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CHAPTER I1
CONCEPTUAL ISSUES IN FERTILIZER MARKETING
2.1 INTRODUCTION
This chapter brings out the important issues in fertilizer marketing
under the Indian rural environment, economic, social conditions of the
farmers.l'he key role played by fertilizer as an agricultural input for enhancing
the productivity of the land, concepts of a public good, main issues in the
logistics of marketing and fertilizer legislation have been discussed.
"It is the customer who determines what a business is. It is the customer
alone whose willingness to pay for a product or for a service converts economic
resources into wealth, resources to products and services, What the business
thinks it produces is not of first importance especially not to the future of the
business and to its success. What the customer thinks he is buying,what he
considers value, is decisive-it determines what a business is, what it produces
and whether it will prosper".1 The farmer is thus the foundation of the
fertilizer industry. His needs, aspirations, must be met by the fertilizer
marketers based on his economic, social, educational background.
Marketing is a process of exchange products and services for the mutual
benefit and satisfaction of both the consumer and the producer. This is
achieved through efficient management of the 4Ps - Product, Pricing,
Promotion and Placement of products (Logistics). Fertilizer marketing is a vital
Part of Marketing of Agricultural Input Marketing in rural India. The
1 Kotler Philip "Marketing Management; Analysis, Planning and Controln Pl-entice Hall of India Private Ltd. New Dehi (1990), p.36.
consumer, the farmer is the backbone of Indian Agriculture and that of
Fertilizer Industry.
Marketing is as critical to better performance in agriculture as farming
itself. Although there has been a considerable progress in technological
improvements in agriculture by adopting HW, fertilizers, plant protection
measureqthe rate of growth in agricultural productivity has not attained the
expected levels. This has been largely attributed to the fact that not enough
attention has been devoted to the facilities and services which must be made
available to the farmers.'
Timely supply of fertilizers and other farm inputs to the farmers at
reasonable prices depends on the existence of an efficient marketing system.
The use of fertilizers largely depends upon spread of information about them
and the logistics part.Marketing men have to adopt persuasive methods to
induce even the most tradition bound f m e r s to use fertilizers in the right
quantity. Dynamic and efficient channels for marketing are therefore
essent ia~.~
In the fertilizer marketing system, it is not just selling of the products
but the selling of concepts too. I t is important that farmers must be educated
on the vital role played by fertilizer in increasing the yields and also the
economics.
The demand for fertilizers is a derived demand. It depends on the prices
of fertilizers and other complementary inputs, such as irrigation, weds, and
~p --
2 Subasch.C, Mehta, Marketing Management Concepts & Cases. Tata Marawhill Co. Ltd., New Delhi.
Subasch.C, Mehta, Marketing Management Concepts & Cases. Tata MeGrawhill Co. Ltd., New Delhi.
also the mpport p r i m of produce.Fertilizer is a very expensive input. A comparative analpie is provided in the table no.16:
Table N0.20
Comparative analysls of coet of Cultivation
SLNo. Cost Elements Paddy Sugarcane Groundnut
Pesticide 4. Irrigation 192 412
Total 4013 10619 93136
Source: Agro stat. Published by The Dept, of Agriculture, Govt of Tamil nadu 1993, page 187.
Fertilizer is a important and expensive component. 72% of the total cost
of cultivation in case of paddy is accounted for by fertilizer. In case of
sugarcane it is 48% has analysed from the above table.
Fertilizer is widely applied for paddy and it has the largest area under
cultivation next to wheat.
Marketing management must ensure the economies of fertilizer usage
even at such high cost of the inputs. By a proper technology transfer technique
the messages must be effectively conveyed. Field demonstrations and timely
agronomic advice on improved cultivation practices will help maintain the
tempo of growth in consumption.
Most of the fertilizers consumed are in the irrigated areas. Even under
severe drought conditions the fertilizer consumption did not come down which
implies that application of fertilizers is still largely confined to -red
irrigated tracts. Although the economics is in favour of the application of
fertilizers in rain fed area the application is too low. Nearly 70% of the
cultivated land is under rain fed conditions which offmvast mpe far fertilizer
marketing. Marketing efforts have so far been focused on areas with wured
irrigation; the logistice support for fertilizer marketing concentrates around
irrigated arean (storage points, retail outlets. transportation facilities etc).
Table No.21
Share of fertilizer consumption by mnin crops
Source: Fertilizer Statistics 89-90 Page 1-105.
1977 - 78 Percentages
The above data reveals that the consumption has been confined to a few
major irrigated crops. A significantly large portion of the volume consumed is
from paddy. Over 40% of the consumption of fertilizers in the aggregate.In the
north and eastern India. Wheat is a major crop and the consumption is heavy
at a share of 28% for N , 29% for P and 15% for K. Product acceptability was
reached for these products early and marketing efforts were focused on these
mops. Sugar cane, Cotton, Groundnut, Pulses etc consume only a small
percentage of the total as reflected by the table. The vast potential available
in these and other crops besides the crops under non-irrigated conditions has
to be tapped by effective marketing management system through intensive
promotion and improved logistics in the areas where such crops are
predominantly grown.
Paddy Wheat Grounut Sugarcane Cotton Others
Total
N
40 28
2 8 6 16
100
P
37 29
5 7 5 17
100
K
51 15 4 8 4
18
100
The several studies on Village Adoption Programs (VAP), Long term Agricultural Programs (LTADP) undertaken by fertilizer units and the
Fertilizer Aesociation of India, reveal that with eficient marketing system the
fnrmera and villages can be transformed to achieve full productivity. Technical
product such as fertilizers has to be marketed to the consumer, the farmer, in
the context of the inaccessibility both in the area of product delivery and
communication.The marketing efforts should include field demonstration, soil
tasting and agronomic services, farmer and dealer meetings and an
understanding of the changing marketing environment through Marketing
Research.
2.2 AN OVER VIEW OF FERTILIZER MARKETING
Productivity of fertilizer marketing system requires improvement.
Marketing productivity is the ratio of sales or net profit to the marketing
costs.4 This can be achieved by reducing the marketing costs without reducing
the service levels. In fertilizer marketing,the marketing costs include costs of
extension /promotion, field research, training of salesmen, dealers. Among the
major fadors that the fertilizer marketing should consider is the large number
of small and uneconomical land holdings. Nearly 76.2% Of the 97 million
holdings are less than 1.43 hectare6 The size of the farm units and the
number of operational holdings are given in table no.22.
Kotler Philip "Marketing Management; Analysis, Planning and Control" - Rentice Hall of India Private Ltd. New Delhi.
5 Annual Agricultural Census 1985-86. Agro Stat. 1993. Published by Department of Agriculture, Tamil Nadu. p.183.
Table No, 22
Operational holdings and the sizes-1986-86
Source: Annual Agricultural Census 1985-86. (Agro Stat.1993 page.183-84). Released by Tamil Nadu Department of Agriculture.
No. of holdings (million)
Percentage
Size (hect.)
It is seen from the table that 58% of the land holdings are less than 0.40
hect. and 77% of the holdings are less than 1.5 hect. which are most
uneconomical for cultivation. The All India Average holding is just 1.69 hec.
Marketing of the concept of intensive cultivation is the only answer to the
situation. The farmers with such meager holdings cannot be motivated for
using fertilizer unless the economics of us of fertilizer to them is demonstrated.
Most of the farmers do subsistence farming and there is hardly any marketable
surplus. Therefore they cannot be motivated by increasing the procurement
prices of produce. Promoting the concept of multiple cropping, adoption of
HYV, use of proper fertilizers in adequate dosages must become the efforts of
the fertilizer marketing system. The statistics also reveals that the aggregate
holding size is less than 2 hectare.
In the current marketing system increased attention is paid to large
holding farmers and planters who are already convinced about the fertilizer
usage.
56
58
0.39
The fertilizer marketing system should target at the marginal to
medium size holdings in developing their marketing mix.
Small
18
19
1.43
Medium
21
22
5.0
Large
2
1
17.0
Totd
97
100
1.69
The fertilizer consumption pattern vary from state to state depending on the irrigation facilities, marketing efforts of fertilizer manufacturers. In the
fertilizer marketing the marketers concentrate on the existing potential demand rather than creating new and basic demand in new areas and
traditionally unfertilized crops. The following table provides state wise
consumption shares as also the per hectare consumption;
Table No.23
Share of fertilizer consumption & per hect consumption
Source: FA1 annual review 1992-93.p 90.
S1. NO.
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18.
The data in the table 110.18 reflects the wide variation from state to state
in the consumption rates and also the consumption share. Utter Pradesh,
Madhya Pradesh, Maharastra and Andhra pradesh are the mejar states with
State
Uttar Pradesh Andhra Pradesh Maharastra Punjab Madhya Pradesh Karnataka Tamil Nadu West Bengal Gujarat Haryana Bihar Rajasthan Orissa Kerala J & K H.P Assam Others
Total
Percentage
17.8 12.4 10.2 9.8 6.5 6.4 6.3 6.0 5.8 5.0 4.9 4.0 1.7 1.6 0.3 0.2 0.2 0.9
100.0
Consumption kglhect.
139 115 57 162 35 64 114 88 73 108 57 27 22 67 40 32 8
67
l a r e & a p h i d area and aleo large area under cultivation. Both the share
of consumption and the rate of consumption in these states are low.
The overall rate of fertilizer consumption is low at 67 kg~hectare aa
compared to the desired level of 100kghectare. In the neighbouring countries
the consumption ratess are higher : Bangladesh 110 kg~hect, Pakistan
89 kg/hect.The per hectare consumption in Japan 400 kg,China 307 kg.'
National Council of Applied Economic Research (NCAER) while
conducting a fertilizer demand study (1978) found that only 55% of the farmers
used fertilizers and that only 62% of the total cropped area was fertilized.'
NCAER classified the states by the induction of adoption (cropped area) as:
Table No.24
Classification of s ta tes b y index of fertilizer adoption
Source : Report of the high powered committee on fertilizer consumer price. p.40. Published by The Fertilizers Association of India, New Delhi.
Index of adoption of fertilizer per cent
Upto 30
31 to 60
Above 60
Fertilizer Statistics 92-93, p. IV 22.
States
Assam, Madhya Pradesh, Rajashthan, Himachal Pradesh, J & K Orissa, Maharashtra.
Bihar, Karnataka, Andhra Pradesh, Gqiarat, Haryana, Uttar Pradesh, Tamil Nadu, West Bengal.
Kerala, Pudab.
' Fertilizer Statistics 92-93, p. IV 22.
Report of The High Powered Committee on Fertilizer Consumer Prices. Published by The Fertilizer Association of India, New Delhi.
B a d on the sample data of the farmers enquiry, NEAER identified,
the reasom for inability of farmers for use of fertilizers of 45% of the farmere
as:
Table No.26 What makes farmera use fertillzera
Source :Report of high powered committee on fertilizer prices of
GO1 (1988) p.40.
S1.No.
1
2
3
4
5
From the table no.19 it is seen that the primary reason for non use is
due to lack of adequate promotional effort and credit availability. The survey
also revealed that the majority of non users had small operational holdings.
These are good indicators for improving the fertilizer marketing system.
There is vast scope for increasing consumption in M.P. , A.P. T.N. and Orissa where a large number of districts have a very low
consumption r a k e due to inadequate logistics.
Reasons
Not aware of fertilizers
Consider fertilizer harmful to soils
Non -availability of credit
No facility for irrigation
Others (non availability of
fertilizers,uncertainty of profit)
Total
Fertilizer marketing assumes special significance in view of the large
scale zone-wise imbalance between production & consumption of fertilizers:
Percentage of
Fa rmers
10.8
9.8
17.5
48.1
13.8
100.0
Table No. 28
Zone- wise production, consumption and gap 1992-93
Source: Fertilizer News Sept 1993 page 89.
Zones
Eaet
Consumption Production Difference
North
Consumption Production Difference
South
Consumption Production Difference
West
Consumption Production Dflerence
The table no.20 brings out the significant differences between production
and consumption Zone wise. Only western zone is surplus in production of
Nitrogen compared to the consumption needs of the zone due to location of
Consumption Production Difference -1004
Nitrogen OOM'
1104 591 -513
3253 1983 -1270
1986 1318 -663
2092 3539
+ 1447
Phoephata OOOT
369 403 + 34
755 103 -652
850 830 +20
899 985 t86
large d e fertilizer plants in this region (IFFCO, KRIBCO, RCF, GSFC, and
GNVC,)
All the other zones are deficient , aggregating to a deficiency of over 10
lack tonne6 on an all India basis. With the growth in consumption the
deficiency would further deepen and even the western zone would not be in
surplus. This indicates the urgent need for stepping up the production capacity
of Nitrogen.
In case of Phosphates east, west and south appear to be surplus. This
is largely due to the lower levels of application. With the intensive marketing
efforts with a view to promote the use of phosphate the consumption rate
would pick up faster than the production rate thereby widening the gap
between production and consumption further. Additional production capacities
have to be generated in Phosphate also. With a view to maintain the tempo of
consumption and bridge the gap between supply and demand, imports are
arranged. In case of Nitrogen GO1 arranges the imports and utilizes the
existing channels for distribution, since the product is under control. In case
of phosphates marketers can arrange imports directly.
On an all India basis both Nitrogen and Phosphates are imported to fill
the gap between consumption and indigenous production. Products in the form
of Urea, DAP and complex are imported depending on the availability and the
prices in the global market. Until recently this was being arranged by GOI.
After the decontrol marketers are free to arrange imports of phosphates.
However for products (Urea) that are still under control GO1 makes the arrangements. Due to zonal imbalances products are required to be
transported from zones having excess to the deficit Zones. Logistics becomes
a major effort in the fertilizer marketing operations.
The strategic role of marketing management and application of
marketing principles in the fertilizer industry is yet to be appreciated in India.
A eyskmatic approach to identify the potential markets, understand the need8
and capability and the motivation factors of farmers have not been attempted.
Until recently fertilizer marketing was considered synonymous with
distribution and as a result of this, promotion, extension, marketing research
activities continued to be at a low ebb.
The concern for the marginal and small farmers has not been adequate.
The marketing mix consisting of the 4P's, has not been adequately managed
to keep the interest of both marketer and the final consumer, a t equal levels.
This has largely been due to the controls exercised by the GO1 in the area of
product mix, pricing and distribution.
2.3 FERTlLIZERS PRODUCTS AND THEIR PROPERTIES
The objective of this section is to briefly introduce the concept of
chemical fertilizers, its forma, analysis, range of products manufactured
indigenously and also bring about the vital role played by the nutrients
individually and in combination in crop development. The importance of
maintaining balanced usage & the marketing efforts needed to promote
balanced application in the context of decontrol of phosphate & potash are
brought out. Variations in the prices of the nutrients cause imbalance in usage.
For development of plants, sixteen elements are essential. These are;
Carbon, Hydrogen & Oxygen (absorbed by the plants from atmosphere and
water), nitrogen, phosphate, potash, Sulphur, calcium, magnesium, boron,
copper, iron, zinc, manganese, molybdenum and chlorine.'
Hand book on Fertilizer marketing 1988, Published by Fertilizer Association of India, New Delhi.
Continuous mopping removes plant nutrients and depletes soil fertility.
TO maintain the mil fertility and to obtain higher yields year after year
nutrients must be added to the soil. Fertilizere contain one or more of these
essential plant nutrients. Nitrogen (N), Phosphate (P), and Potash (K) are the
major nutrients supplied by chemical fertilizers
A fertilizer product which contains any one of the nutrients N,P,K is
called straight or simple fertilizer product.The major fertilizer products which
provide only N are; Urea, Ammonium Sulphate, CAN. Urea (46%N) is the moat
concentrated, widely used single nutrient fertilizer providing nitrogen.
Single super phosphate (SSP) is the most widely used single nutrient
fertilizer providingphosphate (P). Muriate of Potash is the most popular single
nutrient fertilizer providing potash (K).
Farmer can use combination of these single nutrient fertilizers
depending on the crop and soil requirements. There are standard
recommendations evolved on the basis of agronomic considerations.
The farmers are always advised to test the soil conditions and obtain the
appropriate recommendations for fertilizers. The quantum and the type of
fertilizer products to be applied depends on other factors such as; crop pattern,
soil conditions, nutrient levels of soil cultivation practices etc. According to
agronomical advice application of fertilizers in split dosages would proxide
better yield than applying all fertilizer at one time to the crop.
Communication on these aspects is a major effort in fertilizer marketing
system. Fertilizer units, Dept, of Agriculture at state have set up Soil testing
services /Agronomic guidance centres. These are available to farmers at a very
nominal cost.
Multi- nutrient fertilizer products: Multi - nutrient products are
promoted to provide balanced application of fertilizers so that the crops can
respond better and the yields can be maximized. Multi- nutrients products will
reduce the logietics cost and also the convenience to the farmers.
Fertilizer products which contain two or more of the nutrients NPK are
called multi nutrient or complex or compound fertilizers. Number of multi
nutrient fertilizers are produced in India. They have made a great impact on
the fertilizer consumption practices of farmers. The importance of balanced
application of N, P & K are given in the exhibit on page 938.
17-17-17,1846-0 (DAP),10-26-26,lO-32-16,19-19-19,28-28-Oare someof
the most popularly known multi nutrientlcomplex fertilizer products. A 100 kg
of 17-17-17 will contain an aggregate of 51 kg of nutrients - 17 kg nitrogen, 17
kg phosphate, and 17 kg potash and the rest 49 kg will comprise of filler
material. The product 18-46-0 also called DAP will contain 18% nitrogen, 46%
phosphate and nil potash.
There are a number of advantages in using complex fertilizer products
as compared to single nutrient product;
* More than one essential plant nutrients are available in the product and
the farmer is saved from the trouble of selecting, purchasing,
transporting, storing and applying different types of fertilizer materials
separately. In addition to the cost factor the crop response for complex
fertilizer is significantly better than single nutrient fertilizer applied
separately. This concept is being promoted during the past two decades
aggressively.
* Application of recommended quantities of suitable multi nutrient
fertilizer ensures balanced fertilizer and therefore better yields and
higher returns to the farmers as well as maintenance of soil fertility.
There are eome disadvantages in the application of multi nutrient
fertilizer productq
* The products should exactly match the requirements as otherwise the
farmer would be unnecessarily paying for the nutrients that are not
needed by the crop. There are hardly any fertilizer product which
exactly matches the need. This requires good understanding of the
fertilizer products by the farmer.
* Unit cost of nutrients are more in multi nutrient fertilizer as compared
to the single nutrient fertilizer.
These have been major areas of extension and promotion in fertilizer
marketing.
Each of the nutrients NPK has specific function to perform in the plant
growth and yield levels.
Nitrogen (N) promotes plant growth and development. Plants look green
and the growth will be lushful .It helps increasing crop yields.
Phosphate (P) promotes good root growth, flowering,seed and fruit
development, accelerates ripening.
Potash (K) regulates plant growth and makes the crop drought resistant,
improves resistance to pests and crop quality.
Fertilizer marketing involves promoting efficient use of fertilizer
products. A studylo recently conducted (1988) on the usage pattern of
lo Farmers survey conducted by the Fertilizer Association of India- Southern Region, Madras.
fertilizer products revealed that after the decontrol when the p r i m of
~hosphate & potash went up steeply 88% of the farmers covered by the survey
reported that they have become more judicious in the purchase and application
of fertilizer products.
Modem Marketing Management envisages continuous search of the
changing customer needs and developing appropriate productslservices to meet
the constantly changing needs for greater benefit of the consumer.Continuous1y
monitoring the performance of the products in relation to the needs and the
competitive strategies, segmenting the markets and consumers for a focused
effort of the marketing mix are the basic philosophies of marketing
management.
Efficient marketing management: senses, searches and satisfies
consumer needs on a continuing basis. Marketing should benefit both the
marketer and consumer in providing opportunity for growth and profitability
to the organization and best value for the customer's money.
The product concept is an orientation which assumes that consumers
respond favorably to useful products and very little marketing effort is
required to achieve satisfactory level of sales and profits.The selling concept
is an orientation in which it is believed that consumers will not exercise the
buying effort unless they are approached with substantial selling and
promotional effort. The Marketing concept is an orientation that puts emphasis
on the tasks of identifying the needs, wants and requirements of current and
future consumers and to adopt the organization to deliver products more
effectively, efficiently and ec~nomically.~'
l1 Kotler Philip "Marketing Management; Analysis, Planning and Control Prentice Hall of India Private Ltd. New Delhi.
In the context of the emerging fertilizer scenario, a total adoption of
marketing concept in its full spirits and essence is required.
Farmera have to be adequately motivated to use fertilizers according to
the recommendations, Economics of fertilizer use even at increased prices must
be demonstrated.
With changes in the prices of agri inputs more particularly the fertilizer
and the changes in the procurement prices the economics of fertilizer use
changes. It would be less or more profitable to the application of fertilizers and
following different cropping pattern. Fertilizer marketing units must
demonstrate the continued profitability by the use of the fertilizers at the
recommended levels. Taking up Field demonstration plots and arranging
meeting of experts from the Dept, of Agriculture would bring increased
confidence among farmers.
This would need tremendous efforts not only to produce the right type
of fertilizer products but to make them available to the farmers even at the
remote places. It is not just a maintenance marketing of meeting the existing
demands but creation of additional demands through developmental workmore
particularly in the rain fed and low consuming areas.
Fertilizer is a technical product. Knowledge of the product and its proper
use to the farmer are essential requirements for stimulating consumption.
The Indian farmer is tradition bound ,his inadequate educational
background, lack of purchasing power, uncertainties of the monsoons etc are
severe inhibiting factors.
Fertilizer marketing which is a sub set of agricultural input marketing
is a complex operation because of the product ranges varied soil conditions,
crop patterns, low purchasing power, uncertainties of monsoons, language
b d e r e , tradition bound farmers,inadequate infra-structural facilities etc.
Productivity of the fertilizer marketing system must be improved.
Marketing productivity is the ratio of sales or net profit to the marketing
costs incurred.This can be achieved by reducing the marketing costs a t the
same time maintaining the service levels to the customer^.'^
In fertilizer marketing, the marketing costs include extension/
promotion, Field research on marketing aspects, transportation, warehousing,
margins, field force, administrative costs, credit, motivation/ training of
channels of distribution and salesmen. These are also the areas for better
control coordination and optimization.
Improved sales forecasting techniques, innovative product mix, inventory
control, effective MIS. Marketing research studies are the tools to achieve the
marketing productivity in Fertilizer marketing system.
Marketing management has not been and could be adequately employed
in the fertilizer industry since several elements of the marketing mix (Product,
Pricing, Promotion and placement of the products) were restricted from
Government controls. The product has a wide range in order to meet the crop
and soil needs.
l2 Kotler Philip "Marketing Management; Analysis, Planning and Control Prentice Hall of India Private Ltd. New Delhi.
Table No.27
Range of Fertilizer Products Consumption 1991-92
Includes other products. Source: FA1 Annual review 1992-93 Page 86. compiled.
Product
Ammonium sulphate Urea Can A.C. SSP MOP SOP APS APS DAP UAP UAP Nitrophosphate Nitrophosphate NP & NPK
The table reflects existence of multiplicity of products and grades besides
this there are also several brands: for example SPIC urea, Nagarjuna urea,
Viay urea, Mangala urea, IFFCO Urea, Ujwala urea, etc. and SPIC DAP, PPL
DAP, for a generic product.
As per the table no.21, over 50% of the products consumed is urea
followed by DAP 17% Urea, DAP together with MOP can meet the entire
NP & NPK NP & NPK NP & NPK 2 88
In terms of: Nitrogen 8046 Nutrients Potash 1360 Material - 27781
Consumption 1991-92 OOOT
487 14003
400 86
3165 1701
2 1 108 897
4518 380 2 1
364 94
Grade/Analysis
N
21 46 25 86
0 0 0
16 20 18 28 14 15 23
P
0 0 0 0
16 0 0
20 20 46 28 35 15 23
K
0 0 0 0 0
60 50 0 0 0 0
14 15 0
requirement of different soils and crop patterns. Further low analysis fertilizer
should not be produced and marketed both from the point of cost and
continence.
It is seen from the table that Ammonium sulphate, CAN and Urea
all meet the same requirement of N. For historical reasons these products were
introduced into Indian fertilizer marketing system. As discussed in the
introductory chapter the Fertilizer consumption was created from imported
products. As such whatever products that were easily available and those that
came under the aid was distributed. Now that a large proportion of the
consumption ie from the indigenous production, product range must be
reduced. Urea is the highest analysis Nitrogenous fertilizer containing 46% N.
All the other low analysis fertilizer such as CAN and other given in the table
can be eliminated. This would not only ease marketing efforts but save on
transportation, inventory control, promotion and other marketing costs and
assist the farmer in his operations.
Such a wide product range is not required. This has substantially
increased the logistics costs of the industry (Transportation, bagging Inventory
control.etc), besides unhealthy competition. These products have been
marketed for over two decades and reviews of their continued needs have not
been taken up. Products have to be continuously evaluated for their relevance
to serve the farmers needs. The concept of Product Life Cycle (PLC) has not
been applied in the industry. Farmers must not be made to pay for the
nutrients that the crops do not need. Product innovation / withdrawal have
seldom taken place. The products must be made flexible to meet the specific
needs of the farmers. Urea, DAP, MOP, have immense flexibility from the
farmers point of view. Complex products may have their own advantage in
improving the crop yields and convenience of application, but suffer from
rigidity.-Most o h n farmers are required to pay for the nutrients they do not
need when they go in for certain grades of complex products. Complex products
are being increasingly promoted by large scale manufacturers.
The benefits of fertilizer urn and the importance of balanced application
have to be effectively conveyed through communication , demonstration in a
convincing manner to the different segments of farmers- Small, Medium and
large land holdinge.
The traditional practices are deep rooted among farmers. The farmer is
encountered with a number of uncertainties with regard to monsoons,
availability of fertilizers and other agricultural inputs on time, availability of
credit is another important factor. Most often the farmer is unable to choose
the type of fertilizer products he would like to apply since he generally gets his
requirements on credit from a dealer cum money lender .The farmer is most
o h n obliged to sell his produce to the dealer from whom he obtained his
fertilizer and other inputs , at an unremunerative price.
Under this context the marketing of fertilizer should take place to
ensure that the right type of product is made available at the right time and
place and at the right price.The consumer target group in fertilizer is highly
heterogeneous in respect of needs capabilities, access and understandings. The
cropping pattern, soil conditions. logistics,communications facilities vary very
widely. Marginal, Small, Medium and large farmers owning lands with
irrigation facilities, Plantation owners form different segments for fertilizer
marketing. According to Marketing approach marketers should focus on the
needs not just on the products. In the fertilizer industry the emphasis has so
far been on the products. This has come about due to dependence on imports
and the availability of products in the international market. Until 70 greater
portion of the products consumed was from imports since the indigenous
production had not developed. The promotiodextension were depending on the
type and the volume of products imported. The industry had been passing
through periods of gluts and scarcity. As such no orderly market developmental
activity was undertaken. The promotion was focusing on creating awareness
to the benefit of fertilizer use in general. Product development, promotion,
pricing strategies, logistics were not the key aspects.
An analysis of fertilizer use in India indicates that the consumption
shown a dramatic growth during the forty year period 1951-1991. The consumption until the mid 1980's was largely influenced by the availability of
products while the indienous production capacity increased GO1 arranged
imporb to fill the gap between demand and domestic supply.
Table No.28 Trend of consumption & production of fertilizers
(in a n interval of five year period) Million Tonnes of NPK c-ik,s, 33YQ31'
Source: Report of the high powered committee on fertilizers page 14 & Fertilizer News sept 93 page 95.
yea,
1950-51 1955-56 1960-61 1965-66 1970-71 1975-76 1980-81 1985-86 1990-91 1991-92 1992-93
Potash in not produced in India the entire requirement of direct
consumption and the requirement for the production of complex products are
imported.
The table ,reflects the steep growth in fertilizer consumption and
production during the period 1950-51 through 1992-92.The consumption rose
to over 12 million tonnes of NPK during 92-93 from a mere 69000 t in 1950-51.
The production of N&P also steeply increased to 10 million tonnes.During the
decade the increase both in consumption and production 1980-90 were
phenomenal. The production registered a 300% increaso .Dd W-
Consumption NPK
0.069 0.148 0.306 0.789 2.207 2.894 5.516 8.737
12.546 12.728 12.251
Production NP
0.038 0.088 0.170 0.357 1.061 1.828 3.005 5.753 9.044 9.863 9.752
by 277% during this period. The graph on page 1028 provides fertilizer
production trends - plan periods.
The consumption rate declined since 1982-83 and started showing a
negative trend in 1992-93.
2.4 ROLE AND IMPORTANCE OF CREDIT IN FERTILIZER MARKETING
Credit had played an important role in the Indian agriculture during the
last two decades according to a study13, undertaken by the Fertilizer
Association of India. The importance of credit for fertilizer trade has increased
many fold in the recent years. The emphasis laid on the development of dry
land areas further underscore the importance of this vital input.Credit is
needed for distribution by dealers and for production by farmers.
The role of credit in influencing fertilizer consumption has been
demonstrated time and again in a number of studies. The 1964 NCAER, survey
on factors affecting fertilizer consumption-Problems and Policies, concluded
that inadequate institutional credit was an important factor in determining
fertilizer consumption patterns. The 1980 NCAER survey on Demand for
fertilizer reemphasized the vital role played by credit in fertilizer marketing
system. The importance of short-term credit for agriculture of which fertilizer
is a major component was noted by National Commission On Agriculture
RJCA) in the mid 70's when it projected the short-term credit a t Ra.7000 Cr.
The rain fed agriculture assumes importance since it accounts for 66%
of the total cultivated area of the country. Further the rain fed areas are
characterized by predominance of small and marginal farmers (those
cultivating up to 2 hect of land) whose resource base is grossly inadequate in
l3 Role of credit in fertilizer Marketing - A seminar conducted by FA1 1986.
relation to the needs. This category of farmers holds the key for further
acceleration in the growth rate of fertilizer consumption as the intensity of
fertilizer use is in this caae is much higher than of large farmers.The resulte
of the etudy revealed that farmers with holdings size up to 2 hect consume
fertilizer in the range of 86 kg/ hect as compared to 56 kg I hect by large
farmers (1978).
The seasonal character of both crop output and the fertilizer demand
also drives home the need for suitably adjusting the credit availability. To
illustrate, the fertilizer should be placed nearer the consumption centers, well
in advance, to ensure that this essential input is available as and when
needed.The distributorldealer must have enough funds to hold inventories, lest
fertilizer consumption would suffer. Cultivation operations of farmers would
suffer unless the requisite amount of crop loan is made available on time
Credit has a major role in fertilizer marketing operations.
2.5 DISTRICT WISE CONSUMPTION
An analysis of district wise consumption trends reveal that out of the
329 districts,in 24 districts,the consumption is less than 5kg hect, in 25
districts the consumption ranges between 5 to lOkg/hect. and only in 48
districts consumption is near 100kghect. All India average 71 kg 1990-9114.
During 92-93. ~ u n t u r ' ~ district in Andhra Pradesh consumed 1.61
lakh tonnes followed by 1.51 lakh tonnes in Faridkot district (Punjab). An
analysis of the district wise consumption pattern indicates a high degree of
skewness, 197 districts (out of 329) consumed 85% of the total consumption
during 1992-93. This reveals the need for developing consumption in a large
number of districts.
l4 Report of high powered committee on fertilizer prices of GOI, 1988.
l5 FA1 - Statistics 92-93, p.151.
2.6 ' DISTRIBUTION OF FERTILIZERS UNDER ESSENTLAL COMMODITIES ACT (ECA)
Under the ECA system, the state wise requirement of fertilizer is
assessed both on a long term and short term basis. Long term projections of fertilizer consumption are based on the agricultural production targets.
However, a much more detailed exercise is undertaken by the Department of
Agriculture & Cooperation in the Union Ministry of Agriculture for working
out the short-term requirements of fertilizers for each agricultural season
separately. This exercise is taken up jointly with the Union Department of
Fertilizers, Planning Commission, Ministry of Railways as well as with the
State Department of Agriculture and the fertilizer industry. The assessment
of fertilizer requirement is initially made by each State Government. It is
based on the likely coverage under high yielding varieties and other
development programs, irrigation facilities, existing level of fertilizer
consumption, special programs, if any and other factors like availability of
credit and infra-structural facilities. This exercise is finalized during the Zonal
Conferences which are held before the beginning of each crop season. Adequate
provision is also kept for pipe line requirement for each state.
Based on the assessment, a coordinated supply plan is drawn up for
each state for kharif (April-September) and Rabi (Oct-Mar)seasons separately.
Each fertilizer manufacturing unit should indicate the anticipated availability
product-wise for the ensuing season (Kharif or Rabi). Manufacturers will also
provide16 Fertilizer Statistics 1992-93 their plan of supply to various states
of their marketing operation. These details are provided to the Department of
Agriculture (GOI) in a structured pro- format well in advance of the season. A
format of the state wise allocation is given in table No.29.
Is Report of high powered committee on fertilizer prices of GOI, 1988.
Table No.29
ECA allocation. Rabi 1991.92
S0urce:Fertilizer Marketing News: Oct 1991 Page 3.
The table no.24 statement is a reproduction of the Government of India communication from Ministry of Agriculture. This is a sample of the allocation
made. The requirement of the southern states and the allocation to various
manufacturma in muth and other regions are indicated as an illustration. Such
allocations are finalized at the zonal conferences held biannually-annually for
each zone. The state governments indicate their requirements and
manufacturers provide the product availability and also their plan of
distribution for the concerned season.
The above distribution planning for various factories clearly indicates
that allocations are not only made for the units located in the state but also
from of other states. Products move from north & west to south and also vice-
versa. The above allocation clearly brings out that optimization based on the
least cost has not been attempted. Crisscross movement of the product (urea)
is inevitable under such a plan of allocation. IFFCO, KRIBCO, NFL, RCF
which are plants based in north and north-west would be moving to south
which increases the fertilizer leads. This can be eliminated if optimization
model is adopted.
The Agriculture Ministry consults with the Fertilizer Ministry to firm
up manufacturer wise product availability based on their indication and
ministry's estimation of availability. At the Zonal Conference the unit wise,
state wise, product wise plan of allocations are drawn up. This will form the
supply plan for the season under the ECA. ECA becomes the basis for
monitoring the supply and releasing the subsidy.
The state government in consultation with the manufacturer draws
month wise, product wise, district wise, channel wise (private & coops) plans
based on the ECA allocation finalized at the zonal Conference for the season.
The existing system of fertilizer demand assessment, allocation and
distribution has succeeded in delivering the fertilizer products equitably to a
large extent. This system has however some drawbacks:
1. The State quite often project very ambitious requirements as there are
no financial stakes on their part. This exaggeration is also borne out of
their anxiety to ensure that there is more than adequate availability of
fertilizers in all parts of the state a t all times.
2. No detailed exercise is made by the States for working out their requirements a t the district level. The entire assessment is worked out
a t the state headquarters based on simple rule of thumb. In fact, there
is no scientific mechanism for working out requirements of fertilizers
from the block lwel upwards.
3. There is no proper arrangement to compute the consumption of fertilizers concurrently during the season and to project the opening
stock a t the beginning of the next season. This leads to unrealistic
opening stock figures at the beginning of the next season which affect
calculation of the net requirements for the State during a season.
4. There is a tendency on the part of the state to show progressively higher
consumption of fertilizers and claim progress, irrespective of ground
realities. There is no system through which the consumption reported
by the state is verified with the actual supplies.
The above drawback have severely limited marketing approach and
optimization in the fertilizer allocation and movements.
The existing situation had led in the past and have the potential to lead
even in future to faulty planning of imports leading to gluts or shortages. The
situation of excessive availability on many occasions have resulted in
unhealthy practices like unduly higher discount to dispose of stock.
Under the changed environment of decontrol of phosphate and potash
manufactures have complete freedom to develop an innovative Marketing
strategy.The requirement of cropa and soil are the nutrients-NPK and are met
by a number of straight and multi nutrient products. There are also several
brands of the same analysis of gradedanalysis, Urea, DAP, SSP. The forms in
which the fertilizers are Marketed and consumed are given in the table;
Table No.30 Form in which fertilizer (Major) products are dispatched
* includes all other grades and analysis. Source: Fertilizers statistics 1992-93. Published by Fertilizer Association.
Total material*
The table brings out the declining offtake trend of phosphates and
potassic fertilizer products (18-46-O,SSP, 15-15-15, 12-32-16, and the like )
during 89-90 and 92-93, due to de-control of these products and consequent to
steep increases in prices in August 92.
245.8 253.4 ]
The table further brings out the large extent variety of fertilizer
products there are several brands of the same product being marketed. This
has generated considerable strain on marketing particularly in the area of
extansion/promotion. This has also created logistics problems including
packing, transportation, warehousing, inventory management. If the product
ranger are reduced, there will be significant saving in the logistics cost at
micro and macro level.
The field survey covering a sample of farmers belonging to different
category of land holdings and crop pattern undertaken as a part of this
research reveals that farmers would like to get high analysis fertilizer products
and tha t the different types and analysis of fertilizers that are currently being
marketed and promoted causes problems of understanding the varied
communications of the marketers and also obtaining the fertilizer products.
It is necessary to review the product range and reduce the number to
the basic minimum which will help in reducing the cost of production,
promotion and more particularly the 1ogistics.The product range must be
minimized. Only the highest possible analysis must be produced.17 For
instance; production of 15-15-15 and 17-17-17 should be discouraged if 19-19-19
can be produced instead as this would cut down production and marketing
(logistics/packaging) cost substantially. Product should be made more flexible
from the farmers usage point of view. Products that contain nutrients that the
crops do not need should not be promoted. From this view point DAP is the
most flexible product.
l7 Report of the high powered committee on fertilizer prices 1988.
2.7 SEASONALITY IN DEMAND
Fertilizer is produced throughout the year,but its consumption is highly
seasonal. In India, there are two main agricultural seasons depending on the
monsoon pattern - Kharif and Rabi. Kharif covers the period April through
September whereas Rabi refers to October through March. The bulk of the
application and the use of fertilizer is limited to two spurts of a few weeks in
each of these two seasons. Even though the ratio of fertilizer consumption
varies between Rabi and Kharif from state to state, on an all India basis the
consumption pattern was Kharif 47% and Rabi 53% during 88-89.
Table No.3 1
The zone wise consumption pattern for 88-89 are given below
Source : Fertilizer statistics 1992-93. Published by FAI.
Zone
East North West South All India
Month wise variation in consumption of fertilizer is also substantial.
While fertilizer production is continuous throughout the year, greater
portion of the consumption takes place only during the main agricultural
seasons Manufacturers must ensure that their products are available a t the
retail outlets well ahead of the seasons. Farmers survey revealed that the
fertilizers are purchased just a t the time of agricultural season. If fertilizer
products are not available , the small and marginal farmers would not use.
Consumption (%)
Kharif Apr-Sept
41 40 51 56 47
Rabi Oct-Mar
59 60 49 44 53
~owkver , medium and large holding farmers obtain fertilizers with additional
efforts, by getting their requirements from neighbouring villages and towns.
Fertilizer marketing units have to develop their logistics based on the
seasonality of demand and develop transportation and warehousing plans as
also inventory management based on the seasonality.
Table No., 32 Month wise consumption pattern of NPK in South- Percentage8
Source: Basic data obtained from FA1 - SR, Madras.
A Sample
The table reveals that over 48% of the consumption in South India takes
place during July -0ct. The pattern in other zones are different.Even within
the south there are variations. The arrival of monsoons (South-west and North
East), release of water from major reservoirs and the crop pattern influence
the demand pattern for fertilizers in each state. A graph indicating the month
wise ansumption pattern is shown on llla.
Month
April May Jun Jul Aug Sept Oct Nov Dec Jan Feb Mar
The consumption pattern indicates that July thru sept off take increases
in South with peak in Sept. The off take follows the offset of the south west
AndhrP Pradmh
1.8 2.0 4.9 12.0 14.0 16.1 6.3 7.1 10.1 9.9 8.0 7.8
Karnataka
2.0 7.6 11.1 12.9 12.0 16.2 8.2 5.0 6.3 9.5 4.8 8.0
T.Nadu
2.3 6.0 4.5 6.2 9.0 12.6 15.6 13.2 10.4 6.8 5.8 7.5
Kerala
4.3 10.4 13.7 13.2 8.5 8.5 10.9 10.0 4.7 4.3 3.3 8.2
Total
2.2 4.8 6.8 10.9 12.1 14.9 9.2 8.2 8.9 7.8 6.4 7.8
mone6om beginning in Kerala during MayIJune. The consumption skewed towards early part of kharif in Kerala & Karnataka and towards later part of
kharif and early part in A.P & T.Nadu. The transportation of products,
warehousing should follow this trend to ensure that right products are placed
at the right locatione. Release of water from major reservoirs also has an
impact on the off take pattern. Fertilizer marketing units have to develop the
logistics plans based on the requirements of the consuming centers and also
the seasonality of demand as otherwise there will be need for back tracking at
unnecessary additional cost of transportation and handling.
The availability of trucks and wagons for loading as also the storage
space with CWC, SWC etc. also depend on seasonality. Movement of food
grains and movement of products from ports would affect the availability of
transportation facilities and other logistics infrastructure facilities.
The promotion and extension of fertilizer marketing should also follow the
seasonality pattern.
2.8 LEGISLATION IN FERTILIZER MARKETING
Statutory regulations and Legal aspects have significant impact on
fertilizer marketing and covers product formulations, pricing, packaging,
quality control, product distribution, etc. Some key aspects of legislation in
fertilizer marketing are discussed in this section.
L,awslB relating to the manufacture and sale of fertilizers are
necessary to ensure that the consumer, the farmer is supplied with the
fertilizer of a standard quality. The fertilizer control order (FCO),promulgated
by the GO1 in 1957, under the Essential Commodities Act (ECA) with
amendments and modification from time to time, regulates fertilizer business
l8 Hand book on Fertilizer usage (1986). pp. 124-128. Published by Fertilizer Asmiation. New Delhi.
in India-Besides quality contro1,which is the main purpose of the fertilizer
legislation, in most countries, the FCO. provides for the registration of dealers
and statutory control and distribution of fertilizer products in India.
Every person dealing in fertilizer whether as a manufacturer, dealer or
salesman should have a proper understanding of the various provisions
contained in the FCO. Knowledge of the basic provisions would also help
farmers to know their rights and privileges in respect of fertilizers and the
authorities to be approached for redressing any grievances regarding supply
of fertilizers of sub-standard quality or over charging.
The main provisions of the FCO are summarized below:
The Central Government (GOI) may,with a view to regulate equitable
distribution of fertilizers and making fertilizer available at fair prices to
farmers, ~ L Y maximum prices of any fertilizers which may be sold by
manufacturers to dealers. No manufacturer or dealer shall sell any fertilizer
to a consumer a t a price exceeding the maximum price fixed by the GOI.
Any unit manufacturing fertilizer is required to obtain a certificate of
registration.
Any fertilizer product which is not in the prescribed standard and
analysis cannot be manufactured. The products have to be packed and
marketed in the manner laid down in the order. Dealers should exhibit the
quantities of different product sold by them in the stock on a daily basis. The
list prices of such products stocked must be prominently displayed.
In order to ensure equitable distribution of fertilizers in various states,
Fertilizer movement control order , has been promulgated (1973). The
enforcing authority of the FCO lies with the state Dept of Agriculture.
2.8 CHANNJZLS OF FERTILIZER DISTRIBUTION
Market i n t end ia r i e s such as the retail dealers perform a very effective
role in delivering, promoting, stocking, and providing market fwd back. They
help in overcoming the marketing barriers.
The two main distribution channels in the fertilizer marketing system
are: cooperatives and private trade, between them handle almost 35: 65
respectively.1g A typical fertilizer marketing syetem is given in the exhibit
on page l a .
In a three tier system; bulk marketers taking products from
manufacturers who do not have their own marketing set up operate through
wholesalers and retailers. In a two tier system manufacturers have their own
marketing organization and the products are distributed through wholesalera
and retailers. In the single tier system, manufacturers directly deal with the
retailers without going through the wholesalers. The most popular system is
the two tier:
Village level coop
Private Trade 1
Source; Hand book on Dealer development FAT 1988.
l9 Hand book on fertilizer dealer development (1988). Published by FAI, New Delhi.
The fertilizer dealer has a very important role to play in the fertilizer
marketing system. The dealer is the main and the last link in the fertilizer
marketing distribution chain. A motivated fertilizer dealer can become a very
effective opinion leader and can help in bringing about a revolutionary change
in the rural environment.The fertilizer dealer must therefore be equipped with
the necessary knowledge of fertilizer products, rural markets,skills to manage
his aetup in an effective manner. The dealer can be perceived as a "change
agent". The rapport between the fertilizer dealer and the fertilizer salesman
must be very good in order to achieve the marketing objectives. Fertilizer
dealer is not only a creator and satisfier of demand but also a point of
purchase promoter, provider of market feedback i n f ~ r m a t i o n . ~ ~
Fertilizer dealer must be made as an integral part of the marketing
system with regard to developing serving the local markets.
2.10 ROLE & FUNCTIONS OF FERTILIZER DEALERS
In order that a fertilizer dealer can play his role effectively, it is
necessary to identify his various responsibilities and strengthen him in these
areas. The dealer has a positive role to play in bringing about a revolutionary
change in the rural environment. He has to equip himself with the necessary
knowledge of the market, about the products he has to deal with the
management of his undertaking, complaints handling, etc;
Manufacturers and consumers cannot fully eqjoy the benefit of mass
production without an efficient distribution network. In the marketing system
of today, producers do not generally sell their goods directly to the ultimate
coneumers. A host of intermediaries exist between producers and consumers
to perform a variety of functions.
20 Hand book on Fertilizer Dealer 1988, Published by FAI, New Delhi.
Thedistribution chain generally consists of manufacturer -> distributor - > wholesaler -> dealers (retailers) -> consumers. The channels fill the gap of
time, place, economics and convenience between the manufacturer and the
ultimate consumer. The distribution channels or the middlemen are, therefore,
necessary part in the marketing system.
The present day distributor or dealer is no longer a mere stockist. He
has to participate in the more vital marketing functions. In fact, a dealer is
Manufacturers image builder in the market, manufacturers delegate some of
their marketing functions to intermediaries. Generally, distributors or dealers
perform the following functions at field level:
1. Provide window display of products;
2. Hold stocks;
3. Re-transport (secondary transport);
4. Act as sales promoters;
5. Act as extension advisor;
6. Offer service (pre and post sales);
7. Provide communication and feedback to manufacturers.
Manufacturer's responsibility lies in identifying dealers, who can
adequately perform or have the potential to be developed to perform these
functions. They hand over the product to retail outlets who have to carry the
message and the image of the manufacturer to the market and consumers.
Dealers can influence the purchase decision of comumers and role of dealers
in consumer's purchase decision is very significant. They can make or mar a
brand. Manufacturers in turn have the responsibility of assuring dealers
adequate returns from their business. Salesmen's frequent calls, providing
t r a inhg and guidance in increasing his profitability will go a long way in
dealer's motivation.
Dealers generally look for popular brands of products which have quick
turnover. They would meet the existing demand rather than developing it.
They eerve as a vital communication link between manufacturers and
consumers-manufacturers provide information to consumers on products,
services, etc. through dealers and obtain feedback etc.
A retail dealer is the last and the vital link in the fertilizer marketing
system. He has the closest contact with the farmer. The efficiency of the
distribution channel lies largely with the ultimate performance of the
dealer.Fertilizer marketing itself has the following special characteristics:
1. Consumers in millions widely spread;
2. Low literacy level of consumer;
3. A widely varying unit purchase;
4. Heterogeneity in consumption pattern;
5. Requirement highly seasonal;
6. Necessity of extension; and
7. Communication barriers.
The types and tiers of channels, manufacturers choose (direct or indirect
marketing) for their product depends on the corporate and marketing
objectives of the company. Manufacturers may choose different channels for
their different areas and class of markets, e.g., sales to farmers and sales to
plantations, sales in the primary territory and sales in the distant markets.
The marketing functions of the distribution channels depend on the delegation
the manufacturers extend.
A dealer's preference for stocking a particular brand is more often
related to the popularity of the brand, sales turnover, commission or margin
he gets frommanufacturets. An average fertilimr dealer deals with other allied
agricultural inputs such as seeds and pesticides. Some times, he is a money
lender too. However, a dealer capable of rendering package deal to the farmer
is preferred?1
The fertilizer dealer in order to be effective should have knowledge of
the cropping pattern in the neighborhood, of seasonal fluctuations, price of
different types of fertilizers in order to determine the stock of various brands
he has to hold. Manufacturers who provide him the required training and
information will motivate him to deal in their brands. The dealer should be
able to provide basic agronomic services to farmers-recommending right dose
of fertilizers for the crops in the area served by him. Dealers can utilize
manufacturers' soil testing facilities by arranging to collect soil samples from
farmers and forwarding them recommendations. This will not only help farmer
in applying right dosages, but also helps dealers in maintaining the stock of
right products.
The manufacturers should keep the dealers informed of their products
and services ao that he can pass on this message to farmers. The field sales
force has the task of educating him. His complaints on product quality,
packaging and delivery have to be attended with caution and speed to build up
image of the company, he can also organize farmer seminars to impart
knowledge of products and improve farm management practices as a part of
consumer services.
Dealer liaison with departmental officials and commercial banks is
essential. He is expected to service all types of consumers, big and small, and,
therefore, he has to offer even loose fertilizers-particularly for nursery
~ -
Feedback obtained from the village level survey 1994.
operations. Dealer is an important media for market information. Salesmen are
the eyes and ears and the spokesmen of the manufacturer on the field. This
they can perform only with willing cooperation of dealers. Manufacturers can
obtain fund of valuable information on product availability, price, competition
and service facilities prevailing in the market through dealers.
Fertilizer is now in the buyer's market. Dealer development and
utilization have more relevance today than even before. According to a recent
sample survey, more than one-third of farmers depend on the advice of dealers
to decide their fertilizer purchases. Their importance is even more in the case
of new product introduction. Manufacturers have to train, guide and motivate
dealers in the efficient discharge of their duties and responsibilities.
Cooperatives are entering the fertilizer marketing in a big way. While their
dealings will be largely governed by cooperative disciplines, they need guidance
and support to become effective marketing outlets.
Retail cooperatives have a greater role to play. The availability of credit
has put them in a better footing. In South India, there are over 31,000
cooperative outlets and market fertilizers worth over Rs.45 crore annually.
Today's fertilizer dealer is a representative of multi brands. A
manufacturer, who leads, guides and communicates effectively with dealer gets
the bigger cake.
Developing & maintaining an effective channel of distribution is an
important aspect of fertilizer marketing. The retail outlets must be encouraged
to stock the products well ahead of requirement. A recently conducted survey
reveled that consumption of fertilizers is largely due to the timely availability.
77% of the respondent farmers report that product availability was an
important factor in the consumption. Marginal increases in prices do not affect
the consumption rates as much as the availability.Dealer motivation for
dealing with a particular type of fertilizer products depends on the product's
acceptance level among farmers and the stock turnover rates.
Marginslcomrnissions become ~ec0ndar-y.~~
In fertilizer industry the retailer (private or institutional) deals with
multi analysislgrades/l~rands.
Private trade has four distinct patterns of operations. In a three tier
system, marketers take material in bulk from those manufacturers who do not
have their own established marketing set up. They operate through wholesale
and retail dealers. In the two tier system manufacturers have their own
marketing organization and they distribute fertilizers through wholesale and
retail outlets. In the one tier system the manufacturers directly deal with the
retailers. However they route a portion of their products through institutional
agencies such as cooperatives/agro-industries etcZ3.
Table No. 33 Zone wise spread of re ta i lout le ts (1988) a r e given below
Zone
* includes other areas also. Source: Ministry of agriculture New Delhi. Annual report 1988 and Fertilizer News Annual Review Sept 1993 p 86.
Retail outlets
Institutional I Private I Total
East
North
West
South
A11 India*
22 Report of the study conducted by FA1 Southern Region (1988).
7,150
21,318
18,378
13,879
60.991
Report of the high powered committee on pricing 1988.
There a r e 1.75 lakh (1993) retail outlets (35% institutional and 65%
private). During 92-93, the total fertilizer products distributed was 26.3 million
tonnes which works out to an average of 150 tonnes per annum.
Fertilizer retail net work is adequate in Maharastra, Gujarat in the west
and Andhra Pradesh in south. In the rest of the country the net work and also
the spread is not adequate. Spread of dealer network (1988) is given in the
map on 120a.
The Dealer is not adequately motivated in fertilizer business. The dealer
commission is very low at 58, besides the supplies from manufacturers is not
timely and adequate as reflected in the field level study under taken for the
research. He is usually a multi brand, multi-company dealer. He deals in a
variety of other agricultural inputs seeds, pesticides, etc. He is also a money
lender and deals with agricultural produce. The competition among the dealers
is high. There is a heavy concentration of private dealers in major towns on
road and rail heads.
The average fertilizer turn over is 140.50 tonnes annually varies widely
from zone to zone:
Table No. 34
Spread of fertilizer dealers-Zone wise
Source; Compiled from FA1 statistics 88-89.
Turnoverla p e r dealer
(TI
68.68 172.58 155.58 150.63 140.49
Ferti l izer Despatched
(000T)
3093 7618 7047 6100 24578
Zone
East North South West All India
Dealers
45020 44142 45298 40492 174950
In the fertilizer industry, the retail outlets also serve aa point of sale
promotion. Local dealers are made to participate in promotional programs
organized by the marketing firms. Training programs to impart product
knowledge, selling skills, inventory management, order processing point of sale
promotion would be covered in local language at such programs. Subject
specialists from the agricultural dept are generally invited to handle sessions
at such dealer training programs.
In most consuming centers the dealers are highly concentrated at taluk
head quarters1 Towns, as such their main objective is to improve their share
of sales which occurs in a very short span of time during the seasons.
Cooperative societies and their retail outlets have better financial
capabilities, infra-structural facilities as compared to the private outlets but
they lack initiative and selling skills.
Table No.35
Distribution through cooperative retail outlets April- Jun 1990
52.51 197998 16.19 38143
Pesticides
114
Source: Fertilizer statistics 91-92 page I- 85.
Cooperative net work is a potential channel for marketing of agri inputs
particularly fertilizers in view of their spread in the interior areas . Although
the volume of fertilizer products handled by this channel exceeds 5 million
tonne8 annually, it forms less than 24% of the total quantity of fertilizers
distributed annually.
From the above table it is observed that cooperative retail out lets
prwide a package of agricultural inputs-seeds, pesticides, implements and
others in substantial volumes and value.However, the turnover of sales of
pesticides is low at Rs. 65 lakhs.
The infrastructure for storage and handling , the manpower and the
financial strength the cooperative, have can cater to over 40 % of the demands.
In case of other inputs such as seeds and pesticides the volume handled is far
less than the potential. Aggressive and innovative marketing should be infused
into the cooperative channel both from the point of the cooperatives and
serving the farmers needs.
Table No.36
Share of cooperatives i n the fertilizer distribution
Source: Fertilizer Statistics 1989-90 & 91-92.
Year
Percentage
The above performance of the cooperatives indicates vast capability and
potential of the cooperatives in playing a more significant role in the fertilizer
marketing system. But the trend of participation is declining. Marketing
efforts must reverse the trend and utilize the potential to the maximum extent.
The performance which reached a level of 44% in 84-85 started declining and
was around 30% in the early 90's.
1984-85
44
85-86
34
86-87
36
87-88
34
8889
32
89-90
34
2.11 ROLE OF COOPERATIVES IN FERTILIZER MARKETING SYSTEM
Cooperatives have been given the pride of place in the agricultural
development of the country. They have played a crucial role in bringing about
green revolution in the irrigated areas. The cooperatives are expected to play
an equally important role in the second green revolution covering rain fed
(Dry land) farming and production of pulses and oil seeds.24
In the Indian context there is no other agency which can take care of the
entire gamut of agricultural operations covering the supply of inputs, credit,
marketing, storage and processing of agricultural produce.Cooperatives have
not only functioned as major suppliers of agri- inputs but emerged as major
producers. IFFCO & KRIBCO would be producing 30% of the total fertilizers
consumed in the country.
In India, the cooperatives cover 97% of the rural area and their
membership constitutes 45% of the rural population. The cooperative
infrastructure (retail outlet, storage facilities, credit, manpower.) provides
a massive framework for fertilizer distribution and promotion. The
cooperatives also deal in other agricultural inputs and offers a package of
agricultural inputs and services.25
Among the institutional agencies distributing agricultural inputs, it is
only cooperatives that provide production credit and also distribute fertilizers
to farmers.Such production credit has three components. "A" components to
finance wages of labour, "B" components to finance cost of inputs and "C" to
finance the cost of additional labour consequent to the use of inputs covered
24 Chauhan K.K.S. and Misra R.M."Fertilizer in Agricultural developmentW(l9S8), p 29, published by Red Rose house New Delhi.
Z6 Fertilizer Statistics 1992-93. p 1-123.
by 2'. Cooperatives thw have become an integral and vital part in the distribution of ~ e r t i l i z e r s . ~
An analyrir of etate wise share of cooperatives in the distribution of
fertilizers2' indicates, wide variations in the performances. In Andhra Radeah the share wan 9.9% in 89-90, Gujarat-6856, Haryana-30%, Punjab-
4346, Tamil Nadu-27%, Karnataka 254, Kerala 424, Maharastra 35%, West
Bengal311 and All India 34%. The cooperatives have not played their due role
in the logistics of fertilizers although they have the required capability and the
infrastructure.
An analysis2' of the short term advances by cooperatives and fertilizer distribution for a ten year period 1975-1976 through 1984-85 reveal :
1. There is a close link between the short term advances by cooperatives
and the fertilizers handled by them.
2. A strong positive correlation exists between "B"component loans and
the volume of fertilizer marketed by them
3. State wise high yields per hectare also indicate a high degree of
correlation.
2a Report of the hi& powered committee on Fertilizer prices appointed by GOI. (19881.p 47.
27 Report of the high powered committee on Fertilizer prices appointed by GOI. (1988).p 47.
z8 Report of the high powered committee on Fertilizer prices appointed by GOI. (1988).p 47.
Thi analysis brings out the pivotal position the cooperatives have in
stimulating fertilizer consumption and the key role played by them in the
fertilizer marketing system.
Most of the private retail outlets being located near rail heads and in
areas with concentration of consumption, the onus of reaching the fertilizer
to remote are= and inaccessible areas rests with the village cooperative net
work.
Fertilizer industry has provided support to strengthen the
cooperative system . Apex cooperatives at the state level have improved
their turn over and profitability when they started marketing Fertilizer
products. Their growth has been significant since 1965 when most of the
fertilizer manufacturing units in the private sector started utilizing the
cooperative channel for marketing their products. The role and importance
of cooperatives in the fertilizer marketing system has been brought out in
the report of the high powered committee on prices
During 1965-66 there were 1.92 lakh societies with a membership of
26 million farmers. Out of this 49 thousand societies distributed
agricultural inputs such as seeds, fertilizers, pesticides, implements etc
totaling to a gross value of products of Rs.202 crores. By 86-87 the
membership rose to 72 millions and the value of produds distributed rose
to Rs.1140 crores (fertilizer Rs.965 crores).
Even though, the quantum of fertilizer distributed to cooperatives has
gone up steeply in the recent years, it has registered a decrease in terms
of percentage share in distribution. The share of cooperatives in fertilizer
distribution was 34% in 89-90. Realizing the significance
of cooperatives in fertilizer distribution and the infrastructural facilities,
they have for serving the small farmers even in remote areas, the GO1 hae
initiated a number of measures to improve the cooperative share in
fertilizer distribution. The cooperative system, an the oldest channel for
fertilizer distribution has seen many ups and downs in its progrew when
it waa called upon to perform multifarious functions of a true multi
purpose farmers service institution including the marketing of agricultural
inputs.
The trend of total fertilizer consumption and the quantity handled
by the cooperatives are summarized below:
Table No.36a
Trends i n Performance of cooperatives
Source: Fertilizer Statistics 1991-92. p. 1-109.
I t is apparent that the total quantity of, fertilizer handled by the
cooperatives has rapidly declined from 59% in 65-66 to 35% in 89-90. This
has been attributed to several factors and the most important are:
Adoption of multi agency approach by the fertilizer manufacturing units
for distribution of fertilizers, choking of cooperative credit, steep increase
in the rate of interest on loans, lack of aggressive marketing strategy
by the cooperatives, steep increase in the private retail network.2Q
Cooperatives should continue to have a significant share of fertilizer
distribution for the following reasons
29 Report of the high powered committee on fertilizer pricing page 47.
I. Cooperatives are voluntary organizations with a social orientation.
2. The massive integrated cooperative institutional network is unique and unparalleled.
3. Cooperatives are also engaged in procurement, pooling and processing
of marketable agricultural surpluses of the farmers, helping them in
holding the price line and improving return on their agricultural output.
4. Cooperatives have large storage capacities extending to over twelve
lakh T.
Table No.37
Storage capacity with Cooperatives & NPK consumption
Total includes other states not tabulated Source; Fertilizer Statistics. 92-99 p.111-67 & pp. 90-99.
State
Andhra Pradesh Assam Bihar Gujarat Haryana Karnataka Kerala Madhya Pradesh Maharastra Orissa Puqjab Rajasthan Tamil Nadu Utter Pradesh West Bengal
Total
Storage Capacity (000T)
651 241 394 361 606 761 268 1028 1527 430 1955 483 815 1856 366
12067
Consumption NPK (OOOT)
1514 26 596 717 609 7 80 203 793 1132 203 1200 491 800 2180 731
12152
Availability of storage space of the cooperatives are highly
uncorrelated to the consumption. The capacitier, available in Maharastra,
Utter Pradesh, Madhya pradeah are far inadequate compared to the
consumption. Higher capacity will enable providing the farmer the right
products at the right time by stocking the producta well on time for the season.
Cooperatives have the additional responsibility of providing the products to
interior areas for which they get additional distribution. The available space
alw has not been fully utilized for the logistics of fertilizer marketing. The
above table indicates that the storage capacity developed by the cooperatives
in Punjab, Maharaetra, and U.P. are far greater than those of the other stat-.
Cooperatives have a vital role to play in the fertilizer marketing
~ystem with their widespread net work of primary cooperative societies
in the villages, storage facilities and manpower, and also the financial
capability to extend credit. The state and central governments are also
providing special incentives to step up their marketing.The marketing skills
and motivation of employees dealing with fertilizers must be improved
by training and financial support to filly tap the potential of this channel.
Developing adequate storage facilities so that the dealers can draw
their requirements with ease, attending to their problems and complaints,
providing periodical training on order processing promotional programs,
inventory control methods and techniques are among the key responsibilities
of the marketers. These are the developmental areas of the marketing system.
Fertilizer demand is highly seasonal.Marketing system should
consider the seasonality pattern for developing their programs /strategies
so that they may have the maximum impact in stimulating consumption.
Fertilizer is produced thorough out the year but the consumption is confined
to short spurts of a few weeks in the two main seasons Kharif (AprilSept)
& Rabi(0ct-March). Even though the ratio of the fertilizer consumption vary
from state to state on an all India basis the Rabi: Kharif has been 55:45.
Segmentation is an important aspect of marketing management; in the
fertilizer marketing system this is seldom practiced. Consumers can be
stratified in to amall , medium, large scale farmers, plantations, sugar
factories for developing products and other marketing strategies. These target
group of customers have different needs, capabilities, buying behavior
patterns, etc which requires different marketing approaches.
Marketing Research must become an integral part of Marketing
System. This enables to understand the dynamic markets and tune the
marketing mix. In the Fertilizer Industry, the required emphasis was not
given to the marketing research part of marketing.
This study examines the marketing approach that is considered
suitable for implementation and makes an analysis of the strategies
involved in Product, Pricing, Promotion and placement of products.
2.12 FERTILIZER AS A PRIVATE AND PUBLIC GOOD
Public good is a commodity or a service which , if supplied to one
person can be made available to other persons at no extra cost. A public good
is said to exhibit non rival consumption; one person's consumption of the good
does not reduce its availability to any one else. In contrast a private good when
consumed by one person can preclude consumption by other.
Paul A Samuelson (1983) has defined public good80 as a good which
is;
a) Non-rival in consumption.
David W Pearce, Dictionary of Modern Economics (1983). English Language Book Society London, pp 360-61.
b) Nongxcludability - if the good is produced, the producer cannot
prevent any one from buying and using it.
The provision of a public good is a matter of collective choice. The public good ia produced and distributad with governmental interactions,
regulations and support. The public good is maintained and served
through compulsory taxation. Fertilizer product meets all the canons of a
public good?1
Fertilizer Industry is of vital importance to the growth and the
sustenance of the Indian Economy.Its growth and development are of
importance to the public at large .Every one directly or indirectly is touched
by the fertilizer industry. Like Education ,Health , Transportation and
communication among the services of public interest, fertilizer is a public
product. The increase in fertilizer consumption has been an index of overall
development and economic improvement of villages in India. The several
village adoption programs launched by fertilizer manufacturers for
improving the living conditions of villagers through increased agricultural
productivity, have demonstrated the fact that fertilizer is a public good.
Increased quantum subsidy on fertilizer invoked public resistance as this
have had impact of additional tax burden, inflation, etc;
Increased consumption of Fertilizers is for the good of the public. Since
it results in increased fwd production need by the growing population and
improves the dietary status. The industry gets the benefit in the form of raw
material for production and processing. The export of agricultural products
would increase and help the exchequer in improving the balance of payment.
It solves unemployment problem and containing the inflation. Fertilizer has
there all the virtues of a public good and therefore needs support from the
David W Pearce, Dictionary of Modern Economics (1983). English Language Book Society London, pp 360-61.
Government. Rwiding subsidy on fertilizers and other agricultural inputs i8
a common phenomenon in all countries. The government must take a balanced
approach in extending the subsidy. If subsidy does not increase the
productivity, it will become a burden on the public in the form of additional
taxes. Subsidy must motivate the producers of fertilizers to utilize the capacity
to the maximum extent, marketing efforts must be geared to market all the
productions. Farmers must be encouraged to use the fertilizer in the right
quantity. These are the essential needs to get the benefit of subsidy for the
public.
Thus the need for an orderly growth and development in the fertilizer
industry is of public interest. While fertilizer is a private good for the
farmer which is meant to improve his farm productivity, it is a public good aa
its increased consumption and economical use benefits the public at large with
increased food grains and basic raw materials for many industries. The
transportation system, retail dealer net work, growth and development of
cooperation largely depended on the fertilizer industry. Many cooperative
societies which were sick regained their strength and vigor after they
started marketing fertilizer products.
2.13 IMPORTANCE OF LOGISTICS IN FERTILIZER MARKETING
Introduction:
Marketing activity centers around the satisfaction of needs and
requirements through the exchange process. In order to facilitate the
exchange process, barriers to the exchange have to be overcome. The first
barrier to smooth exchange results from the fact that the sources of supply
and centers of demand are located at widely different locations. Since source
of supply and centers of supply are widely dispersed geographically, logistics
management is of paramount importance in Fertilizer Marketing System.The
NCAER demand study (1978) discussed earlier in this chapter, has found out
that among the principle reasons for non- use of fertilizer is the non - availability. The need for physical movements is further complicated when
the requirements are seasonal and demand points are in remote and
inaccessible areae.
Demand for fertilizer products is highly seasonal. It takes place in a short spurt of a few weeke during the main Agricultural seasons Kharif
(April- Sept) and Rabi (Oct- Mar) while the production is almost continuous
throughout the year. The fertilizer marketing therefore requires utmost
planning and coordination in the area of logistics. Advanced planning in
transportation of products to the right locations on a least cost basis.
The word "Logistics " borrowed from the military management,
connotes, the science and the art of moving products from the point of
production /availability to the consuming centers in the best possible manner
so that the consumer gets his requirements at the place and at the time he
needs. Logistics management is a very important aspect of marketing
operation. Improved customer satisfaction and increased profitability to
the marketing organization can be simultaneously achieved by efficiency
in the logistics.
In the fertilizer industry logistics is synonymous with marketing
costs It includes:
* Bagging and Handling
* Transportation
* Storage
* Developing dealer net work
In the fertilizer marketing system this is a major managerial taek.
The logistics not only includes domestic production but also the imported
produde.Traneportation, inventory carrying and distribution margine
account for the major portion of the fertilizer marketing cost.
For increasing the fertilizer consumption to reach the targeted level of
20 million T NPK Iannum by the turn of the century, not only the production
facilities have to be stepped up but marketing efforts have to be
intensified. Rwiding the farmer the right product at the right place and at
right prices would be the major responsibility of the GOI, State
governments and the fertilizer manufacturing units. Logistics has an
important role to play. Provision of logistics support for distribution of
commodities of mass consumption is a prerequisite for any effective
distribution network. The logistics system must be continuously evaluated
by adopting a system approach so that the consumer expectations are met
to the possible extent by utilizing the infrastructure to the optimum extent.
Fertilizer is a very significant and basic input in any strategy for the growth
of Indian agriculture, particularly in the context of use of high yielding
varieties of seeds in conjunction with adequate irrigation facilities. The
challenge before the Indian planners is to feed a fast growing population
within the available cropped area not only in the short term but over a
longer-tern scenario as well.
The challenges to cope with distribution of fertilizers from present
level of 12.2 million tons (1992-93) of nutrients to nearly 20 million tonnes
per annum by 2000 A.D., therefore, requires strengthening the logistics
infrastructure. Transportation, Warehousing, Dealer net work, involving
cooperatives in a bigger way in fertilizer marketing system.
Fertilizer sector has been analyzed regarding consumption,
production, import, warehousing and transport scenario in the country. A
rail transport strategy based on a 60% share of the inter-modal mix for the
Indian Railways with an assumption of a 6% annual growth rate in tonnage
uplifkment by rail has been outlined. These include mechanization of
terminal handling operations, development of nodal goods eheds, pelleting
and mopping up rail capacity on aegments where wagon empty
movements are inherent today.
Development of logistic support for distribution of fertilizers was
undertaken by the GO1 as a conscious effort to give fillip to the need for
introducing scientific methods to the whole gamut of activities in the
agricultural scenario in the post independence period. This had become
imperative because Indian agriculture has been neglected by our colonial
masters and there was a total stagnation in this vital area. How the
necessary transformation was brought about is a saga of enlightened
leadership provided by Indian planners and political leadership during the
last four decades. At the same time, it is one area where private
entrepreneurship has been allowed freedom with dramatic results.
2.14 GROWTH OF INFRASTRUCTURAL FACILITIES FOR FERTILIZER MARKETING SYSTEM
During the last forty years 1950 through 1990 there has been
phenomenal increase in the infrastructural facilities needed for fertilizer
marketing goods vehicle has gone up from 82000 in 51-52 to 14, 8000 in 90-91
(18 times), literacy level has gone up from 17% to 52%,Length of roads has
gone up from 1.57 lakh kms to one million kms during 50-51 and 90-91.
The increase in rail route has not been significant. It has increased from 54000 kms to 62000 kms. However there has been large scale conversion
from meter gauge to broad gauge. The policy of uniguage has been of great
assistance to fertilizer movement, requiring no transshipment on many
routes. These figures are presented in the table No.34.
The rapid increase in the literacy levels and the availability of
multimedia including the electronic has given new opportunities for extension
and promotion.
The retail outlets have also increased significantly to over 2.5 lakh
points. The &rage facilities and the handling facilities at ports have not
increased to meet the needs of fertilizer logistice.
Table No.38 Growth of infwtrudural facilities needed
for fertilizer loglstica
Source: Economic survey 91-92. Ministry of Finance GOI. New Delhi. p.S-34.
The above table reveals that the logistics facilities such as rail route,
storage have not increased in tune with the growth in the fertilizer industry.
Rail route (000 kms) Road (000 kms) Goods vehicle (000) Movement of fert by rail (million T) Storage space (million T)
Fertilizer consumption (lakh T)
The length of national high ways (NH) as also the length of state high
ways has significantly increased. Due to increased number of trucks and other
vehicles the revenue also has steeply increased to Rs. 4400 cr/ annum
indicating potential for reinvestment in improving this vital infrastructure for
logistics management.
1990-91
62 1000 1480
17 16
123
1950-51
54 157 82 4 4
0.70
The fertilizer movement has shifted to road from rail. From the energy
consemation point of view this is not desirable. Rail movement should be
maximized.
Increaae (No.of timea)
1.1 6.4
18.0 4.3 4.3
17.6
The number of goods vehicle has significantly increased during this
period. Although the storage space has increased four fold the growth rate is
not keeping paw with the growth in fertilizer production. Beeides this the
location of storage points require a change in view of the shifte in consumption
trend. due to changes in cropping pattern and improved irrigation facilities.
The need for greater emphasis in logistice in the fertilizer industry
is due to large scale ,imbalances in the zone wise production and
consumption.
Table No.39
Zone wise imbalanoea between Production & consumption
Source: FA1 annual review 92-93.
East Consumption Production
North Consumption Production
South Consumption Production
West Consumption Production
AU India Consumption Production
Deflcit
1992-93
Nitrogen (000T)
1104 591
3253 1983
1986 1318
2092 3539
8435 7431
1004
Phosphate ( O O W
364 403
755 103
850 830
899 985
2873 2321
552
Thb zone wim imbalance between production and consumption has
neceeeitatad movement of fertilizer producta over long leads and therefore
the logistia has a predominant role in the fertilizer marketing system.
In case of nitrogen (Urea) all the zone except west are deficit requiring
movement of producta over long distances from fertilizer plants and ports to
the wneuming points.1n case of phosphate except in east and west where
there is marginal exww , there is deficiency in other zones requiring a similar movement. With the growth rate in consumption being faster than the rate of
increase in fertilizer capacity in the coming years upto 2000 , such movements
become inevitable . Rationalization in movement is necessary to meet the
requirement in the light of this zonal imbalances.
In order to facilitate the efficiency several public and private sector
service organizations such as railways , warehousing corporations , truck operating agencies in the private sector, the national highways dept. should gear up.
2.15 FERTILIZER TRANSPORTATION SCENARIO
Comparing the production and consumption we find the deficit in
northern zone is the maximum followed by the southern and eastern zones.
This imbalance in the zone wise supply and demand has created logistics
problems in fertilizer marketing. The problem is further compounded since
the import of fertilizer is also through the ports located in the western and
southern zones. The imported material has thus to move from west and
south to the north and from south east zone.
The average lead (distance) of fertilizers was 991 kms in 77-78, this
went up to 1024 in 1989-90 and slightly reduced to 929 kms in 1990-91.
It wsa anticipated that with the setting up of new plants the operating
territories of fertilizer units would reduce and the lead would come down
significantly.
During 1990-91 fertilizer movement by rail was 18 million tonnes of
materials and by mad it was 10 million tonnee indicating a rail road mix of 66:34. The ecenario in 1971-72 was shifted to 94:6 between rail and road and
in 1980-81 this ehiRed to 59:41. The analysis indicate that there has been a
significant shift in the inter modal mix. The railways have not been able to
meet the increased demand of the industry in terms of wagon availability and
handling facility. The movement of fertilizers from plant to field storage points
takes more on the availability of the mode - Rail or Road than on the
relative wsts.The data on rail head the share of movement are given in the
table No.40.
Table No.40
Rail lead & Share of rail movement to the total
Source: Fertilizer Statistics 1992-93 p. I1 -56.
Year
77-78 80-81 81-82 82-83 83-84 84-85 85-86 90-91
The table reveals that the average lead of fertilizer by rail was 560 kms
in 77-78. The lead was too high. Fertilizer had to move over long distances from ports and plants to the consuming centers at that time since a large
number of fertilizer plants were still in the construction stage and those that
Lead Kms
560 800 730 660 620 682 725 843
Share Percentage
84 79 69 67 72 62 53 67
had Ammenced production were running at very low capacities. Besides this
over 17.6% of the consumption was met by imports even during 1983-84.( Total
consumption of NPK was 77.1 lakh tonnes and import was 13.6 lakh tonnes
of NPK). During 1992-93,the consumption went upto 122.5 lakh tonnes of NPK
and the import waa 28.7 lakh tonnes (23.4%). The indigenous production of
N&P went up from 45.6 lakh tonnee in 1983-84 to 97.5 lakh tomes in 1992-93
(214%), in spite of the fertilizer lead did not come down. In spite of this the
lead did not come down, in fact it increased to 929 krns from 1990 onwards
indicating that the fertilizer movement had not been rationalized with respect
to the location of new plants and also the fertilizer manufacturers did not
consolidate their territories based on the economics of the movement.
I t was anticipated that with the setting up of new fertilizer plants the
fertilizer lead would come down since the consumption centers would be closer
to the source of supply, the fertilizer plants and the fertilizer manufacturers
would readjust their distribution territories but the lead trend was
upwards indicating that the products of different units had a criss cross
movement increasing the overall cost of moving the products.
The share of rail movement also got reduced because the railways could
not provide the required quantum of covered wagons for fertilizer movement
and the terms of the railways became un competitive compared to road
movement. Since the early 90s there is some marketingefforts by the railways.
Because of this there is some improvement in the trends of the share.
Movement by road is economical for distances up to 250 km.
However fertilizer products are moved even beyond 400 kms by
road sometimes due to non availability of wagons and also the e6ected
time taken by wagons to reach the destinations. Piece meal wagons take
much longer time than train loads. Further when movements take place by
rail there should necessarily be road bridging on despatching side or
receiving aide This operation adds to the total cost of transportation in cam
of rail mwemenb.
By 2000, it is anticipated that 40 million t o ~ e s of fertilizer materials
are required to be transported, warehouse and handle annually.32 The
railway would be required to increase their upliftment capacity and also
increase infrastructural facility for handling almost twice the volume
currently being handled. Rail movement provide the least energy
requirement mode in fertilizer transportation.
The department of fertilizers have projected the need for
movement of 30 million tonnes of fertilizer materials (10 million tonnes
imported products) by 1994-95.
However, the indigenous production is not sufficient to meet the total
demand of fertilizer in the country and the gap is met by imports. Imports are
also necessary in the absence of significant phosphate deposits. A large part
of requirement of phosphate is met either by imports of finished fertilizers
(in the form of DAP) or of phosphoric acid as an intermediate ingredient
in production of phosphatic fertilizers. Even the indigenous production of
phosphoric acid is mainly based on imported rock-phosphate and sulphur.
Requirement of potash is met entirely through import as there are no
known sources of potash in the country.
2.16 FERTILIZER STORAGE
Storage of fertilizers over a long period is necessary as the consumption
of fertilizers is confined to two to three short spells in the year while the
production of fertilizers is by and large continuous. The magnitude of
fertilizer storage can be judged by the fact that a t any given period of time,
52 Report of the high powered committee on fertilizer pricing,
6 to 7 million tonnes of different fertilizers are stored in the various
warehoueea in the country by manufacturers and the distributing agencies.
No other commodity barring food grains involves such a massive warehousing.
The main Agencies in the storage of fertilizers are Central
Warehousing Corporation (CWC), State Warehousing Corporation (SWCs)
and cooperative organizations. Private Warehousing Agencies also play an
important role in fertilizer storage. CWC has a t present 465 warehouses with
a total of 6.7 million tonnes of capacity. There are 16 State Warehousing
Corporations, together having 1295 warehouses with a total capacity of 9.2
million tonnes. Cooperatives have about 11.4 million tonnes of capacity of
which about 5 million tonnes are in form of rural godowns at village
level." Fertilizers account for about 27 per cent of total storage capacity
utilised in respect of CWC and 48 per cent in respect of SWCs. The maximum
storage requirement is May every year.
It is estimated that by 2000, over 43 Million T of fertilizer materials
would be consumed. For marketing this volume of fertilizers an additional
storage space of 15 Million T is required.34
At the macro level storage capacity has to be significantly increased
in order to accommodate the increased volume of production. New
locations have to be identified for generating additional capacities based on
the current and emerging demand pattern. Consequent to improved
irrigations facilities and introduction of HYV on as large scale in
traditionally rain fed areas the shift has taken place. This has to be
considered.
33 Report of the high powered committee on fertilizer pricing.
34 Report of the high powered committee on fertilizer pricing.
At the micro level full utilization of the availability of storage spaces
with the cooperatives and private trade must be made.
Adequate storage space must be created at hilly and inaccessible areas
of eastern zones where consumption potential has been tapped due to
inadequate logistics.
2.17 PROMOTION & EXTENSION IN FERTILIZER MARKETING
Marketing Management envisages the AIDA approach for promotion-
creating Awareness, developing Interest, generating Demand ensuring
Adoption (AIDA approach).
Promotion is one important element among the 4 Ps of marketing mix
management. The objective of promotiord Extension in the fertilizer
marketing is to convey, and communicate to inform, to persuade, to convince
the potential farmers to buy the right type of fertilizer products, in right
quantities and apply them at the right time and in the right method for
maximum returns.Intensive promotional efforts have brought forth
significant increase in fertilizer consumption. However farmers are still not
able to get full benefit of the fertilizer applied mainly because of its inefficient
use. Fertilizers are costly inputs and its full efficiency can be obtained by
timely application in right quantities along with other inputs. The farmer
is still not aware of the full potential. The on going promotional programs
must emphasize this aspect in the programs
Fertilizer Industry has made significant efforts to increase fertilizer
consumption in the country with promotional and extension (education)
program from the manufacturers, state and central governments and other
voluntary agencies. These program include ; soil testing service for right
recommendation of fertilizer products and the quantity of application,
block demonstrations, farmer's training, dealers orientation and training,
distribution of seed-cum fertilizer drills and distribution of mini
kits.Village Adoption Program, Long term Agricultural program, Mobile
Audio visual Vans, utilizing mass media for communications etc. The farmer
s w e y revealed that these programs focused on product promotion rather
than concept marketing. The farmer is not fully convinced of the economics
of fertilizer use under the rain fed areas which is the major part in the
agriculture eystem (77%).
Some of the large fertilizer manufacturing units such as IFFCO, MFL,
FACT, MCF, SPIC have adopted villages to ensure all round development of selected villages. Some marketers have established farmer's service
centers where inputs like fertilizers, seeds, pesticides, implements and
technology know-how are made available through a single window approach.
The content and pattern of fertilizer promotion activities carried
out by various fertilizer manufacturers have not been uniform. This is
reflected in the budgetary provisions made by some manufacturers for their
promotional programs. The enquiry reveals that about 86% of expenditure
is incurred by one manufacturer for mass advertisement alone. Only 14%
went towards field demonstrations Farmers and Dealers training programs,
village adoption etc. On the other hand the outlay of another manufacturer
did not include any expenditure on mass advertisement but included on
field demonstration farmers training program, village adoption etc. The
promotion budget had no relationship either with the production capacity or
sales turn over.
The retention price system also had an impact on fertilizer promotion
activities undertaken by the manufacturing units. The manufacture did ' not
have any incentive for investing on fertilizer promotion since such
expenses were not covered by subsidies.
Some fertilizer manufacturerr (HFC) undertook promotion and
extension program in mme low fertilizer consuming districts of M.P, U.P,
Bihar, Amam, Orissa and West Bengal under the aid of Indo-British fertilizer
education project.
In the fertilizer industry promotion and extension are carried out by
GOI, State Governments, fertilizer manufacturing units, agricultural
University extension services, voluntary organizations, ICAR etc. The
messages conveyed generally are: benefits of fertilizer use, balanced
fertilization, efficient use of fertilizers and brand image. Newspapers,
magazines and journals of regional languages are used for mass media
advertising. Posters, Hoarding , wall paintings, messages on buses, trains
are used as part of mural advertisement. Letters, leaflets, product profile
are mailed to farmers, fertilizer dealers, village opinion leaders,
department officials and extension personnel by fertilizer manufacturing
units.
In addition, cinema, radio, television, slides, exhibitions, trade
shows, diaries, calendars, gifts, banners, stickers, buntings hand bills,
sponsoring of visits eta. are also employed.
Promotion is also made through entertainment programs at the
villages. These include open air dramas, puppet shows etc
On the promotion front agricultural input products share similarities
with consumer products; the number of prospects to be reached is large,
diverse, spread across different regions cultures, socio-economic background
and literacy levels. Age, income and language stratification is very high.
Farmers and planters on many occasions need to be approached individually
or in group. Intensive farmer contact program and group meetings are
essential requirements of fertilizer extension programs. Most often such
programs have to be carried out during evening 1 night when the farmers are
available a t their houses and are in a relaxed mood for effective
communication.
In the fertilizer marketing the success cannot be achieved merely by
creating awareness. The farmers have to be carried up to post-trial
evaluation stage to obtain a favorable and sustainable response. Personal
contact is more effective than contact through mass media as the former
provides an opportunity for the farmers to ask specific questions and
relate the product potential with current and past experience. It is essential
to understand farmer's need individually; but it is expensive for the fertilizer
marketing units to do so. The fertilizer salesmen specially appointed
interviewers dealer personnel are made to carry out the task at minimum
cost.
In the fertilizer promotion / extension multi media have to be adopted
since no single medium predominantly could serve the purpose of making
the farmers aware as well as convince about the product. Field demonstration
supported by group meetings, individual contacts, audio visual programs
will create the desired effect.
National commission on Agriculture (NCA) has made the following
recommendations based on their
1. The message of profitable use of fertilizer according to soil testing and
technical advice should be carried across to the farmers, more
particularly to those with small and marginal holdings. This should
bring home the need for balanced use of fertilizers. Government must
take the primary responsibility for disseminating the message of
balanced use of fertilizers through an effective extension agencies.
35 Report of the high powered fertilizer consumer prices (1988). Published by FAI, New Delhi.
2. Fertilizer dealers must be provided with adequate incentive and
motivation to cover Point of Purchaee (POP) promotion. They are in
cloee touch with the farmers and their promotional efforts will yield
good results.
3. Fertilizer marketers must carry out promotional work through
demonstration and training.
4. Suitable monitoring system should be evolved to ensure that fertilizer
marketing units do not undertake promotional efforts to nullify the
effect of other programs.
5. The soil testing facilities available with manufacturers and other
agencies must be put to effective use.
2.18 SOIL TESTING FACILITY
Soil testing is an important aspect of fertilizer marketing system.
Testing the soils helps in determining the nutrient levels of the soil and
determining the type and quantity of fertilizer to be used. Farmers have to test
the soils periodically after raising 3 to 4 crops. This will help to improve the
economics of fertilizer use. The concept of soil testing and use of the right type
of fertilizers in right quantity should be promoted by the fertilizer
manufacturers. Setting up of laboratory facilities for testing soil at fertilizer
plants is a statutory requirement. The state and central Governments have set
up the facilities at strategic locations. The fertilizer dealer channel is utilized
for the purpose of collecting samples of soils and routing the recommendation.
The soil testing facility is a highly capital intensive operation in the fertilizer
industry and must be put in to best use. The facility created at fertilizer plants
and by the Dept of agriculture is grossly under utilized.
The NCA study revealed that only 45% of farmers used fertilizers and
that only 33% of the cropped area was fertilized indicating vast untapped
potential for fertilizer consumption and the scope for fertilizer promotion1
e ~ t e n s i o n . ~
The soil testing facility developed by fertilizer manufacturers has been
a very expensive axtension facility. This facility has not been adequately
used as rwealed by the findings of the high powered committee on fertilizer
pricing.97 The farmer survey also brought out the under utilization of this
important and expensive facility3' The extent of capacity utilization in
various soil testing labs are detailed in the following table:
Table No.41
Utilization of SOU Testing Laboratories
Source: Report of the high powered committee (1988), p.27 compiled.
Capacity utilization (70)
upto 50 51-70 71-90
over 100
The low utilization of STL is attributed to the following reasons:39
Soil test ing labs (70)
15 13 52 20
36 Report of the high powered fertilizer consumer prices (1988). Published by FAI, New Delhi.
" Report of the high powered fertilizer consumer prices (1988). Published by FAI, New Delhi.
38 Report of the farmer survey - FA1 S R .
Report of the high powered committee (1988) p.27.
* Inadequate and irregular flow of soil samples.
* Inadequate st&
* Frequent breakdown of instruments.
Lack of interest and motivation among field staff
* Ineffective monitoring system.
Soil testing service is yet to become popular with farmer. Soil testing
is of fundamental importance in India to delineate the nutrient deficiencies
in the soil and advice farmers for balanced use of fertilizers. This will not only
increase the profitability of fertilizers but also improve the efficiency of
other nutrients. Soil testing service also enable increasing the per hectare
consumption of fertilizers.
2.19 CONCLUSION
In this chapter, current marketing management system in the fertilizer
industry has been elaborately covered. For historical reasons (inconsistent
product availability of products, heavy dependence on imports, governmental
controls, lack of infrastructural facilities for marketing, large volumes of
fertilizer products manufactured by public sector units, Bureaucracy, lack of
market orientation etc) marketing approach had been lacking in the industry.
Fertilizer marketing system must be revitalized . The 4Ps of marketing
mix must be managed efficiently. A long term productivity approach must be
adopted in the marketing. Transport is the most important element in the cost
of logistics. The irrational movement should be eliminated by redefining the
distribution territories for the units based on transportation. Optimization
techniquee must be employed at micro level to minimize the costs. Forecasting
of state wise consumption must on scientific lines. MIS must be strengthened
for effective logistics management by hooking up field warehouses and the
planthead quartets. Bulk movement of fertilizer products must be adopted.
