Coromandel to focus on developing fertilizer value chain amidst geo-political unrests

The government's reduction in fertilizer subsidies, with the allocation for 2024-25 at Rs 1.64 lakh crore (13% lower than the revised estimate of Rs 1.89 lakh crore for 2024), is impacting the sector in multiple ways.

The Government of India’s Nutrient-Based Subsidy (NBS) policy, which subsidizes key plant nutrients such as nitrogen, phosphorus, and potash, plays a vital role in keeping fertilizers affordable for the farming community. The reduction in subsidy rates for Kharif 2024, compared to last year, is largely attributed to the decline in global commodity prices.

However, during the first half of the year, the demand fundamentals for the industry remained strong. This includes factors such as above-normal monsoon rainfall, higher reservoir levels, and a correction in Minimum Support Prices (MSPs) which led to improved crop sowing. Additionally, the timely announcement of subsidy rates and subsidy payouts by the government helped the industry plan raw material procurement ahead of time, resulting in improved production numbers for Phosphatic fertilizers. While the geopolitical situation, particularly with China, impacted DAP imports, the industry swiftly adapted by increasing the use of NPK fertilizers. During the Kharif season, NPK consumption rose by 18 per cent, supporting balanced crop nutrition.

Sustained availability of fertilizers at reasonable farmgate prices is likely to boost agricultural output, with the first advanced estimates projecting a 6% increase in Kharif foodgrain production, reaching 165 million tons.

As a company, Coromandel focuses on promoting balanced nutrition and offering differentiated, value-added products that contribute to improved yields for farmers. These products cater to the growing demand for more efficient and sustainable farming practices, enhancing crop productivity. Coromandel has consistently grown its volumes, and during the Kharif season, our market share has increased from 15 per cent to 17 per cent.

We have focused on developing a strong fertilizer value chain by enhancing our raw material sourcing capabilities and investing in backward integration. Our approach to reducing import dependence has led to the expansion of intermediate capacities and improved infrastructure. In 2019, we increased our phosphoric acid capacity at Visakhapatnam with a second plant, followed by a state-of-the-art sulfuric acid plant in 2023. This year, we laid the foundation for new phosphoric acid and sulfuric acid plants at Kakinada, making all our fertilizer sites backward integrated.

Additionally, we have entered mining operations in Senegal to secure a steady supply of rock for our phosphoric acid plants. Our captive power and water generation facilities, alongside these strategic investments, ensure cost-effective operations that meet global standards. With a robust supply chain, diversified sourcing, and long-term contracts for critical raw materials, Coromandel has a competitive edge. This integrated approach makes our operations more sustainable and efficient, even amidst volatile commodity prices.

The Russia-Ukraine war caused significant supply chain disruptions, leading to price volatility and shortages of key fertilizer raw materials like potash, phosphate, and ammonia. Prices peaked in 2021, making it difficult for the fertilizer industry to maintain production and imports. However, by the second half of 2023, raw material prices began to normalize.

Coromandel successfully ran its plants at full capacity, thanks to strategic long-term supply contracts and recent investments in intermediate capacities. Additionally, the timely subsidy support from the Government of India helped ensure efficient sourcing of raw materials and continuous fertilizer supply to farmers during this period of volatility.

Revenue in H1 was impacted by commodity price volatility and a corresponding reduction in subsidy rates. However, Coromandel’s fertilizer business grew by 7% in volume, with plants operating close to full capacity. Additionally, the company saw strong performance in its Crop Protection business, driven by new products and higher volumes in both domestic and international markets. The company’s 800 retail stores also contributed positively, with strong engagement in the farming community and technology-driven interventions.

The future of Nano DAP in India is promising, with increasing focus from both the government and industry on efficient farming practices. Nano fertilizers, such as the Nano DAP produced at Coromandel's Kakinada plant, enhance nutrient efficiency, offering optimal delivery and absorption for plants. This technology has the potential to replace conventional fertilizers while improving crop yields.

At Coromandel we have invested in the Research and Development of Nano Fertilisers through a team of agile scientists at our R&D centre Monash Academy at IIT Bombay where Gromor Nano DAP was developed. Extensive field trials at over 3,000 locations across India have demonstrated its effectiveness across various crops. Collaborations with leading ICAR Institutes and agricultural universities have further validated its efficacy.

We have also established a Nano Technology Centre in Coimbatore to advance nano applications in agriculture. Our sales team is actively educating farmers on the benefits of nano fertilizers, and we are leveraging our existing distribution network to train farmers on their use. We are planning to commercialize Nano Urea and are working on other variants to expand our offering.

Bio-pesticides play a key role in integrated pest management (IPM), helping farmers reduce reliance on conventional pesticides. They are eco-friendly, minimizing soil and water contamination, and offer safe and effective alternatives for crop protection with a lower ecological footprint.

Coromandel offers a range of biopesticides, including Azadirachtin-based products, which are produced at the world’s largest manufacturing facility in Cuddalore, Tamil Nadu. We are also setting up a captive neem plantation to enhance our sourcing capabilities.

Through fermentation and microbial R&D, along with collaborations with research institutes, we are expanding our product portfolio to include bio-fertilizers, microbial crop protection solutions, and plant-based extracts. These products have received positive feedback from customers, and we are using our Mana Gromor Retail stores to promote IPM practices. Additionally, Coromandel is the largest player in the organic fertilizer market, with a sales volume of around 2 lakh tons.

Coromandel’s export business primarily focuses on Crop Protection and Bio-pesticide products, which are sold in approximately 80 countries, with strong presence in Latin America, Africa, and Asia. We hold around 850 product registrations globally.

Mancozeb, a broad-spectrum fungicide, is one of our flagship products and a key contributor to export revenues. Azadirachtin, a biopesticide derived from neem seed, is exported to developed markets such as the US, Canada, and Europe.

We are focused on expanding our global footprint, particularly in Brazil and Southeast Asia, and have established subsidiaries in the Philippines and Vietnam. In the biologicals segment, we are exploring strategic partnerships in developed markets to expand our portfolio. Our proposed Multi-Product Plant in Ankleshwar, dedicated to new-generation molecules, will cater to export market demands, with product registrations already in progress.