So prices are NOT purely market-driven.
Statement 2 (Ammonia is a key ingredient, and natural gas is used to produce it) — CORRECT:
Fertilizer production uses about 1.2% of world's total energy, and 90% of that goes into making ammonia.
Ammonia is the key ingredient in nitrogen fertilizers.
It can be produced from natural gas.
Statement 3 (Sulphur is a byproduct of oil refining used in fertilizer production) — CORRECT:
Sulphur is indeed a major byproduct of oil refining and gas processing.
It is used in producing phosphoric acid fertilizer (through the "Wet Process").
Oil refineries like the Mathura refinery produce sulphur as a byproduct.
Answer: B (2 and 3 only).
Key Takeaway:
Government controls fertilizer prices in India (not market-driven).
Ammonia = key fertilizer ingredient = made from natural gas.
Sulphur = oil refinery byproduct = used in phosphatic fertilizers.
The government controls fertilizer prices through subsidies and administered pricing, not market mechanisms, making fertilizer policy a major fiscal burden.
Natural gas shortages and rising international prices directly impact India's fertilizer production costs since ammonia production depends heavily on natural gas as feedstock.
The question tests understanding of the industrial linkages between oil refining, gas processing, and fertilizer manufacturing in India's chemical industry.
Fertilizer Price Control in India
Indian Economy retail price market-driven administered by the Government
Fertilizer Price Control: Government vs Market Mechanisms
Fertilizer prices in India are government-controlled, not market-driven
New Urea Policy (2015) fixes urea prices centrally
Nutrient Based Subsidy (NBS) scheme covers P&K fertilizers
Government provides subsidies to keep farmer prices low
India's fertilizer pricing is heavily government-administered, not market-driven. The state controls prices through two main mechanisms to ensure affordability for farmers.
Price Control Mechanisms
Fertilizer Type | Policy/Scheme | Price Control Method | Key Feature |
|---|---|---|---|
Urea | New Urea Policy (2015) | Fixed retail price | Uniform price across India |
Phosphatic (P) | Nutrient Based Subsidy | Subsidy per nutrient | Companies set MRP, govt pays subsidy |
Potassic (K) | Nutrient Based Subsidy | Subsidy per nutrient | Market forces + subsidy support |
Why Government Controls Prices
Food security: Ensures farmers can afford fertilizers for crop production
Political consideration: Fertilizer subsidy is a major electoral issue
Market failure: Pure market pricing would make fertilizers unaffordable for small farmers
Trap: Statement 1 claims prices are market-driven — this is the opposite of reality
Confusion: Students may think decontrol = market pricing, but subsidies still exist
Remember: Even under NBS, government subsidies heavily influence final prices
Ammonia Production for Fertilizers
Science And Technology Ammonia input of urea natural gas
Ammonia: Key Fertilizer Ingredient from Natural Gas
Ammonia (NH₃) is the primary ingredient in nitrogen fertilizers like urea
Natural gas is the main raw material for ammonia production
Haber-Bosch process converts nitrogen + hydrogen into ammonia
Fertilizer industry consumes 1.2% of world's total energy
Ammonia is the foundation of nitrogen fertilizer production. About 90% of fertilizer industry's energy goes into making ammonia, primarily from natural gas through industrial processes.
Ammonia to Fertilizer Process
%%{init: {"flowchart": {"wrappingWidth": 460}}}%%
flowchart TD
s1["`**Natural Gas (CH₄)**
Primary raw material providing hydrogen`"]
s2["`**Haber-Bosch Process**
N₂ + 3H₂ → 2NH₃ (high pressure & temperature)`"]
s3["`**Ammonia (NH₃)**
Key intermediate chemical`"]
s4["`**Urea Production**
Ammonia + CO₂ → Urea fertilizer`"]
s5["`**Application**
Nitrogen source for plant protein synthesis`"]
s1 --> s2
s2 --> s3
s3 --> s4
s4 --> s5Why Natural Gas
Hydrogen source: Natural gas provides hydrogen atoms needed for NH₃
Energy efficiency: Most cost-effective method compared to coal or electrolysis
Availability: Abundant supply in major fertilizer-producing countries
Remember: Ammonia is an input for urea, not the final product
Don't confuse: Ammonia vs Ammonium — ammonia is the gas (NH₃)
Key fact: Natural gas → Hydrogen → Ammonia → Urea fertilizer
Sulphur in Fertilizer Production
Science And Technology Sulphur phosphoric acid fertilizer by-product of oil refineries
Sulphur: Oil Refinery Byproduct for Phosphatic Fertilizers
Sulphur is a major byproduct of oil refining and gas processing
Used to produce phosphoric acid for phosphatic fertilizers
Wet process converts sulphur to fertilizer-grade phosphoric acid
Indian refineries like Mathura produce sulphur as byproduct
Sulphur emerges as a valuable byproduct when oil refineries remove sulfur compounds from crude oil. This sulphur becomes a key raw material for phosphatic fertilizer production.
Sulphur to Fertilizer Chain
%%{init: {"flowchart": {"wrappingWidth": 460}}}%%
flowchart TD
s1["`**Crude Oil Processing**
Oil refineries remove sulfur compounds`"]
s2["`**Sulphur Recovery**
Byproduct sulphur extracted and purified`"]
s3["`**Sulphuric Acid (H₂SO₄)**
Sulphur converted to acid`"]
s4["`**Phosphoric Acid**
H₂SO₄ + Rock Phosphate → H₃PO₄ (Wet Process)`"]
s5["`**Phosphatic Fertilizers**
DAP, SSP, TSP production`"]
s1 --> s2
s2 --> s3
s3 --> s4
s4 --> s5Sulphur Sources & Uses
Source | Process | Fertilizer Application | Example in India |
|---|---|---|---|
Oil Refineries | Desulfurization of crude oil | Phosphoric acid production | Mathura Refinery |
Gas Processing | H₂S removal from natural gas | Sulphuric acid manufacturing | ONGC facilities |
Mining | Direct extraction (limited) | Industrial sulphur supply | Imported mainly |
Key connection: Oil refinery → Sulphur → Phosphoric acid → P fertilizers
Don't miss: Sulphur is a byproduct, not the main product of refineries
Remember: Wet process uses sulphur for phosphatic fertilizers, not nitrogen ones
Fertilizer Subsidy Schemes in India
Indian Economy
Major Fertilizer Subsidy Schemes: NUP & NBS
New Urea Policy (2015) replaced earlier urea policies
Nutrient Based Subsidy (2010) covers P&K fertilizers
Direct Benefit Transfer being piloted for fertilizer subsidies
Total fertilizer subsidy is ₹70,000+ crore annually
India operates two parallel subsidy systems — one for urea and another for phosphatic and potassic fertilizers. Both aim to keep farmer prices affordable while ensuring industry viability.
Subsidy Scheme Comparison
Scheme | Covers | Mechanism | Price Setting | Subsidy Calculation |
|---|---|---|---|---|
New Urea Policy | Urea only | Fixed retail price | Government sets uniform price | Cost minus fixed price |
Nutrient Based Subsidy | P&K fertilizers | Per-nutrient subsidy | Companies set MRP | Fixed rate per kg of N/P/K/S |
DBT (Pilot) | All fertilizers | Direct cash transfer | Market rates | Subsidy to farmer's account |
Fertilizer Subsidy Structure
# Fertilizer Subsidies
## New Urea Policy
- Fixed retail price
- Energy efficiency norms
- City gas priority
- Indigenous production promotion
## Nutrient Based Subsidy
- P&K fertilizers
- Per nutrient rates
- Balanced fertilization
- Reduce urea over-use
## Direct Benefit Transfer
- Pilot in select districts
- Aadhaar linking
- Reduce leakages
- Market-based pricingPolicy Objectives
Affordability: Keep fertilizer costs low for farmers
Balanced nutrition: Promote P&K use to reduce soil degradation from urea overuse
Efficiency: Reduce subsidies while maintaining agricultural productivity
Self-reliance: Encourage domestic fertilizer production capacity