New Delhi/Gandhinagar: The practice of bundling soluble and specialty fertilisers with heavily subsidised conventional fertilisers such as urea is hurting innovation and pushing micro, small and medium enterprises (MSMEs) in the sector towards collapse, according to Rajib Chakraborty, President of the Speciality Fertiliser Association of India (SFAI).
In an interview to PTI, Chakraborty said that farmers, as well as the industry, are often placed in a difficult position by this practice, known in trade parlance as "tagging," in which dealers make the sale of subsidised urea conditional on the purchase of speciality products.
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He said the practice occurs at multiple levels, company, distribution and dealer, and has caused significant damage to the industry over the years.
As a result, he said, new and improved fertiliser products developed by smaller companies are struggling to reach the market.
"The newly invented products or augmented products are actually not reaching the dealer shelf," he said, adding that only a negligible share of such innovations makes it to store shelves because bulk volumes remain with companies engaged in tagging.
Although a few states, Uttar Pradesh, Gujarat, Madhya Pradesh and Maharashtra, have already taken enforcement action against tagging, the practice is still prevalent in many parts of the country.
Chakraborty shared about a more prosperous period for the industry in the late 1990s and early 2000s, when the sector grew 30-35 percent annually and attracted a wave of new entrepreneurs, many of whom built lasting relationships with farmers.
Today, by contrast, MSMEs -- particularly agri-MSMEs -- are burdened by heavy debt and at risk of shutting down, he said, noting that many have taken large bank loans to set up operations that are now struggling to survive, and are not eligible for loan waivers extended to farmers.
Chakraborty called for urgent changes to the Fertiliser Control Order (FCO) to create special protections for MSMEs engaged in innovation and to allow them to sell their products across state lines, rather than being restricted to limited geographies.
He also urged the government to direct public-sector companies to procure a share of their requirements from MSMEs, noting that an existing law mandating such procurement is rarely enforced in practice.
On the current regulatory environment, he said it discourages domestic manufacturing and favours imports for large corporations and government entities.
He cited an unspecified instance in which a domestically manufactured fertiliser, developed as a substitute product, was denied approval to sell after a year-long wait -- a decision he called surprising and indicative of systemic bias against local manufacturing.
On the funding side, Chakraborty said private capital -- including venture capital and foreign direct investment -- has shown little interest in backing research and development in the sector, since returns from such investment take time to materialise.
He said the government must step in to fund R&D, arguing that the innovation currently taking place at the MSME level is happening in an unstructured, resource-starved manner and could expand significantly with proper support and structure.
Despite the challenges facing the sector, Chakraborty said he expects greater adoption of soluble fertilisers -- particularly through foliar (spray) application -- during the current kharif season. He estimated that such usage could rise by around 25 percent by volume.
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He also welcomed recent progress in developing indigenous fertiliser technology, though he cautioned that any meaningful reduction in India's dependence on imports would take time to materialise.
On the prospects for scaling up domestic production of soluble fertilisers, Chakraborty said manufacturing activity in this segment remains very limited in India, and that building a robust domestic base would require sustained investment over a long period rather than being treated as a short-term or crisis-driven exercise.
He said the ease of importing and reselling fertiliser, compared with the difficulty of manufacturing locally, continues to push both private and government-linked companies towards imports, leaving little room for domestic production to take root under current policy conditions.
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