strategic analysis of indian fertilizer industry
DESCRIPTION
Indian Fertilizer Industry has been witnessing much changes on part of production technology,feed stock, and regulatory policy. So far this industry has been merely logistics and distribution management and not other functions needed much concern because of regulated price. Till 2010, NPS III had been in force and had to be lifted according to phase wise deregulation of the sector but since new policy has not been finalised, same has been in continuation. This presentation includes current scenario of the industry, Porter's analysis and SWOT analysis of IIFCO to understand more the Indian fertilizer industry.TRANSCRIPT
ByBidhu Bhushan Binit(group leader)Group No:05
STRATEGIC ANALYSIS OF INDIAN FERTILISER
INDUSTRY
Course: Agri-Input MarketingPGDM(2011-2013)Indian Institute of Plantation Management, Bangalore.
FERTILIZERS• India is the third largest producer and consumer of
fertilizer in the world.
• Indian fertilizer industry started in 1906 with SSP production facility at Ranipet near Chennai.
• Started operating in a big scale since 1940s, when the
Fertilizer & Chemicals Travancore of India Ltd. and the Fertilizers Corporation of India were set up in Kerala and Bihar
• The private sector produced 44.73 % of nitrogenous fertilizers and 62.08 % of phosphatic fertilizers in 2006-07.
• Total production of fertilizers in india-206.5mt .
• The production of urea in India has reached near self-sufficiency. The requirement of the nitrogenous fertilizers is met through the indigenous industry
• In the case of phosphatic fertilizers, the raw materials and intermediates are imported in large scale.
• The requirement of potash (K) is met entirely through imports. No fertilizer unit of India has any reserve of potash.
Introduction
Industry Analysis
Major Challenges
Current scenario
SWOT Analysis
Main fertlizers produced in India
• Urea
•Di-ammonium Phospahte
•Complexes
•Single Super Phosphate
Introduction
Industry Analysis
Major Challenges
Current scenario
SWOT Analysis
Porter's Model on Fertilizers
Introduction
Industry Analysis
Major Challenges
Current scenario
SWOT Analysis
Porter Analysis
Introduction
Industry Analysis
Major Challenges
Current scenario
SWOT Analysis
THREAT OF NEW ENTRANTS:- LOW
Entry barriers are high
1. Supply side economies of scale- Present fertilizer industries both public and private sector enjoy the benefit of scale economies of scale. The cost per unit is low. 2. Demand side benefits of scale-the buyers i.e. farmers are having faith on the fertilizers they are using. They communicate to each other the results of fertilizers. Hence always has tendency to buy what others are buying. Hence for new entrant it is difficult to break this attachment. 3. Customer switching costs- It is high. When farmers are using any fertilizer, they are well known about the results, also for that fertilizers they have tie up with the o-operative societies, they can get it on credit basis also.
Porter Analysis
Introduction
Industry Analysis
Major Challenges
Current scenario
SWOT Analysis
RIVALRY –
• High fixed costs• Negligible perceived differences between the brands• Prices fixed – price competition impossible• FFBL has sole DAP production facility• Engro imports and sells DAP• A little competition between these two
Porter Analysis
Introduction
Industry Analysis
Major Challenges
Current scenario
SWOT Analysis
POWER OF SUPPLIERS-LOW
• Gas subsidies given by government• Long term agreements• Firms can’t influence market prices• Hence supplier power is very low
Porter Analysis
THREAT OF SUBSTITUTES-LOW
• No proper substitutes• Natural fertilizers can be used but not as effective• Animal manure not suitable for commercial production
Introduction
Industry Analysis
Major Challenges
Current scenario
SWOT Analysis
Porter Analysis
BARGAINING POWER OF BUYERS- VERY LOW
• No alternate for urea – have to buy it irrespective of prices• Urea used as an alternate for DAP• When DAP prices increase, urea sales increase and DAP sales fall
Introduction
Industry Analysis
Major Challenges
Current scenario
SWOT Analysis
Industry Analysis
• 65 large-sized fertilizer plants in India
• 32 units-urea
• 20 units-DAP & complex fertilizers
• 13 units-ammonium phosphate & CAN
• Nitrogenous fertilizers-88% urea ,10% DAP & 2% ammonium fertilizers.
Introduction
Industry Analysis
Major Challenges
Current scenario
SWOT Analysis
Industry Analysis
Introduction
Industry Analysis
Major Challenges
Current scenario
SWOT Analysis
24%8%3%9%5%3%4%
2.00%5%
Rice 37%Wheat 24%Food Grains 8%Pulses 3%Oil Seeds 9%Sugarcane 5%Cotton 3%Vegetables 4%
Figure 2: Crops wise consumption of Fertilizer in India
Rice37%
Wheat24%
Food Grains8%
Pulses3%
Oil Seeds9%
Sugarcane5%
Cotton3%
Vegetables4%
Fruits2%
Others5%
Rice
Wheat
Food Grains
Pulses
Oil Seeds
Sugarcane
Cotton
Vegetables
Fruits
Others
Industry Analysis
Introduction
Industry Analysis
Major Challenges
Current scenario
SWOT Analysis
PRODUCTION AND IMPORT OF FERTILISERS(IN '000'T)
0
2000
4000
6000
8000
10000
12000
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06
YEARS
PROD
UCTIO
N AN
D IM
PORT
(IN
'000 T
ONNE
S)N Production
N Imports
P2O2 Production
P2O2 Import
K2O Production
K2O Import
Major Players of Public Sector
Introduction
Industry Analysis
Major Challenges
Current scenario
SWOT Analysis
The public sector companies in Indian fertilizer market are listed below:
Fertilizer Corporation of India Limited (FCIL)
Hindustan Fertilizer Corporation Limited (HFC)
Pyrites, Phosphates & Chemicals Limited
Rashtriya Chemicals and Fertilizers Limited (RCF)
National Fertilizers Limited (NFL)
Projects &Development India Limited (PDIL)
The Fertilizers and Chemicals Travancore Limited (FACT)
Madras Fertilizers Limited (MFL)
FCI Aravali Gypsum & Minerals India Limited, Jodhpur
Private Companies
Introduction
Industry Analysis
Major Challenges
Current scenario
SWOT Analysis
The Scientific Fertilizer Co Pvt Ltd
Coromandel Fertilizers
Deepak Fertilizers and Petrochemicals Corporation Limited
Devidayal Agro Chemicals
DSCL
Gujarat State Fertilizers &Chemicals Limited
Tata Chemicals Limited
Chambal Fertilizers
Nagarjuna Fertilizers and chemicals limited
Godavari Fertilizers and Chemicals limited
Zuari Industries limited
Major Challenges
• Gap between demand and supply• Greater dependency of country on
imports( also feedstock)• Unable reduce burden of government in
subsidiary rates• Infrastructural bottlenecks• Uncertainties in government policies• Small size of older plants
Introduction
Industry Analysis
Major Challenges
Current Scenario
SWOT Analysis
Current Scenario
Introduction
Industry Analysis
Major Challenges
Current Scenario
SWOT Analysis
• Most companies are expecting approval for their huge capital expenditure plans from department of fertilizer and industry
• Indian fertilizer companies joined hands with Jordan, Senegal, Oman, Morocco, Egypt etc
• The demand for fertilizer has increased by 5% (21 June 2010, Rashtriya Chemicals and fertilizer)
• 10% increase in Urea price in April 2010
• Fertilizer subsidy has taken largest share for 58.7% of total subsidies in 2008-09
About IFFCO
Introduction
Industry Analysis
Major Challenges
Current Scenario & IIFCO
SWOT Analysis
COMPANY OVERVIEW FOR THE FARMERS, OF THE FARMERS, BY THE FARMERS.Indian Farmers Fertilizer Co-operative Limited (IFFCO) was registered on November 3,1967 as a Multi-unit Co-operative Society. On the enactment of the Multistate Co- operative Societies act 1984 & 2002, the Society is deemed to be registered as a Multistate Co-operative Society. The Society is primarily engaged in production and distribution of fertilizers. IFFCO, to day, is a leading player in India's fertilizer industry and is making substantial contribution to the efforts of Indian Government to increase food grain production in the country.
SWOT Analysis - Strengths
SWOT Analysis
1. Growth: IFFCO is one the most leading companies of India. This industry is expected to grow at significant rate and internal strength is quite strong and good management as well.
2. Technology: Technology innovation has increased thecompany’s productivity and distributional channels
because of the company adoption of modern technology.
3. Over the years, IFFCO has grown in strength from a modest membership of 57societies in 1967-68 to 33260 as on March 31,2008.
4. The society derives strength from the invaluable contribution made by its talented and dedicated employees, who is well accomplished to deliver in the dynamic economic scenario for gaining competitive advantage.
Introduction
Industry Analysis
Major Challenges
Current Scenario
SWOT Analysis - Weakness
1. Gas supply: company has to depend on other companies for the use of production
2. Insufficient production: as per demand of the fertilizer in the country, company is not able to provide in full fledged way.
3. IFFCO are going only straight forward direction, i.e. produce only fertilizers.
4. The use of fertilizers is depending only on rain and irrigation facilities. If both are not good it will directly affected to the use of fertilizers.
Introduction
Industry Analysis
Major Challenges
Current Scenario
SWOT Analysis
SWOT Analysis - Opportunités
1. Continuous improvements quality and international exposure has helped open up new doors to crossover audience (farmers) and offers immense potential for development.
2. Company has opportunity to expand its Harrison by structuring new plant at kalol unit because of to meet demand of the market.
3. Expand the market by globalization.
4. IFFCO has a good distribution network by which he will sale pesticides, bio-fertilizer, research seeds etc40
Introduction
Industry Analysis
Major challenges
Current Analysis
SWOT Analysis
SWOT Analysis - Threats
1. Many competitors are coming to crash the strengths of the company in the market for example GSFC.
2. Sometime lack of quality may generate disloyal market.
Introduction
Industry Analysis
Major challenges
Current scenario
SWOT Analysis
THANK YOU
Introduction
Industry Analysis
Major challenges
Current scenario
SWOT Analysis
Questions
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Introduction
Industry Analysis
Current scenario
SWOT Analysis