SFAI Urges FCO Reforms To Protect MSMEs From Disruptive Fertiliser Bundling Practices

New Delhi, Jul 13 (KNN) The practice of bundling specialty and soluble fertilisers with subsidised conventional products such as urea is affecting innovation and threatening the survival of micro, small and medium enterprises (MSMEs) in the sector, said Rajib Chakraborty, President, Speciality Fertiliser Association of India (SFAI).

In an interview with PTI on Monday, Chakraborty said the practice—known in the industry as “tagging”—forces dealers to sell specialty fertilisers only when farmers purchase subsidised urea. He noted that this occurs across multiple levels, including companies, distributors and retailers, creating distortions in the market.

Impact on Innovation and Market Access

Chakraborty emphasised that the system has limited the reach of newly developed fertiliser products, particularly those introduced by smaller firms. 

"The newly invented products or augmented products are actually not reaching the dealer shelf," he said, adding that only a negligible share of such innovations makes it to the market as bulk volumes remain concentrated with companies engaged in bundling.

While some states, including Uttar Pradesh, Gujarat, Madhya Pradesh and Maharashtra, have taken steps to curb the practice, it continues in several parts of the country.

He contrasted the current situation with the late 1990s and early 2000s, when the sector witnessed annual growth of 30–35 per cent and attracted new entrepreneurs. In contrast, many MSMEs today are facing financial stress and risk closure, often burdened with significant debt and lacking access to relief measures available to farmers.

Call for Policy Reforms

Chakraborty called for changes to the Fertiliser Control Order (FCO) to provide targeted support for MSMEs engaged in innovation. He suggested easing restrictions that limit companies to selling within specific regions and urged better enforcement of existing provisions requiring public-sector companies to procure from MSMEs.

He also raised concerns about regulatory delays and approvals, citing instances where domestically developed fertiliser products faced prolonged clearance timelines. According to him, the current framework tends to favour imports over local manufacturing.

Need for Investment and Long-Term Support

On funding, Chakraborty said private investment, including venture capital and foreign direct investment, remains limited in fertiliser research and development due to longer return cycles. He suggested that government support would be essential to strengthen innovation and build a structured ecosystem for product development.

Despite the challenges, he expects increased use of soluble fertilisers, particularly through foliar (spray) application, during the current kharif season, with demand potentially rising by about 25 per cent.

However, he cautioned that scaling up domestic manufacturing in this segment would require sustained, long-term investment. The relative ease of importing fertilisers, compared to setting up local production, continues to discourage domestic manufacturing under the current policy environment.

(KNN Bureau)