Question 67 from UPSC CSE 2020 - ECONOMICS

Question

With reference to chemical fertilizers in India, consider the following statements:
1. At present, the retail price of chemical fertilizers is market-driven and not administered by the Government.
2. Ammonia, which is an input of urea, is produced from natural gas.
3. Sulphur, which is a raw material for phosphoric acid fertilizer, is a by-product of oil refineries.
Which of the statements given above is/are correct?

IASCODEX · Accepted Answer

Correct Option: B. 2 and 3 only

Strategy: - Identify that fertilizer prices for urea in India are government-controlled via subsidies, making statement 1 incorrect.
- Recall that ammonia (essential for urea) is produced from natural gas, supporting statement 2.
- Recognize that sulfur, used in phosphoric acid fertilizers, is a significant by-product of oil refining, supporting statement 3.
- Based on this, eliminate statement 1 and validate statements 2 and 3 to determine the correct option.

Key Info: Chemical fertilizers in India include nitrogenous (mainly urea), phosphatic, and potassic varieties.

## Fertilizer Pricing
The Indian Government administers prices for major fertilizers. Urea is sold at a controlled Maximum Retail Price (MRP) under the New Urea Policy; the difference between MRP and production/import cost is compensated by the government as a subsidy. Non-urea fertilizers (Phosphatic and Potassic) are covered by the Nutrient Based Subsidy (NBS) Scheme since 2010, under which prices are partially market-linked but the government gives a fixed per-nutrient subsidy--yet MRP is often influenced by government guidance and market conditions, not fully market-driven.

## Ammonia and Urea Production
Ammonia is the primary feedstock for nitrogenous fertilizers like urea. In India and globally, synthesis of ammonia commonly uses natural gas (methane) through the steam reforming process; alternatively, naphtha can be used. Ammonia combines with carbon dioxide to form urea in fertilizer plants.

## Sulphur and Phosphoric Acid Fertilizers
Sulphur is a by-product of petroleum refining and natural gas processing. Removal of sulfur is necessary to reduce pollution from fossil fuels. Extracted elemental sulfur is widely used to produce sulfuric acid, which is the key reagent in the 'wet process' to manufacture phosphoric acid. Phosphoric acid is then used in producing various phosphatic fertilizers such as DAP (di-ammonium phosphate) and SSP (single superphosphate).

## Key Policies and Statutes
Fertilizer Control Order (FCO) sets quality and regulation standards. The Ministry of Chemicals and Fertilizers and the Department of Fertilizers administer and implement policies, including subsidies.

IASCODEX · Answer

Option A: 1 only

IASCODEX · Answer

Option C: 2 only

IASCODEX · Answer

Option D: 1, 2, and 3