Description
to minimize the cost of sending the urea from company to the distributor
A
PROJECT REPORT
ON
“OPTIMAL RAIL ROAD MIX FOR DESPATCH OF UREA FROM CHAMBAL FERTILIZERS AND CHEMICAL LIMITED,GADEPAN”
Faculty of Management Institute of Rural Management, Jaipur July 2009
In Partial fulfillment for the requirement of the Award of
Post Graduate Diploma in Business Management
Submitted to: by: Prof. Poonam Mishra Arora Faculty FMS-IRM Jaipur
Submitted Rahul PGD-BM FMS-IRM
CERTIFICATE
This is to certify that Mr. Rahul Arora (PGDM), a student of Post Graduate Diploma in Management at FMS - IRM, Jaipur, has worked at Chambal Fertilizer and Chemical Limited, Gadepan under the able guidance and supervision of Mr. R.S. Hareesha. The period, for which he was on training accounted for 7 weeks, starting from 15th of May, 2010, to 30Th of June, 2010. This Summer Internship report has the requisite standard for the partial fulfillment of the Post Graduate Diploma in Business. To the best of our knowledge no part of this report has been reproduced from any other report and the contents are based on original research.
Signature (Prof. Poonam Mishra)
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DECLARATION
I hereby declare that this project report entitled “Optimal rail road mix for despatch of urea from Chambal fertilizer and Chemical Limited” is a bonafide record of work done by me during the course of summer project work and that it has not previously formed the basis for the award to me for any degree/diploma, associate ship, fellowship or other similar title of any other institute/society.
Date: 30.06.2010
Rahul Arora FMS-IRM
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ACKNOWLEDGEMENT
The Summer Project on “Optimal rail road mix for despatch of urea from Chambal Fertilizer Chemical Limited, Gadepan” offered a great learning experience. During the tenure of this project, we were fortunate to have interacted with people, who in their own capacities have encouraged and guided us.
Firstly, we would like to express our sincere gratitude to HR Department of CFCL for providing us an opportunity to undergo summer training in Supply and Distribution department of such a reputed organization. Our special vote of thanks to Mr. A.K.Saxena, Manager HR for giving us the opportunity to work with the company which gave us a great learning experience.
Our sincere thanks go to Mr. R.S. Hareesha (General Manager, S&D, CFCL) for trusting our potentials by giving us such a valuable project. We would also thank him for providing his guidance and support in completing this project.
We are also grateful to Mr. Manish Pathak (Deputy Manager, S&D, CFCL) our project guide, for providing us the required support & knowledge regarding our project and other related activities. He has been extremely helpful and cooperative. Without his support & critical evaluation this project could not have been completed successfully.
We extend our heartiest thanks to Brig. S. K. Gaur (Director FMS-IRM), FMS-IRM faculty members for their regular assistance all through the project and we would also thank Mrs. Poonam Mishra(Project Guide, FMS-IRM) for the direction and purpose she gave to this project through her invaluable insights, which constantly inspired us to think beyond the obvious.
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INDEX
Contents
EXECUTIVE SUMMARY ............................................................................................................................ 7 RESEARCH DESIGN .................................................................................................................................. 9 RESEARCH PROBLEM........................................................................................................................... 9 OBJECTIVE OF THE RESEARCH............................................................................................................. 9 RESEARCH METHODOLOGY .............................................................................................................. 10 SAMPLE SIZE...................................................................................................................................... 10 SAMPLING UNIT ................................................................................................................................ 11 RESEARCH DESIGN ............................................................................................................................ 11 DATA COLLECTION METHOD ............................................................................................................ 11 TOOLS USED ...................................................................................................................................... 12 LIMITATION OF THE STUDY............................................................................................................... 12 PRACTICAL UTILITY OF STUDY ........................................................................................................... 13 FERTILIZER ............................................................................................................................................. 15 INTRODUCTION ................................................................................................................................. 15 DEFINITION ....................................................................................................................................... 16 ROLE OF FERTILIZER IN AGRICULTURE .............................................................................................. 17 PRODUCTION OF FERTILIZER IN INDIA .............................................................................................. 18 WIDENING DEMAND AND SUPPLY GAP OF UREA IN INDIA .............................................................. 19 FERTILIZER INDUSTRY............................................................................................................................ 21 HISTORY ............................................................................................................................................ 21 BACKGROUND ................................................................................................................................... 22 INDIAN FERTILIZER INDUSTRY ........................................................................................................... 23 W.T.O. Implications ....................................................................................................................... 26 Future Trends ................................................................................................................................ 26 FERTILIZER COMPANIES IN INDIA ..................................................................................................... 27 PRODUCTION PROCESS OF FERTILIZERS ........................................................................................... 29 THE POLICY ENVIRONMENT FOR FERTILIZERS .................................................................................. 32 REGULATIONS OF OTHER INTERNATIONAL TREATIES ...................................................................... 33 5
ESSENTIAL COMMODITY ACT............................................................................................................ 35 FACTORS INFLUENCING FERTILIZER MARKETING ............................................................................. 36 OTHER DETERMINANTS .................................................................................................................... 38 GROWTH OF FERTILIZER INDUSTRY .................................................................................................. 39 FEATURES/CONTRAINTS RELATED TO FERTILIZERS .......................................................................... 40 CHAMBAL FERTILIZER AND CHEMICAL LIMITED ................................................................................... 42 INTRODUCTION ................................................................................................................................. 42 COMPANY PROFILE ........................................................................................................................... 44 AWARDS AND RECOGNITIONS .......................................................................................................... 51 SERVICES BY CFCL.............................................................................................................................. 53 BUSINESS SCENARIO ......................................................................................................................... 55 MARKETING DEPARTMENT AT CHAMBAL FERTILIZERS AND CHEMICALS LIMITED, GADEPAN ........ 56 SUPPLY AND DISTRIBUTION .................................................................................................................. 58 CONSTRAINTS IN SUPPLY AND DISTRIBUTION OF FERTILIZERS ........................................................ 59 MODES OF DISTRIBUTION................................................................................................................. 60 RAIL ............................................................................................................................................... 60 ROAD (By Trucks) .......................................................................................................................... 64 OPTIMAL RAIL ROAD MIX FOR DESPATCH OF UREA FROM CFCL GADEPAN (within 500kms.) ............ 68 DATA ANALYSIS ..................................................................................................................................... 73 FINDINGS............................................................................................................................................... 78 SUGGESTIONS ....................................................................................................................................... 84 SWOT ANALYSIS .................................................................................................................................... 86 BIBLIOGRAPHY ...................................................................................................................................... 87
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EXECUTIVE SUMMARY
The summer training of a management student plays an important role to develop him into a well – groomed professional. It gives theoretical concepts a practical shape in a field of applications. It gives an idea of dynamic & versatile professional world as well as an exposure to the intricacies & complexities of corporate world. Our Summer Internship Project was of 45 days at Chambal Fertilisers and Chemical Limited, Gadepan. The presents study was undertaken at the Production and Administration site of Chambal Fertilizers and Chemical limited, Gadepan, Kota. The study was titled as “Optimal rail road mix for despatch of urea from CFCL, Gadepan within 500kms.” The primary objective of the study was to minimize the transportation cost by calculating the optimal mix for despatch of urea by rail or road. The research was carried out for seven weeks and was Descriptive as well as Exploratory in nature involving operational work and enquiry. The tools used for the data collection in the present study are past data provided by company, unstructured interview and observation. The data was collected and analyzed and final observations are presented in report along with suggestions. At CFCL, we got a chance to apply the theory to latest technological & marketing environment. In the 45 days of exposure we learnt a lot on various aspects of organizational structure, departments & their impact. It was really an interesting experience.
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RESEARCH DESIGN
RESEARCH PROBLEM
With the entry of the new players in the agriculture sector, competition in fertilizer industry has increased. Fertilizers is a subsidized product as it came under Essential Commodity Act. Due to these reasons the distribution of fertilizer is as per the Government rules and regulations. Government also provides subsidy on transportation cost. So the company which is able to supply fertilizer with low costs is/are preferred. So it becomes necessary for the company to know the various costs incurred on transportations. The research problem is mainly concerned with the following: a) Determining how to minimize the cost of transportation. b) Finding optimal rail road mix for despatch of ure.
OBJECTIVE OF THE RESEARCH
? The major objective of the research is to evaluate the scope of decreasing cost of transportation. ? The other purpose of the project was to mainly determine the preferred mode of transportation on the basis of cost and various other factors.
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RESEARCH METHODOLOGY
The research done is Exploratory and Descriptive in nature. A systematic research was designed with series of steps as follows:
Step 1:
Finding out various locations where urea is transported from
CFCL, Gadepan.
Step 2:
Finding out the procedure and cost of despatch of urea from
rail and road.
Step 3:
Comparative analysis to come to a valid conclusion
The data collected was mostly from secondary sources. While collecting data adequate safeguards were taken.
SAMPLE SIZE
As per the norms of Government of India despatch of urea by road is restricted within 500kms. Beyond this the despatch can be made only through rail. So on the basis of this, a sample size of 55 was selected which is based on the scope of project. This includes most of the districts of Rajasthan and Madhya Pradesh.
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SAMPLING UNIT
All the distributors within these 55 districts were sample units for the study.
RESEARCH DESIGN
The study is Descriptive in nature since it involves fact finding enquiries of different kinds. Also because the major purpose of this research is to find the optimal rail road mix for despatch of urea from CFCL, Gadepan. Since the research has variables which are not under the control like the production of urea by the company but it can control the cost of production and cost of despatching the urea from CFCL, Gadepan. Also since one of the objective of study was to find the new mix for despatching of urea, this study entailed Exploratory research design also.
DATA COLLECTION METHOD
The data collected for the study was mostly secondary data and was taken from company database. The data regarding freights of railway was taken from online sources. The data regarding freights of road transportation was collected by informal meetings with the transportation vendors of the company.
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TOOLS USED
The study involved the usage of Bar graphs and Pie charts -: ? Bar Graph: - It is a chart with rectangular bars with lengths proportional to the values that they represent. These are used for comparing two or more values that were taken over time or on different conditions, usually on small data sets.
?
Pie Charts: -It is a circular chart divided into sectors, illustrating relative magnitudes or frequencies.
? Weighted average
LIMITATION OF THE STUDY
? The sample size could not be increased as the despatches can only be made within 500kms (by trucks) according to GOI. ? Since the data required for the study was confidential and private, so in few of the cases original data could not be obtained from CFCL. ? Since it was peak time for agriculture sector, company officials were not able to give proper time.
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PRACTICAL UTILITY OF STUDY
Every institution looks around for existing as well as new markets so as to capture the business opportunities before their competitors can grab the opportunity. A wrong selection of any particular market can lead to problems like increased transaction cost. This particular project will help CFCL in knowing various facets of their business as follows: a) Knowing the least cost of transportation for despatch of urea. b) Finding the best mix of rail and road. c) Helps in saving cost.
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FERTILIZER
INTRODUCTION
Agriculture contributes about 25% of GDP in our country and more than half of the population is engaged in agriculture. There is a positive correlation between consumption of fertilizers and the production of food grains. This phenomenon is not only peculiar to food grains, but to other crops including yield from horticulture and plantations. The factors which have contributed to increase in the food grains production are: 1> The introduction of improved and high yielding varieties of seeds. 2> Expansion of irrigation facilities 3> Improved use of fertilizers 4> Improved package of practices 5> Plant protection measures 6> Easy availability of credit to farmers The food grain production increased from 201 million tons during 199899 to 234 million tons during 2009-10. As a result, not only India is selfsufficient in food grains, but also we have developed the capability to export in time of surplus. Successful agriculture activity hinges on the existence of a conducive policy environment, adequate supply and distribution of agriculture inputs such as fertilizers, seed, and pesticides etc. adaptation of scientific resulting in optimum production. Fertilizers provides the essential plant nutrients needed for increasing crop yields specially food grains exploiting the full potential of high yielding varieties. Fertilizers consumption increased from 50.82 million tons in 1951 – 52 to presently stagnated production level of around 210 – 212 million tons.
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DEFINITION
Fertilizer is generally defined as "any material, organic or inorganic, natural or synthetic, which supplies one or more of the chemical elements required for the plant growth". Sixteen elements are identified as essential elements for plant growth, of which nine are required in macro quantities and seven in micro quantities. Of these elements, carbon, oxygen and hydrogen are supplies by air and water and are, therefore, not treated as nutrients by the fertilizer industry. The main aim of the industry is to provide the primary and secondary nutrients which are required in macro quantities. Essential elements for plant growth No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. Name of element Carbon Oxygen Hydrogen Nitrogen Phosphorus Potassium Calcium Magnesium Sulphur Boron Chlorine Copper Iron Manganese Molybdenum Zinc Macro nutrients Secondary nutrients Primary nutrients Nomenclature
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ROLE OF FERTILIZER IN AGRICULTURE
The agricultural sector plays a vital role in Indian economy. It provides income, employment and source of livelihood for major population, support diversification for rapid industrial growth by providing wide range of raw materials. It contributes to the export of the country and above all it makes food grains available for the increasing population of the country. The food grain production increased from about 74 million tons during 1966-67 to 380 million tons during 2008-09. Fertilizers provides the essential plant nutrients needed for plant growth and increasing crop yield especially food grains, exploits the full potential of High Yield Variance (HYV), by increasing the food grains production and generating the adequate surplus of various agriculture commodities. Fertilizers consumption increased from 1.1 million tons during 1966-67 to more than 20 million tons during 2008-09. It is estimated that increasing fertilizers use has alone contributed about 60% of the total food grain production in the country. The use of fertilizer has played a vital role in increasing the production. The consumption of fertilizers is directly related to the quality of subsoil and surface water for irrigation. Now the farmers are provided with more water and other facilities through canals and drainage systems and this modernization has promoted the use of fertilizers as well, thus leading to more consumption of fertilizers. The population of our country and the world has rapid rate of growth as compared to growth in food production. There has also been a decline in the arable land per person in recent times. The demand for food and agricultural products to feed the population is expected to be double by the end of the decade.
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PRODUCTION OF FERTILIZER IN INDIA
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WIDENING DEMAND AND SUPPLY GAP OF UREA IN INDIA
The demand of urea in country has always been more than the supply. In order to meet the demand India has to depend upon imports.
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FERTILIZER INDUSTRY
HISTORY
Department of Fertilizers comes under the ambit of Ministry of Chemicals and Fertilizers. This Department was earlier used to be named as Department of Chemicals & Fertilizers. The genesis of the Department of Chemicals and Fertilizers can traced to the erstwhile Ministry of Production in the fifties. During that time, while "Fertilizer" subject was being dealt as a part of the Section, the subject matter of "Chemicals" was assigned to Ministry of Commerce and Industry. The importance of the fertilizer and chemical sectors was recognized in 1963 when the subjects concerned were placed in one Department in the newly set up Ministry of Petroleum and Chemicals. In 1975, with the appointment of a separate Cabinet Minister for Chemicals & Fertilizers, the Ministry of Chemicals & Fertilizers comprising the Department of Petroleum and the Department of Chemicals & Fertilizers came into being. A separate Ministry of Chemicals & Fertilizers came into existence in September, 1982 headed by a Cabinet Minister who is assisted by Minister of State. It was part of the Ministry of Agriculture till 1984. In June, 1991, it becomes part of newly created Ministry of Chemicals & Fertilizers. Department of Fertilizers came into existence as a separate Department in September, 1985 consequent upon the bifurcation of the then Ministry of Chemicals & Fertilizers. Thereafter, this Department was brought under the ambit of Ministry of Agriculture for a short duration. However, the earlier position was restored in 1992.
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BACKGROUND
Chemical fertilizers have played a vital role in the success of India's green revolution and consequent self - reliance in food grain production. The increase in fertilizer consumption has contributed significantly to sustainable production of food grains in the country. Government of India has been consistently pursuing policies conductive to increased availability and consumption of fertilizers in the country. The Retention Price Cum Subsidy Scheme (RPS) for indigenous nitrogenous fertilizer units was introduced by the Government of India in November 1977 to ensure a reasonable return on investment and to facilitate healthy development and growth of fertilizer industry. The Scheme was later extended to phosphatic and other complex fertilizers in February 1979 and Single Super Phosphate (SSP) in 1982. However, from August 1992, the Government has progressively decontrolled the prices and distribution of phosphatic and other complex fertilizers. At present, farm gate price of Urea is controlled by the Government whereas its distribution has been partially decontrolled from 1 April 2003. The Retention Price Scheme stimulated indigenous production and consumption of fertilizers in the country. However, for attaining greater internal efficiencies and global competitiveness, unit specific approach of RPS has been replaced by a group based concession scheme based on greater normative approach called the New Pricing Scheme 9NPS) from 1 April 2003. The Fertilizer Industry Coordination Committee (FICC) constituted on 1 December 1977 to administer and operate the Retention Price Scheme continues under the New Pricing Scheme for administration of the scheme for urea.
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INDIAN FERTILIZER INDUSTRY
Indian Fertilizer industry is one of the vital industries for the Indian economy, since it manufacturers a very critical raw material for agriculture. The fertilizer industry especially the ammonia urea plants are energy demanding in their operation. The main objective of the fertilizer industry is to ensure the supply of primary and secondary nutrients in the required quantities. The fertilizer industry in India has performed a vital role in enabling the necessary increase in the use of plant nutrients for achieving the objectives of self-sufficiency in food grains production and accelerated and continuous agricultural growth. The fertilizer industry which is one of the most energy intensive sectors is very important from the context of environmental discussions. Due importance to increasing productivity through the implementation of competent and pollution free technologies in the manufacturing sector would be most desirable in combining economic, environmental and social development objectives. Pre Liberalization
In India per hectare consumption of fertilizer in 1950-51 was less than 1/4th of the global average. Production was by and large in the purview of public sector and cooperative sector. In 1977 the government introduced the Retention Price Scheme (RPS) with the goals of providing fertilizers to farmers at reasonable rates without affecting the profitability of the manufacturers. Under this policy the government would pay the manufacturers, the difference between the administered price (sale price) and the retention price (cost of production).
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Over and above the retention price subsidy, the equated freight subsidy was introduced to enable the manufacturers to cover the cost of transportation. Post Liberalization
The policy of economic liberalization has its effect on the fertilizer industry too. The government in a move aimed at reducing subsidy, decontrolled all the phosphatic and potassic fertilizers in 1992.This strained the ratio of fertilizer utilization. With this policy of liberalization, the retention pricing scheme (RPS) which had been introduced in 1977, got confined only to urea. Post liberalization, the government strategized a long term fertilizer policy to be completed in three different phase, beginning in 2000-01 and ending in 2006-2007.
Phase 1: 2000-01 and 2001-02
? ? ? ? ? ?
Evaluate existing capacity. Increase in urea prices from time to time. Evaluate the possibility of a coal based expertise. Promote joint ventures. Finalize policy on fertilizer pricing and capacity enhancement. Eliminate distribution controls on urea and augment concession scheme to bio fertilizers.
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Phase II (2002-03-2003-04)
? ? ? ? ? ?
Finalize decision on feedback. Long term strategy of increased capacity. Decide on extent of protection to local industry. Eliminate MRP and encourage productive investment. Reorganize the association between the industry and farmers. Judicious utilization of fertilizer and greater emphasis on ecofriendly fertilizer. Establish Fertilizer Policy Planning Board.
?
Phase III (2004-05-2006-07)
? ?
Removal of MRP Define government's role in decontrol setup and with respect to policy relating to LNG.
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W.T.O. Implications The restriction on quantity of fertilizers to be imported has been eliminated from April 1, 2001.The proposed plan to establish a tariff rate quota (TRQ) for the import of urea has been deferred. The Government has planned to impose a higher tariff of 150-200 per cent on imported urea in future. This would lead to increase in prices of imported urea and be detrimental to the demand supply gap which is likely augment in future.
?
?
Future Trends India's demand for fertilizers in 2007-08 was 26 MM tons, which went up to 29 MM tons in 2008-09 against a supply of 20 MM tons in 2008-2009. The demand for fertilizers in 2011-12 is forecasted to be around 35.5 MM tons. More fertilizer projects are in the pipeline. Gujarat is expected to play a leading role in fertilizer production. Indian companies have penetrated the overseas market, signaling a new phase for the industry.
?
?
? ?
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FERTILIZER COMPANIES IN INDIA
PUBLIC SECTOR
? ? ? ? ? ? ? ?
National Fertilizers Limited Fertilizers and Chemicals Travancore Ltd. Rashtriya Chemicals & Fertilizers Limited Madras Fertilizers Limited Paradeep Phosphates Limited Pyrites, Phosphates & Chemicals Limited Fertilizer Corporation of India Limited Projects & Development India Limited
COOPERATIVE SECTOR
? Indian Farmers Fertilizer Cooperative Ltd. ? Krishak Bharati Cooperative Limited
PRIVATE SECTOR
? ? ? ? ? ? ? ? ?
Gujarat State Fertilizer Company Limited Coromondel Fertilizers Limited Shriram Fertilizers & Chemicals Limited Zuari Industries Limited Southern Petrochemicals Industries Corporation Ltd. Mangalore Chemicals & Fertilizers Limited Gujarat Narmada Valley Fertilizers Co. Ltd. Deepak Fertilizers & Petrochemicals Ltd. Indo-Gulf Fertlizers & Chemicals Corporation Ltd.
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? ? ? ? ? ?
Godavari Fertilizers & Chemicals Limited Nagarjuna Fertilizers & Chemicals Limited Chambal Fertilizers & Chemicals Limited Tata Chemicals Limited Oswal Chemicals & Fertilizers Limited Fertilizer Corporation of India Limited
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PRODUCTION PROCESS OF FERTILIZERS
UREA MANUFACTURING PROCESS Urea is produced from ammonia and carbon dioxide in two equilibrium reactions: 2NH3 + CO2 NH2COONH4 Ammonium carbonate NH2COONH4 NH2CONH2 + H2O Urea
Step 1 - Synthesis A mixture of compressed CO2 and ammonia at 240 bars is reacted to form Ammonium carbonate. This is an exothermic reaction, and heat is recovered by a boiler which reduces steam. If the mixture remains in the reactor long enough, the second reaction takes place: ammonium carbonate splits into water and urea. Step 2 - Purification
The major impurities in the mixture at this stage are water from the urea production reaction and unconsumed reactants (ammonia, carbon dioxide and ammonium carbonate). The unconsumed reactants are removed in three stages. Firstly, the pressure is reduced from 240 to 17 bars and the solution is heated, which causes the ammonium carbonate to decompose to ammonia and carbon dioxide: NH2COONH4 2NH3 + CO2
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At the same time, some of the ammonia and carbon dioxide flash off. The pressure is then reduced to 2.0 bar and finally to -0.35 bar, with more ammonia and carbon dioxide being lost at each stage. By the time the mixture is at -0.35 bar a solution of urea dissolved in water and free of other impurities remains. At each stage the unconsumed reactants are absorbed into a water solution which is recycled to the secondary reactor. The excess ammonia is purified and used as feedstock to the primary reactor. Step 3 - Concentration 75% of the urea solution is heated under vacuum, which evaporates off some of the water, increasing the urea concentration from 68% w/w to 80% w/w. At this stage some urea crystals also form. The solution is then heated from 80 to 110oC to re dissolve these crystals prior to evaporation. In the evaporation stage molten urea (99% w/w) is produced at 140oC. The remaining 25% of the 68% w/w urea solution is processed under vacuum at 135OC in a two series evaporator-separator arrangement.
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Step 4 - Granulation Urea is sold for fertilizer as 2 - 4 mm diameter granules. These granules are formed by spraying molten urea onto seed granules which are supported on a bed of air. This occurs in a granulator which receives the seed granules at one end and discharges enlarged granules at the other as molten urea is sprayed through nozzles. Dry, cool granules are classified using screens. Oversized granules are crushed and combined with undersized ones for use as seed. All dust and air from the granulator is removed by a fan into a dust scrubber, which removes the urea with a water solution then discharges the air to the atmosphere. The final product is cooled in air, weighed and conveyed to bulk storage ready for sale.
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THE POLICY ENVIRONMENT FOR FERTILIZERS
Due to continuous increase in the population of our country, need for food grains have been continuously increasing. In order to maintain the food security in the country, the supply and distribution of fertilizers should be timely and at constant rate. Thus the government preferred not to leave the supply and distribution and pricing of fertilizers to the market forces. The selling price of all the nitrogenous fertilizers is controlled by Government to make it affordable for the poor farmers and induce consumption. The price of phosphatic fertilizers were also controlled since March 1976 and under formal control since February 1979 for complex phosphatic material inducing DAP and since May 1982 for SSP. In a world of inflation and increasing prices of input/raw material including feedstock utilize such as power and water and services such as railway freight, cost of production was however higher. Under the Retention Pricing and Subsidy Scheme (RPS), the Government fixed a fair ex-factory price, commonly known as Retention price. Thus making fertilizer available at same price everywhere. Thus by these prescribed efficiency norms, Government reimburses the excess over net realization from sale price as subsidy to the producer. The cost of transport from plant to the consumption point is also compensated on a normative basis. So as to keep a check over the production and consumption of urea, Govt. has put urea under the ESSENTIAL COMMODITY ACT.
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REGULATIONS OF OTHER INTERNATIONAL TREATIES
IFA (International Fertilizer Association) developed a series of 12 principles for use in fertilizer operations globally. 1. All members shall demonstrate leadership and management commitment with regards to safety, security, health and environmental issues in fertilizer production, distribution and sales. 2. All members shall attempt for zero harm and adverse environmental impact whilst maintaining a healthy work place for all employees and contractual staff. 3. All members shall ensure that safety, security, health and environment issues are integrated into their corporate policy and receive the highest importance and priority. 4. All members shall ensure adequate financial and human resources for continual improvement of safety, security, health and the environment performance. 5. All members shall comply with local safety, security, health and environmental laws and strive to embrace international laws and best practices as much as possible. 6. All members shall establish and improve their safety, security, health and Environmental performance through annual objectives, targets or key performance indicators. 7. All members shall establish adequate procedures and controls to ensure that safety, security, health and environment are not put at risk at any time or in any form. 8. All members shall ensure that all employees and contractual staff have the right competence and are adequately trained and informed about safety, security, health and environment related to their specific activities, and shall encourage the participation of employees and
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contractual staff for further improvements.
9. All members shall adhere to the principles of hazard and risk assessment in evaluating all their activities to ensure that safety, security, health and environment standards are continually enhanced. 10. All members shall strive to subscribe to safety, security, health and environment management systems that will be subjected to internal and external auditing. 11. All members shall voluntarily share information with regards to experiences and lessons related to safety, health and the environment with all employees and contractual staff, and with other IFA members, unless under legal constraints or if the information is of proprietary nature. 12. All members shall strive to continually promote safety, security, health and environmental matters to enhance the social responsibility and accountability of the global fertilizer industry.
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ESSENTIAL COMMODITY ACT
The essential Commodity Act, 1955, was enacted by the government of India for the control of the production , supply and distribution of, and trade and commerce in, in certain commodities. The list of commodities is given in section 2 of Act did not include fertilizers. However, in exercise of the power conferred by sub clause (a) of section 2 of the Essential Commodity Act, 1955, the government declared “fertilizers” whether inorganic or mixed fertilizer to be an essential commodity for the purpose of the said act. The government of India issued the fertilizers (control) orders 1957, under section 3 of the essential commodity act, 1955. It came into force from 15-5-1957. These orders extend to the whole of India. It provides inter-alia. For control of prices of fertilizers; registration of dealers; registration of fertilizer mixture; restriction on the manufacture, storage and sale of fertilizers, disposal of substandard fertilizers; producer for drawing samples and methods of analysis of fertilizers. Fertilizer industry cannot sell/moves the fertilizer unless the movement ECA is given to them by the dept. of fertilizers i.e. ministry of agriculture. GOI gives ECA to different companies based on their production plan, based on the above; GOI gives season wise and month wise movement orders for the movement of the fertilizers. And after that company plans for movement on fertilizer to the various states on monthly basis. The dept. of fertilizer strictly monitors the movement plan of fertilizer and accordingly the fertilizers are moved from factory to the consumption center.
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FACTORS INFLUENCING FERTILIZER MARKETING
The factors which affect the marketing of fertilizers are: Ineffective distribution process Retailers Transport Credit facility to customers Lack of awareness in consumers Government policy and control Competitors Need and habitat of customer Weather condition Cropping pattern Nature of product Extensive services Seasonal demand Rigid and slow reaction to market change Uneducated target market
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FERTILIZER PLAN
The fertilizer is a product that helps a farmer in increasing the output from his cultivated land. Since the farming conditions vary from region to region in India, there are lots of uncertainties associated with agriculture. The main dimension for fertilizer plan includes:
- Sales forecast and sales plan - Supply and distribution plan a) Direct distribution plan b) Storage plan - Channel plan - Advertisement plan - Sales promotion plan
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OTHER DETERMINANTS
Determinants of fixed costs: 1. 2. 3. 4. Salaries & Wages Deprecation Allocated Costs Taxes
Determinants of variable costs: 1. Gas as Feed Stock 2. Gas as Fuel 3. Canal Water 4. Chemicals 5. Catalyst 6. Maintenances of Stores 7. Packing Materials 8. Containers 9. Contract Labors 10. Electricity Duty 11. Other Expenses (As allocated)
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GROWTH OF FERTILIZER INDUSTRY
As on 31 Jan 08, the country has an installed capacity of 120.61 lakh MT of nitrogen and 56.59 lakh MT of Phosphate. Presently, there are 56 large size fertilizer plants in the country manufacturing a wide range of nitrogenous, phosphatic and complex fertilizers. Out of these, 30 (as on date 28 are functioning) units produce urea, 21 units produce DAP and complex fertilizers, 5 units produce low analysis straight nitrogenous fertilizers and the remaining 9 manufacture ammonium sulphate asproduct. Besides, there are about 72 medium and small-scale units in operation producing SSP. The sector-wise installed capacity is given in the table below:Sector -wise and Nutrient - wise Installed Capacity of Fertilizer Manufacturing Units (as on 1st January, 2008)
S.No Sector
Capacity ( Lakh MT)
Percentage Share
Nitrogen Phosphatic Nitrogen Phosphatic 1 2 3 Total Public Sector 34.98 4.33 17.13 35.13 56.59 29.00 26.27 44.73 100.00 07.65 30.27 62.08 100.00
Cooperative 31.69 Sector Private Sector 53.94 120.61
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FEATURES/CONTRAINTS RELATED TO FERTILIZERS
Food, Shelter and Cloth are the basic three necessities of life and is very important for all of us. In India almost half of the population is dependent on agriculture for these things. Agriculture is very important source of bread and butter to the people in the country. Agriculture is directly associated with use of fertilizers and urea. In order to meet the demands of increasing population, production of food grains has to be increased. To increase the food grain production, fertilizers play a vital role. Various factors which are affected can be studied as: - Production is continuous but the demand is seasonal and at times, it is for too short period. - Fertilizer is to be marketed through a network of approximate 17,00,000 km of road and among this 50% of the area is un surfaced. Distribution is carried out through 2,50,000 retail points spread in various parts of the country. - Urea comes under Essential Commodity Act, thus the movement and distribution is completely controlled by Government. - In rural areas storage facilities are inadequate. - Demand highly depends on natural factors. - Large number of users with different consumer habits. - Bulky and hygroscopic nature of products, hence need lots of attention and care while handling and distribution. - High costs of carriage and freights. - Compulsion of using jute bags for packaging purposes, even though traders and farmers do not prefer them. - Changing cropping pattern also effects the consumption of urea in varied places. - Poor availability of wagons from railways. Many a times open wagon are supplied during rainy seasons. - Railway network is not spread properly and possess a big problem if the goods are to be supplied in rural areas.
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CHAMBAL FERTILIZER AND CHEMICAL LIMITED
INTRODUCTION
Chambal Fertilizers and Chemicals Limited is the largest private sector fertilizer producers in India. It was promoted by Zuari Industries Limited in the year 1985. Its two hi-tech nitrogenous fertilizer (urea) plants are located at Gadepan in Kota district of Rajasthan. Built at a price of over Rs. 25 billion (USD 500 million), the two plants produce about 2 million tons of Urea per annum. The first plant was commissioned in 1993 and second plant in 1999. These plants use state-of-the-art technology including that from Denmark, Italy, United States and Japan. Chambal Fertilizers caters to the need of the farmers in ten states in Northern, Central and Western regions of India and is the lead fertilizer supplier in the State of Rajasthan. The Company has a vast marketing network comprising 11 regional offices, 1,300 dealers and 20,000 village level outlets. The Company has donned the mantle of providing all agri-products through a ‘single window’ to enable the farmer to buy all products from one source. The Company dealers provide Urea and other agri-inputs like DAP (Di-Ammonium Phosphate), MOP (Murate of Potash), SSP(Single Super Phosphate), pesticides and seeds. Most of these products are sourced from reputed suppliers and sold under the ‘Uttam’ umbrella brand. Today, the Company has attained a leadership position in the pesticide business in North India.
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COMPANY PROFILE
CHAMBAL FERTILIZERS AND CHEMICALS LIMITED is a K. K. Birla group company and is promoted by ZUARI AGRO CHEMICALS LIMITED. It is incorporated on 7th May 1985 with the initial name of ARAVALI FERTILIZERS LIMITED. It got its certificate of commencement of business on 18th July 1985. Earlier the project was decided to be installed at SAWAIMADHOPUR in Rajasthan. Construction was started at SawaiMadhopur site and was subsequently shifted to the current location at GADEPAN in Kota and the company was renamed as CHAMBAL FERTILIZERS AND CHEMICALS LIMITED. It is a gas base project fulfilling its gas requirement from GAIL, through HBJ pipelines. Technology of the project was supplied by SNAMPROGETTI SPA of ITALY including the supply of technical knowhow, erection, commissioning and supervision of the plant. Project zero date was 1st January 1990 and the commercial production commenced on 1st January 1994. Company achieved 100% capacity utilization target within three months of its operation. Average daily production of UREA was around 2850 tons per day. The company planned for its first expansion plan and by the year 199900 its second unit had also started the production. The daily production has now reached to approx. 6000 tons per day. Technology for this project has been provided by TOYO ENGINEERING COMPANY, JAPAN on turnkey basis. Now the company is planning for further expansion by establishing a new unit by the year 2013-14. Chambal Fertilizers caters to the needs of the farmers in ten states in Northern, Central and Western regions of India and is the lead fertilizer supplier in the State of Rajasthan. The Company has a vast marketing network comprising 10 regional offices, 1,300 dealers and 20,000 village
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level outlets. The Company has donned the mantle of providing all agri-products through a 'single window’ to enable the farmer to buy all products from one source. The Company dealers provide Urea and other agri-inputs like DAP (Di-ammonium Phosphate), MOP (Murate of Potash), SSP (Single Super Phosphate), pesticides and seeds. Most of these products are sourced from reputed suppliers and sold under the 'Uttam’ umbrella brand. Today, the Company has attained a leadership position in the pesticide business in North India. In order to help farmers use fertilizers in a balanced way, the Company tests over 100,000 soil and irrigation water samples annually at its Agricultural Development Laboratories located at Agra and Sriganganagar. It then suggests the correct dosage of different fertilizers to be used based on crop planning and soil health. Today, Chambal Fertilizers has consolidated its position in agri-business and diversified into other sectors. These sectors or divisions are:
AGRI-BUSINESS DIVISION
Chambal’s Agri Business Division is one of the largest private sector fertilizer producers in India. Its two hi-tech nitrogenous fertilizer (urea) plants are located at Gadepan in Kota district of Rajasthan. Built at a price of over Rs. 25 billion (USD 500 million), the two plants produce about 2 million tons of Urea per annum Chambal Fertilizers and Chemicals Limited is one of the largest private sector fertilizer producers in India. It caters to the need of the farmers in ten states in Northern, Central and Western regions of India and is the lead fertilizer supplier in the State of Rajasthan. The Company has a vast marketing network comprising 11 regional offices, 1,300 dealers and 20,000 village level outlets.
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The Company has donned the mantle of providing all agri-products through a ‘single window’ to enable the farmer to buy all products from one source. The Company dealers provide Urea and other agri-inputs like DAP (Di-Ammonium Phosphate), MOP (Murate of Potash), SSP (Single Super Phosphate), pesticides and seeds. Most of these products are sourced from reputed suppliers and sold under the ‘Uttam’ umbrella brand. Today, the Company has attained a leadership position in the pesticide business in North India. To establish a closer bond and to provide personalized services, Chambal has also started the ‘Uttam Bandhan’ program under which crop and product demonstrations, field demonstrations and farmer meets are conducted. Soil and water testing are also conducted for free at Chambal’s laboratories and experts emphasize the balanced use of fertilizers. To encourage the new age farmer, a website, 'uttamkrishi.com', provides information on the weather, suitable cropping techniques and markets. ‘Hello Uttam’ telephonic helplines have been set up to answer the queries raised by farmers. Unemployed youth from villages are enrolled as ‘Uttam Krishi Sewaks’. They are trained in the latest techniques and provide specialized services to farmers.
SHIPPING DIVISION – INDIA STEAMSHIP
With the Indian economy booming and the associated need for oil security, Chambal Fertilizers and Chemicals Limited decided to enter the energy transportation sector through the acquisition of the India Steamship Company (ISS) Ltd., one of the oldest shipping companies in the country incorporated in 1928. ISS was merged with Chambal Fertilizers and Chemicals w.e.f September 2004 Today, India Steamship has a fleet capacity of over 600,000 DWT in the form of six Aframax tankers - ‘Ratna Urvi’, ‘Ratna Puja’, ‘Ratna Shruti’, ‘Ratna Shradha’, ‘Ratna Namrata’ and ‘Ratna Shalini’. Three new
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Aframax Tankers of about 105,000 DWT each joined the fleet between April and July 2008. The latest addition is ‘Ratna Shalini’ which joined the fleet in the first quarter of 2010. Chambal’s robust financial strength and market standing has added muscle to India Steamship. To enhance its competitiveness, India steamship is acquiring critical mass by adding tonnage by way of charting activities through a subsidiary in Singapore. What’s more, double hull vessels are being sourced, in line with international shipping standards. Simultaneously, its corporate strategy is being re-aligned to make it more agile and customer focused in today’s competitive global environment.
TEXTILE DIVISION – BIRLA TEXTILE MILLS LIMITED
Birla Textile Mills (BTM) was established in 2000 as division of Chambal. In less than a decade, BTM has emerged as leading name for textiles in India. It has a reputation for innovative products, impeccable quality and reliable service – attributes that are making it a partner of choice for demanding international customers. BTM has set up a 83,376 spindle capacity, state-of-the-art plant at Baddi, Himachal Pradesh. The product roster includes cotton and synthetic grey and dyed blended yarns in various counts for the domestic and world markets. The plant conforms to ISO 9001:2000 standards for its quality management systems. Presently, BTM exports around 25% of its aggregate production to countries in Europe and Asia. Looking ahead, exports will continue to be the key driver of BTM's growth strategy. Consequently, BTM is sharpening its competitive edge by adopting global manufacturing standards and management practices across the organization. Chambal Fertilizers has other business interests through its subsidiaries in the software and in the infrastructure sector:
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CFCL TECHNOLOGY LIMITED (ISGN)
With the aim to enter the sunrise sector of Software Technology, Chambal Fertilizers set up the India Software Group (ISG) in 1998 as its software arm. In an attempt to further expand in the overseas market the company soon acquired Nova soft Information Technology Corporation; A New Jersey, USA based company, along with its subsidiaries. After a decade in the business and years of experience in product development and applications maintenance, the combined entity - ISGN, decided to focus on providing technology solutions to the 3 trillion Dollar US mortgage market to capitalize on its strengths. The acquisition of Mortgage Hub Inc., a US based pioneer of web-based IT solutions and services, enabled ISGN’s plans of restructuring the mortgage industry. With a host of services and a clientele consisting of some of the largest lending organizations in the US, Mortgage Hub added greatly to the range of services on offer. A further expansion occurred with ISGN’s acquisition of the mortgage software division of the Fair Issac Corporation, a leading US based enterprise decision management solutions provider for global businesses and Dynatek a US based provider of mortgage automation software for retail and wholesale lenders. Today, ISGN is one of the most diverse and experienced providers of mortgage technology and services. Its industry leading solutions support the entire spectrum of the loan life cycle, from origination to settlement services, to support on core servicing, loss mitigation and home retention services. With the acquisition of Fiserv’s Fulfillment Services business, ISGN has expanded to 15 locations in the US, and 3 global centers. With 1500 employees supporting more than 1000 customers, ISGN delivers business impact to various lending institutions that include large global financial institutions, neighborhood banks, credit unions, and national lenders.
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ISGN has a market reputation of quality and an un-wavered focus on the mortgage industry. It has, since, 2005 laid foundations and emerged a formidable transformational leader that can help lenders create business impact, exceptional quality, innovative solutions, flexibility in engagement models and a comprehensive suite of mortgage products and services. ISGN’s un-paralleled value proposition is based on: Experience and best practices of working with more than 1000 customers, Scalability, experience and knowledge of more than 1500 employees, Global footprint- 15 locations in the US and 3 global centers.
CHAMBAL INFRASTRUCTURE VENTURES LIMITED
Chambal proposes to foray into infrastructure related business including the Power Sector. A wholly owned subsidiary of Chambal - Chambal Infrastructure Ventures Limited (CIVL) has been set up for the purpose. Chambal's endeavour in the power sector would be to build a major integrated power business, across various sectors, including fuel sourcing through coal mining to take advantage of the significant and expanding opportunities in the fast growing power sector in India
JOINT VENTURE
It also has a joint venture in Morocco for manufacturing phosphoric acid.
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CERTIFICATIONS
1. OHSAS 18001:1999 Certification by Det Norske Veritas (DNV). 2. Environment Management System ISO-14001:1996 Certification by Det Norske Veritas. 3. Quality Management System ISO-9001:2000 Certification by Det Norske Veritas
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AWARDS AND RECOGNITIONS
ASSOCIATE BODIES 1. 2008-09 West Central Railway Best Managed Siding Award - for Minimum average detention to Rakes. 2. 2008-09 West Central Railway Platinum Card Customer Award Railway Freight Payment Over Rs. 100 Crores. 3. 2002-03 The Fertilizer Association of India (FAI) - Award for Best Performance among Nitrogenous Fertilizer Plants. 4. 2001-02 The Fertilizer Association of India (FAI) - Best Technical Innovation Award . 5. 1999-2000 The Fertilizer Association of India (FAI) - First Prize in Production / Technical Discipline. 6. 1997-98 National Productivity Council, India - Shrestha Pramanpatra (Certificate of Excellence) for giving recognition to Production Performance in Fertilizer Industry. ENVIRONMENT, HEALTH AND SAFETY 1. 2009 International Fertilizer Association Green Leaf Trophy Award Laureate - ranked 4th for excellence in safety, health and environment in fertilizer production. 2. 2006, 2007, 2008 British Safety Council "Sword of Honour" for excellence in Occupational Health & Safety Management System. 3. 2006, 2007, 2008 British Safety Council Five Star Safety rating. 4. 2005-06, 2007 Greentech Foundation. "Safety Gold Award". 5. 2004-05, 2006-07 Greentech Foundation ‘Environment Gold Award’. 6. 2004-05 Greentech Foundation "Safety Silver Award". 7. 2006, 2007 Srishti Good Green Governance (G3) Award. 8. 2006 National Safety Awards (NSA) runner up in the category of Accident Free Year. 9. 2005 World Environment Foundation "Golden Peacock Environment Management Award". 10. 2004-06 National Safety Council (India) "Prashansa Patra", in recognition for Developing & Implementing Effective Management System & Procedures and Achieving Good Performance in Occupational Health & Safety (OHS)
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11. 2003-04, 2004-05 Fertilizer Association of India (FAI) "Environment Protection Award". 12. 2003-04 Rose Society of Rajasthan, Kota "Best Industrial Complex for Green belt and Horticulture Development". 13. 2003 Ministry of Environment and Forest (Government of India) short-listed for Indira Gandhi Paryavaran Puruskar. 14. 1998-99 Department of Forest, Kota Division "Award for best work in Forest development and Forest safety". OTHERS 1. 2009-10 Golden Peacock Award for Corporate Social Responsibility 2. 2006-07 Rajasthan Chamber of Commerce and Industry "RCCI Excellence Award" for "Annual Report Management". 3. 2005-06 Rajasthan Chamber of Commerce and Industry "RCCI Excellence Award" in recognition of Good Corporate Governance Practices. 4. 2004-05 Amity Business School, Noida "HR Excellence Award". 5. 2002-03 Mayaram Surjan Foundation, Raipur, Chattisgarh "Award for Excellence for best in house journal. 6. 2002-03 Rajasthan Chamber of Commerce and Industry "RCCI Excellence Award" in recognition of Good Corporate Governance Practice and disclosures in the Annual Report. 7. 2000-01 The Institute of Chartered Accountants of India (Rajasthan Chapter) "Best Annual Report/ Management Award" 8. 1998-99 The Income Tax Department, Rajasthan "Award for Highest Tax Payer in Rajasthan"
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SERVICES BY CFCL
Chambal provides a wide range of services to farmers to help improve agriculture and quality of life. The services which are provided are as follows: UTTAM BHANDHAN
Chambal’s Uttam Bandhan is a community welfare initiative that tries to enhance the farmer’s income and quality of life. Uttam Bandhan is spread out in ten states with around 80,000 farmers as its members. Services provided are customized taking a farmers' preference and packaging them according to the agro-climatic zones. Uttam Bandhan has had a cascading effect on around four farmers to a member.
UTTAM KRISHI SEWAKS
In the Uttam Bandhan programme the crucial link between the Company and the farmer is the Uttam Krishi Sewak. About 300 educated, unemployed youth from a rural background have been trained as Uttam Krishi Sewaks to provide best practices in agriculture and specialised services to farmers. They are self-employed and earn from commission on the sale of specialised products. Uttam Krishi Sewaks try and ensure that the farmers follow agricultural best practices. Through proper training, demonstrations, expert opinion, quality inputs and non-farm income, the Uttam Bandhan farmer has been a gainer in terms of not just increase in income but also quality of life
SOIL AND WATER TEST
Soil health is a matter of national concern. Soil and water samples are collected and tested for micro-nutrients and balanced inputs. Soil test reports are explained and the farmer is educated on the importance of proper soil health and micro-nutrients. Based on thousands of samples tested over the years, soil mapping is being done. The Agriculture Development Laboratories are located at Agra and Sriganganagar and satellite soil testing facilities have been set up elsewhere. The company does not charge any testing fee from Uttam Bandhan member farmers.
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DISSEMINATION OF INFORMATION
Crop and product demonstrations, field demonstrations and farmer meets are conducted regularly to educate farmers on latest farm practices. Farmers are given training on specialised services that vary from cultivation of medicinal and horticulture crops, vermi-culture and the use of bio-fertilizers. A dedicated farmer website uttamkrishi.com, farmer helpline- Hello Uttam and mailers such as ‘Chambal ki Chitthi’ are important channels to share information with farmers. Chambal also actively partners Government Departments, Agriculture Universities, Agriculture Research Stations and Krishi Vigyan Kendra’s under Public Private Partnership to serve the farmers.
ALTERNATE SOURCE OF INCOME
Uttam Bandhan looks beyond land and water to increase a farmer’s income. Breed improvement and Animal Health Care camps are regularly organized and farmers are educated on proper feed and mineral mixtures for good returns. Goat rearing, turkey farming, bee keeping, backyard, poultry etc. are other sources of income for farmers and Uttam Bandhan drives them to enhance income through proper training and making the facilities available at the doorstep.
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BUSINESS SCENARIO
The Government provides with the seasonal demand and requirement for each region. Hence the Government gives the company season wise allocation which is further allocated monthly for the movement of fertilizer to the various states based on the above. Thus the movement plan is compiled and finalized by the headquarters and passed on to the company’s Gadepan site where it is passed to concerned for movement planning/execution. Based on the monthly movement plan, the region calculates the economics keeping in view their budget and expenses on the various heads like transportation, warehousing, handling etc and accordingly indents are given for supply to the distribution department through head office. Regional offices services the trade / farmers by doing marketing development activities like sales promotion and technical services besides regular meet of dealers / traders by the marketing personnel. All these activities are controlled by the regional manager with the help of officers at districts and staff at regional levels.
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MARKETING DEPARTMENT AT CHAMBAL FERTILIZERS AND CHEMICALS LIMITED, GADEPAN
Marketing department at CHAMBAL FERTILIZERS AND CHEMICALS LIMITED, Gadepan consists of about 20 officials looking after following areas: Arrangement of transportation i.e. rail indents and road indents. Contracts(handling/transportation/warehousing) Imports(urea/DAP/MOP) Freight cost analysis, budgeting, MIS. Procurement of NAPHTHA(need based)
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SUPPLY AND DISTRIBUTION
Supplying the urea, based on State/GOI planned allocation from of production to the place of consumption is known as distribution. CHAMBAL FERTILIZERS AND CHEMICALS LIMITED after its first phase of expansion produces around 6000 tons of urea per day. This urea need to be despatched to its destination on time. There comes the role of supply and distribution department. They distribute the urea as per the Government orders. There are two means of distribution of urea from the site. 1) Railways 2) Movement by road The government provides subsidy on movement of urea besides production subsidy with a view to maintain uniformity of price. Thus based on up country locations demand, infrastructural availability and cost of movement, the company decides on the mode of transport i.e. rail or road. However there are certain pros and cons in both type of mode of transport. The main disadvantages in railways are: - Erratic supply of rakes by railway. - Indent acceptability –prerogative of railways. - Poor permeability of rail movement to up country locations v/s imperative presence of product at all times. - Only bulk movement is possible. Similarly there are certain limitations of the road movement, which are as under: High per ton freight cost. Bulk movement is not possible in short time. Truck availability is uncertain in season. Frequent rate fluctuations due to diesel price hike, restriction on overloading, union intervention, levy of taxes and octroi etc.
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CONSTRAINTS IN SUPPLY AND DISTRIBUTION OF FERTILIZERS
Supply and distribution is the heart of fertilizer marketing. Distribution of fertilizer is a complex procedure. The uniqueness of the fertilizer market, the uniqueness of fertilizer consumers, the uniqueness of the product and uniqueness of the farming operations create certain constraints in its distribution. These constraints can be: - Production is continuous but the demand is seasonal and at times, it is for too short period(famine period, change in cropping pattern etc.). - Fertilizer is to be marketed through a network of approximate 17,00,000 km of road and among this 50% of the area is unsurfaced. Distribution is carried out through 2,50,000 retail points spread in various parts of the country. - Urea comes under Essential Commodity Act, thus the movement and distribution is completely controlled by Government. - In rural areas storage facilities are inadequate. - Demand highly depends on natural factors. - Large number of users with different consumer habits. - Bulky and hygroscopic nature of products, hence need lots of attention and care while handling and distribution. - High costs of carriage and freights.
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MODES OF DISTRIBUTION
RAIL The major share of fertilizer is transported by RAILWAYS because of longer distances and bulky commodity. Railways have been sharing the major burden of transporting from supply counts to railheads. The company has 92:8 rail – road transport ratio in overall marketing area. There are nearly 7000 railway stations in country and 800 have been identified for the movement of bulk material like cement, food gain, fertilizer etc. The trains provided for movement of goods are called as “Rakes”. In proximity to railway stations there is a specified place for rake loading and un-loading. These are called as “rake points”. Fertilizer industry is using nearly 350 to 450 rake points for the purpose of movement of fertilizer distribution. The type of rakes provided by railways are briefed as under:
1) COVERED RAKES Name of Rake No. of wagons Carrying capacity(in metric ton) 64 64 58 58 Carrying capacity(no. of bags) 1276 1276 1052 1196
BCN A BCN HS BCN HL BCN
42 42 42 42
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2) OPEN RAKES
Name of Rake BOXN BOXN HS BOXN HL BOXN HA BOXN R
No. of wagons 59 59 59 59 59
Carrying capacity(in metric ton) 65 65 65 65 65
Carrying capacity(no. of bags) 880 880 880 960 960
a. Railway charges
Railway charges are levied as per railway receipt freight rates (tariff rates) Railway receipt freight = Charged weight per wagon * Number of wagons * Train load rate / wagon load rate (as per tariff rate in metric ton)
Foot notes: 1) Here charged weight refers to the weight of the total bags loaded. But it should not be less than 61 metric tons in case of open wagons. 2) If less than 40 wagons (in case of covered wagons) and 57 (in case of open wagons) are loaded, then per wagon load rate is taken otherwise train load rate is considered.
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b. Procedure of movement through rail
This department begins its work once the product reaches the rake point from where it is to be despatched. The product is loaded on the rake and a railway receipt is issued by railway. On showing of this railway receipt only, unloading of rake can be done on wharf at the destination rail head. This work is assigned to handling and transporting agent, whose duty is to unload the rake and send the goods to the warehouses / retailers / dealers as required. The company appoints H & T agent and their performances is periodically reviewed on the basis of: o Efficiency in timely conclusion of rake operations (no demurrage/wharfage). o Ensuring safety of material and quality (least possible cut and torn material/ losses). o Good liaison with railways and company officials.
Once the material is warehoused, the stocks are inspected by concerned marketing officer twice a month, regional officer once a month, and Gadepan officials once in three months. This is a surprise inspection to check: o Whether loading and unloading is done properly. o Proper stocking is done for counting purpose. o The cut and torned bags are repaired and properly weighed and sticked. o Whether tarpaulin is spread in the godowns before putting the bags. o The stock are not close to the walls and the pile is not more than 20 bags. o Maintenance of records or Joint Inspection Report which is prepared after each rake reaches its destination.
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c. Pros and cons of using Railways
ADVANTAGES: 1. 2. 3. 4. 5. 6. Railways are cost effective means for transportation. Railways run as per pre determined schedule. Railways are good for bulky movement of goods. Railways are safer and less prone to damages. Railways are faster means of transport. Environment friendly as compared to other means.
DIS-ADVANTAGES: 1. Railways are not cost effective if the goods are not in bulk. 2. Booking is to be done at least before a month, but accurate forecasting of demand is not possible. 3. Being a Govt. arm too much paper work is to be done. 4. Movement is limited only to those places where rail heads are present. 5. Railway movement is always limited to rail heads, so there is always dependence on movement by road for further movement.
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ROAD (By Trucks) Road movement is done by trucks. Movement by road is alternate mean of movement of goods from CFCL, Gadepan. The movement by road is preferred in many of the cases where smaller quantity is required over shorter distances/door step delivery. As per the laws of central Govt. road movement is restricted within the range of 500 kms. Due to this the road movement is limited to the states of Rajasthan and Madhya Pradesh only.
For the free flow movement of urea by means of road, CFCL has appointed transporters which provide for trucks on times. These transporters are selected on the basis of various grounds. Following things are checked on the appointment of transporters. o Market survey is done for competent parties having minimum two years of experience in transportation of bulk quantities including dealing with truckers and unions. o Parties must be having good market reputation/ sound financial position.
Along with this timely revision of rates is done with the consequent hike in diesel prices by Govt. of India as per contractual terms. The contract can be further extended subject to the recommendation of Regional Office through annual appraisal. The list of transporters responsible for the road movement of urea from CFCL Gadepan is as follows: 1) SER INDUSTRIES 2) L.N. CARRIER
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3) 4) 5) 6)
VARDHAMAN ROADLINES A.S. CORP. AND RAVI ROADLINES MANIDHARI TRANSPORT SHRI ADINATH CORP. The work starts as and when the urea is ready for despatch. Firstly the urea is loaded in trucks, as per the capacity of truck permissible by Govt. i.e. either 9 ton or 16 ton. The goods are transferred with utmost care and adequate penalties can be levied on transporters as per the contractual terms mutually agreed upon, if any damage occurs to the goods in transit.
a. Procedure of movement through road
b. Pros and cons of movement by road
ADVANTAGES: 1. Suitable for small quantities. 2. Movement is possible in remote areas as well where railways are not available. 3. Direct goods are supplied to ware houses unlike railways. 4. Saves a lot of loading and unloading cost. 5. Less paper work is involved, so becomes much easy to transport by movement by road than railways.
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DISADVANTAGES: 1. Not suitable for bulk transportation. 2. During busy season when demand for trucks is more, it becomes hard to get enough number of trucks for transportation. 3. High risk is involved in road transport. 4. Bulk movement in short time is not possible
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OPTIMAL RAIL ROAD MIX FOR DESPATCH OF UREA FROM CFCL GADEPAN (within 500kms.)
Urea is a product which comes under Essential Commodity Act. So as to make it available at all places at a constant affordable price it is subsidized by the Government. Further to insure the timely availability in desired timeframe at least possible cost that an optimal rail road mix is calculated prior to actual movement. Due to the regulation of Govt., road movement is restricted to 500 kms. Therefore the states of Rajasthan and Madhya Pradesh are the only states where supply can be made either by rail or road. The company has setup its three regional offices at Jaipur, Udaipur and Bhopal. These offices check and keep the record of the supply made to the warehouses of the districts coming under them both by rail and road. In case of rail movement of urea, it is moved to various rail heads. From there it is transported to warehouses by means of road.
The districts where urea is supplied by CFCL within 500 kms are as: RAJASTHAN KOTA BARAN BUNDI JHALAWAR TONK BHILWARA CHITTORGARH SAWAI MADHOPUR AJMER DAUSA JAIPUR KARAULI MADHYA PRADESH SHEOPUR KALAN NEEMUCH MANDSAUR GUNA SHIVPURI ASHOKNAGAR RAJGARH SHAJAPUR GWALIOR UJJAIN DATIA VIDISHA
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PRATAPGARH RAJSAMAND NAGAUR UDAIPUR BHARATPUR DHOLPUR SIKAR ALWAR BANSWARA DUNGARPUR JHUNJHUNU JODHPUR SIROHI CHURU BIKANER JALOR
MORENA RATLAM BHOPAL INDORE DEWAS BHIND SEHORE SAGAR DHAR RAISEN KHARGONE HOSHANGABAD JHABUA KHANDWA HARDA
In order to know the optimal rail road mix for the despatch of urea from CFCL Gadepan, a study was undertaken by us to ascertain the cost economics and various other related aspects. In case of movement by road, urea is loaded at CFCL, Gadepan and is directly sent to the district warehouses/ at stock dealer level, where as in case of railway, urea is sent to the respective rail heads (or the nearest rail head, if there is no rail head at that place). From there it is sent by movement by road to the warehouses.
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Following railheads undertake fertilizer rake operations for the below mentioned districts:
DISTRICT KOTA BARAN BUNDI JHALAWAR TONK BHILWARA CHITTORGARH SAWAI MADHOPUR AJMER DAUSA JAIPUR KARAULI PRATAPGARH RAJSAMAND NAGAUR UDAIPUR BHARATPUR DHOLPUR SIKAR ALWAR BANSWARA DUNGARPUR JHUNJHUNU JODHPUR SIROHI CHURU BIKANER JALOR SHEOPUR KALAN NEEMUCH MANDSAUR GUNA SHIVPURI
NEAREST RAIL HEAD KOTA BARAN KOTA BARAN KANAKPURA CHANDERIA CHANDERIA SAWAI MADHOPUR AJMER KANAKPURA KANAKPURA HINDON CITY CHANDERIA CHANDERIA NAGAUR RANA PRATAP NAGAR BHARATPUR BHARATPUR KANAKPURA ALWAR RANA PRATAP NAGAR RANA PRATAP NAGAR KANAKPURA BHAGAT KI KOTHI JAWAI BANDH LALGARH LALGARH BHAGAT KI KOTHI SHIVPURI RATLAM RATLAM SHIVPURI SHIVPURI
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ASHOKNAGAR RAJGARH SHAJAPUR GWALIOR UJJAIN DATIA VIDISHA MORENA RATLAM BHOPAL INDORE DEWAS BHIND SEHORE SAGAR DHAR RAISEN KHARGONE HOSHANGABAD JHABUA KHANDWA HARDA
SHIVPURI PACHORE SHAJAPUR GWALIOR VIKRAM NAGAR DATIA VIDISHA MORENA RATLAM NISHATPUR LAXMIBAI NAGAR DEWAS BHIND SEHORE SAGAR LAXMIBAI NAGAR MANDI DIP KHANDWA ITARSI MEGHNAGAR KHANDWA HARDA
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DATA ANALYSIS
The data related to various factors is collected. Various railheads were known and information regarding their distance from CFCL, Gadepan is collected. In case of rail despatch the urea is first transported from CFCL, Gadepan to the nearest railhead where the urea is to be supplied. From there on the urea is transported from railheads to the distributor warehouse by means road (trucks). On the basis of collected information regarding distance total freight is calculated as per railway norms. This gives the primary railway freight. From railheads to distributor warehouse urea is transported by road. This gives the secondary road freight. In case of direct movement of urea by road, it is sent directly from CFCL, Gadepan to the distributor warehouse. So primary road freight is obtained. A comparison is made between the total cost to each location by both the sources. This gives the preferred mode of transportation for each location. The analysis part is shown as:
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PF-1 (RAIL) It is the primary freight charged by railways as per its norms. This freight varies on the basis of nature of commodity, type of wagon, distance to be covered, or whether the load charges are as per no. of wagons or a complete rake.
PF-2 (ROAD) It is the primary freight charged by transporters for the secondary movement of urea from rail head to the respective destinations/go down locations.
TOTAL COST (RAIL+ROAD) The sum total of PF-1(rail) and PF-2(road) is the total cost incurred in transportation of urea by rail.
PF-1(ROAD) It is the primary and the only freight charged by the transporters to carry the urea from CFCL to the respective destinations/go down locations. For first few kms, a flat rate is charged on per metric ton basis and after that rate per ton per km are charged. LEAD Urea is supplied from CFCL, Gadepan to various dealers at different destinations within a district. The distance of these destinations fron CFCL, Gadepan varies. So a weighted average is taken out which is called as LEAD.
75
Weighted average is taken because the quantity supplied to each destination in a district varies. So the weighted average gives the average distance from CFCL, Gadepan which when multiplied by quantity gives the actual ton.kms for that destination. RAILHEADS The place or Platform of railways where all the goods are loaded and unloaded is called as RAILHEADS.
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77
FINDINGS
Following were the observations in aforementioned studies undertaken.
TOTAL DESPATCH TO M.P. TILL 500 km. TOTAL DESPATCH TO RAJ TILL 500 km. TOTAL DESPATCH TILL 500 km. QUANTITY BY ROAD IN RAJ (preferred mode) QUANTITY BY ROAD IN M.P. (preferred mode) TOTAL QUANTITY BY ROAD(preferred mode) BALANCE QUANTITY BY RAIL PREFFERED ROAD % PREFFERED RAIL %
171638.8mt 385443mt 557082mt 116996mt 24173.5mt 141169.5mt 415912.5mt 25% 75%
(Here mt means metric tons)
On the analysis of collected data it has been notice that the railways are more cost effective mode of distribution of urea. All these conclusions are made on the basis of quantitative facts and figures, but there could be some qualitative aspects which will be having an effect on distribution of urea.
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Total despatch of urea in Rajasthan and Madhya Pradesh from CFCL, Gadepan (in MT) :
Total despatch(in MT)
450000 400000 350000 300000 250000 200000 150000 100000 50000 0 Rajasthan Madhya Pradesh Total despatch
FINDINGS ? Total despatch of urea in Rajasthan by Rail and Road from CFCL, Gadepan is 385443 metric tons. ? Total despatch of urea in Madhya Pradesh by Rail and Road from CFCL, Gadepan is 171638.8 metric tons.
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Table showing total despatch of urea in Rajasthan from CFCL, Gadepan (in MT):
Total despatch in Rajasthan(in MT)
300000 250000 200000 150000 116996 100000 50000 0 Road Rail 268447
Total despatch in Rajasthan
FINDINGS ? Total despatch of urea in Rajasthan by rail amounted for268447 metric tons. ? Total despatch of urea in Rajasthan by road amounted for 116996 metric tons.
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Table showing total despatch in Madhya Pradesh from CFCL’ Gadepan (in MT):
Total despatch in Madhya Pradesh(in MT)
160000 140000 120000 100000 80000 60000 40000 20000 0 Road Rail 24173.5 Total despatch in Madhya Pradesh 147465.5
FINDINGS ? Total despatch of urea in Madhya Pradesh by rail amounted for 147465.5 metric tons. ? Total despatch of urea in Madhya Pradesh by road amounted for 24173.5 metric tons.
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Table showing preferred mode of transport within 500 kms from CFCL, Gadepan:
Preffered mode of transport within 500 kms on the basis of quantity supplied
25%
road rail
75%
FINDINGS ? Within the range of 500 kms. From CFCL, Gadepan preferred mode of transportation is Rail and is favored for 75% of the total despatch, whereas road transportation amounted for 25% of the total despatch.
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SUGGESTIONS
On the basis of study it was found out that preferred mode of despatch of urea from CFCL, Gadepan is through rail. On the basis of past data it was found out that company was emphasizing too much on rail. Earlier the ratio was 92:8. After the study a new ratio of 75:25 is obtained. If this ratio is applied company can save a lot in transportation cost. The various suggestions made are as: ? Company should give more emphasis on road movement of urea from site, as the availability of rakes is uncertain during season. ? During rainy season road movement of goods is better option as trucks can be covered or parked, thus can be saved from unnecessary loses. ? Most of the rakes made available by railways are open type, thus led to losses due to seasonal problems. Railways provide 30% rebate on freight for coverage of these losses, but is not enough. So road movement can be preferred. ? During season time for agriculture, demand for trucks is higher by the company. But at the same time demand in other areas especially stone and other agri goods is also high. In order to overcome such problem it is suggested to increase the number of vendors for road transport. ? Company can go for its own transport system of road as after the completion of their third phase of production it will achieve an economy of scale. This would also help the company in easy transportation of their other related agrigoods like pesticides, D.A.P., M.O.P. as they are being transported in small quantity and thus rail transport are not cost effective.
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SWOT ANALYSIS
STRENGTH 1. Strong distribution channel 2. Good marketing and distribution department. 3. Govt supports in form of transport subsidy.
WEAKNESS 1. Demand is seasonal and uncertain. So it becomes difficult to ascertain the need of trucks and rakes for distribution.
OPPURTUNITIES 1. Company can start its own logistic supply. 2. There is no quota restriction by WTO, so there are more chances of export. 3. Economy of scale can be achieved after completion of CHAMBAL 3.
THREATS 1. Increasing price of fuel and gas. 2. Intervention of Unions. 3. Removal of subsidy. 4. Taxes. 5. Unavailability of required number of trucks and rakes during season time.
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BIBLIOGRAPHY
BOOKS:
? Kotler, Philip. Marketing Management. 13th Edition; Prentice Hall of India 2009. ? Kothari, C. R. Research Methodology. Second Revised Edition; New Age International (P) Publishers 2008
WEBSITES:
? www.chambalfertilizers.in ? www.departmentoffertilizer.com ? www.wikipedia.com ? www.fert.nic.in ? www.marketresearch.com
JOURNALS:
? Annual Report of CFCL ? Fertilizer Journal of India
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doc_196548603.docx
to minimize the cost of sending the urea from company to the distributor
A
PROJECT REPORT
ON
“OPTIMAL RAIL ROAD MIX FOR DESPATCH OF UREA FROM CHAMBAL FERTILIZERS AND CHEMICAL LIMITED,GADEPAN”
Faculty of Management Institute of Rural Management, Jaipur July 2009
In Partial fulfillment for the requirement of the Award of
Post Graduate Diploma in Business Management
Submitted to: by: Prof. Poonam Mishra Arora Faculty FMS-IRM Jaipur
Submitted Rahul PGD-BM FMS-IRM
CERTIFICATE
This is to certify that Mr. Rahul Arora (PGDM), a student of Post Graduate Diploma in Management at FMS - IRM, Jaipur, has worked at Chambal Fertilizer and Chemical Limited, Gadepan under the able guidance and supervision of Mr. R.S. Hareesha. The period, for which he was on training accounted for 7 weeks, starting from 15th of May, 2010, to 30Th of June, 2010. This Summer Internship report has the requisite standard for the partial fulfillment of the Post Graduate Diploma in Business. To the best of our knowledge no part of this report has been reproduced from any other report and the contents are based on original research.
Signature (Prof. Poonam Mishra)
2
DECLARATION
I hereby declare that this project report entitled “Optimal rail road mix for despatch of urea from Chambal fertilizer and Chemical Limited” is a bonafide record of work done by me during the course of summer project work and that it has not previously formed the basis for the award to me for any degree/diploma, associate ship, fellowship or other similar title of any other institute/society.
Date: 30.06.2010
Rahul Arora FMS-IRM
3
ACKNOWLEDGEMENT
The Summer Project on “Optimal rail road mix for despatch of urea from Chambal Fertilizer Chemical Limited, Gadepan” offered a great learning experience. During the tenure of this project, we were fortunate to have interacted with people, who in their own capacities have encouraged and guided us.
Firstly, we would like to express our sincere gratitude to HR Department of CFCL for providing us an opportunity to undergo summer training in Supply and Distribution department of such a reputed organization. Our special vote of thanks to Mr. A.K.Saxena, Manager HR for giving us the opportunity to work with the company which gave us a great learning experience.
Our sincere thanks go to Mr. R.S. Hareesha (General Manager, S&D, CFCL) for trusting our potentials by giving us such a valuable project. We would also thank him for providing his guidance and support in completing this project.
We are also grateful to Mr. Manish Pathak (Deputy Manager, S&D, CFCL) our project guide, for providing us the required support & knowledge regarding our project and other related activities. He has been extremely helpful and cooperative. Without his support & critical evaluation this project could not have been completed successfully.
We extend our heartiest thanks to Brig. S. K. Gaur (Director FMS-IRM), FMS-IRM faculty members for their regular assistance all through the project and we would also thank Mrs. Poonam Mishra(Project Guide, FMS-IRM) for the direction and purpose she gave to this project through her invaluable insights, which constantly inspired us to think beyond the obvious.
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INDEX
Contents
EXECUTIVE SUMMARY ............................................................................................................................ 7 RESEARCH DESIGN .................................................................................................................................. 9 RESEARCH PROBLEM........................................................................................................................... 9 OBJECTIVE OF THE RESEARCH............................................................................................................. 9 RESEARCH METHODOLOGY .............................................................................................................. 10 SAMPLE SIZE...................................................................................................................................... 10 SAMPLING UNIT ................................................................................................................................ 11 RESEARCH DESIGN ............................................................................................................................ 11 DATA COLLECTION METHOD ............................................................................................................ 11 TOOLS USED ...................................................................................................................................... 12 LIMITATION OF THE STUDY............................................................................................................... 12 PRACTICAL UTILITY OF STUDY ........................................................................................................... 13 FERTILIZER ............................................................................................................................................. 15 INTRODUCTION ................................................................................................................................. 15 DEFINITION ....................................................................................................................................... 16 ROLE OF FERTILIZER IN AGRICULTURE .............................................................................................. 17 PRODUCTION OF FERTILIZER IN INDIA .............................................................................................. 18 WIDENING DEMAND AND SUPPLY GAP OF UREA IN INDIA .............................................................. 19 FERTILIZER INDUSTRY............................................................................................................................ 21 HISTORY ............................................................................................................................................ 21 BACKGROUND ................................................................................................................................... 22 INDIAN FERTILIZER INDUSTRY ........................................................................................................... 23 W.T.O. Implications ....................................................................................................................... 26 Future Trends ................................................................................................................................ 26 FERTILIZER COMPANIES IN INDIA ..................................................................................................... 27 PRODUCTION PROCESS OF FERTILIZERS ........................................................................................... 29 THE POLICY ENVIRONMENT FOR FERTILIZERS .................................................................................. 32 REGULATIONS OF OTHER INTERNATIONAL TREATIES ...................................................................... 33 5
ESSENTIAL COMMODITY ACT............................................................................................................ 35 FACTORS INFLUENCING FERTILIZER MARKETING ............................................................................. 36 OTHER DETERMINANTS .................................................................................................................... 38 GROWTH OF FERTILIZER INDUSTRY .................................................................................................. 39 FEATURES/CONTRAINTS RELATED TO FERTILIZERS .......................................................................... 40 CHAMBAL FERTILIZER AND CHEMICAL LIMITED ................................................................................... 42 INTRODUCTION ................................................................................................................................. 42 COMPANY PROFILE ........................................................................................................................... 44 AWARDS AND RECOGNITIONS .......................................................................................................... 51 SERVICES BY CFCL.............................................................................................................................. 53 BUSINESS SCENARIO ......................................................................................................................... 55 MARKETING DEPARTMENT AT CHAMBAL FERTILIZERS AND CHEMICALS LIMITED, GADEPAN ........ 56 SUPPLY AND DISTRIBUTION .................................................................................................................. 58 CONSTRAINTS IN SUPPLY AND DISTRIBUTION OF FERTILIZERS ........................................................ 59 MODES OF DISTRIBUTION................................................................................................................. 60 RAIL ............................................................................................................................................... 60 ROAD (By Trucks) .......................................................................................................................... 64 OPTIMAL RAIL ROAD MIX FOR DESPATCH OF UREA FROM CFCL GADEPAN (within 500kms.) ............ 68 DATA ANALYSIS ..................................................................................................................................... 73 FINDINGS............................................................................................................................................... 78 SUGGESTIONS ....................................................................................................................................... 84 SWOT ANALYSIS .................................................................................................................................... 86 BIBLIOGRAPHY ...................................................................................................................................... 87
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EXECUTIVE SUMMARY
The summer training of a management student plays an important role to develop him into a well – groomed professional. It gives theoretical concepts a practical shape in a field of applications. It gives an idea of dynamic & versatile professional world as well as an exposure to the intricacies & complexities of corporate world. Our Summer Internship Project was of 45 days at Chambal Fertilisers and Chemical Limited, Gadepan. The presents study was undertaken at the Production and Administration site of Chambal Fertilizers and Chemical limited, Gadepan, Kota. The study was titled as “Optimal rail road mix for despatch of urea from CFCL, Gadepan within 500kms.” The primary objective of the study was to minimize the transportation cost by calculating the optimal mix for despatch of urea by rail or road. The research was carried out for seven weeks and was Descriptive as well as Exploratory in nature involving operational work and enquiry. The tools used for the data collection in the present study are past data provided by company, unstructured interview and observation. The data was collected and analyzed and final observations are presented in report along with suggestions. At CFCL, we got a chance to apply the theory to latest technological & marketing environment. In the 45 days of exposure we learnt a lot on various aspects of organizational structure, departments & their impact. It was really an interesting experience.
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8
RESEARCH DESIGN
RESEARCH PROBLEM
With the entry of the new players in the agriculture sector, competition in fertilizer industry has increased. Fertilizers is a subsidized product as it came under Essential Commodity Act. Due to these reasons the distribution of fertilizer is as per the Government rules and regulations. Government also provides subsidy on transportation cost. So the company which is able to supply fertilizer with low costs is/are preferred. So it becomes necessary for the company to know the various costs incurred on transportations. The research problem is mainly concerned with the following: a) Determining how to minimize the cost of transportation. b) Finding optimal rail road mix for despatch of ure.
OBJECTIVE OF THE RESEARCH
? The major objective of the research is to evaluate the scope of decreasing cost of transportation. ? The other purpose of the project was to mainly determine the preferred mode of transportation on the basis of cost and various other factors.
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RESEARCH METHODOLOGY
The research done is Exploratory and Descriptive in nature. A systematic research was designed with series of steps as follows:
Step 1:
Finding out various locations where urea is transported from
CFCL, Gadepan.
Step 2:
Finding out the procedure and cost of despatch of urea from
rail and road.
Step 3:
Comparative analysis to come to a valid conclusion
The data collected was mostly from secondary sources. While collecting data adequate safeguards were taken.
SAMPLE SIZE
As per the norms of Government of India despatch of urea by road is restricted within 500kms. Beyond this the despatch can be made only through rail. So on the basis of this, a sample size of 55 was selected which is based on the scope of project. This includes most of the districts of Rajasthan and Madhya Pradesh.
10
SAMPLING UNIT
All the distributors within these 55 districts were sample units for the study.
RESEARCH DESIGN
The study is Descriptive in nature since it involves fact finding enquiries of different kinds. Also because the major purpose of this research is to find the optimal rail road mix for despatch of urea from CFCL, Gadepan. Since the research has variables which are not under the control like the production of urea by the company but it can control the cost of production and cost of despatching the urea from CFCL, Gadepan. Also since one of the objective of study was to find the new mix for despatching of urea, this study entailed Exploratory research design also.
DATA COLLECTION METHOD
The data collected for the study was mostly secondary data and was taken from company database. The data regarding freights of railway was taken from online sources. The data regarding freights of road transportation was collected by informal meetings with the transportation vendors of the company.
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TOOLS USED
The study involved the usage of Bar graphs and Pie charts -: ? Bar Graph: - It is a chart with rectangular bars with lengths proportional to the values that they represent. These are used for comparing two or more values that were taken over time or on different conditions, usually on small data sets.
?
Pie Charts: -It is a circular chart divided into sectors, illustrating relative magnitudes or frequencies.
? Weighted average
LIMITATION OF THE STUDY
? The sample size could not be increased as the despatches can only be made within 500kms (by trucks) according to GOI. ? Since the data required for the study was confidential and private, so in few of the cases original data could not be obtained from CFCL. ? Since it was peak time for agriculture sector, company officials were not able to give proper time.
12
PRACTICAL UTILITY OF STUDY
Every institution looks around for existing as well as new markets so as to capture the business opportunities before their competitors can grab the opportunity. A wrong selection of any particular market can lead to problems like increased transaction cost. This particular project will help CFCL in knowing various facets of their business as follows: a) Knowing the least cost of transportation for despatch of urea. b) Finding the best mix of rail and road. c) Helps in saving cost.
13
14
FERTILIZER
INTRODUCTION
Agriculture contributes about 25% of GDP in our country and more than half of the population is engaged in agriculture. There is a positive correlation between consumption of fertilizers and the production of food grains. This phenomenon is not only peculiar to food grains, but to other crops including yield from horticulture and plantations. The factors which have contributed to increase in the food grains production are: 1> The introduction of improved and high yielding varieties of seeds. 2> Expansion of irrigation facilities 3> Improved use of fertilizers 4> Improved package of practices 5> Plant protection measures 6> Easy availability of credit to farmers The food grain production increased from 201 million tons during 199899 to 234 million tons during 2009-10. As a result, not only India is selfsufficient in food grains, but also we have developed the capability to export in time of surplus. Successful agriculture activity hinges on the existence of a conducive policy environment, adequate supply and distribution of agriculture inputs such as fertilizers, seed, and pesticides etc. adaptation of scientific resulting in optimum production. Fertilizers provides the essential plant nutrients needed for increasing crop yields specially food grains exploiting the full potential of high yielding varieties. Fertilizers consumption increased from 50.82 million tons in 1951 – 52 to presently stagnated production level of around 210 – 212 million tons.
15
DEFINITION
Fertilizer is generally defined as "any material, organic or inorganic, natural or synthetic, which supplies one or more of the chemical elements required for the plant growth". Sixteen elements are identified as essential elements for plant growth, of which nine are required in macro quantities and seven in micro quantities. Of these elements, carbon, oxygen and hydrogen are supplies by air and water and are, therefore, not treated as nutrients by the fertilizer industry. The main aim of the industry is to provide the primary and secondary nutrients which are required in macro quantities. Essential elements for plant growth No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. Name of element Carbon Oxygen Hydrogen Nitrogen Phosphorus Potassium Calcium Magnesium Sulphur Boron Chlorine Copper Iron Manganese Molybdenum Zinc Macro nutrients Secondary nutrients Primary nutrients Nomenclature
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ROLE OF FERTILIZER IN AGRICULTURE
The agricultural sector plays a vital role in Indian economy. It provides income, employment and source of livelihood for major population, support diversification for rapid industrial growth by providing wide range of raw materials. It contributes to the export of the country and above all it makes food grains available for the increasing population of the country. The food grain production increased from about 74 million tons during 1966-67 to 380 million tons during 2008-09. Fertilizers provides the essential plant nutrients needed for plant growth and increasing crop yield especially food grains, exploits the full potential of High Yield Variance (HYV), by increasing the food grains production and generating the adequate surplus of various agriculture commodities. Fertilizers consumption increased from 1.1 million tons during 1966-67 to more than 20 million tons during 2008-09. It is estimated that increasing fertilizers use has alone contributed about 60% of the total food grain production in the country. The use of fertilizer has played a vital role in increasing the production. The consumption of fertilizers is directly related to the quality of subsoil and surface water for irrigation. Now the farmers are provided with more water and other facilities through canals and drainage systems and this modernization has promoted the use of fertilizers as well, thus leading to more consumption of fertilizers. The population of our country and the world has rapid rate of growth as compared to growth in food production. There has also been a decline in the arable land per person in recent times. The demand for food and agricultural products to feed the population is expected to be double by the end of the decade.
17
PRODUCTION OF FERTILIZER IN INDIA
18
WIDENING DEMAND AND SUPPLY GAP OF UREA IN INDIA
The demand of urea in country has always been more than the supply. In order to meet the demand India has to depend upon imports.
19
20
FERTILIZER INDUSTRY
HISTORY
Department of Fertilizers comes under the ambit of Ministry of Chemicals and Fertilizers. This Department was earlier used to be named as Department of Chemicals & Fertilizers. The genesis of the Department of Chemicals and Fertilizers can traced to the erstwhile Ministry of Production in the fifties. During that time, while "Fertilizer" subject was being dealt as a part of the Section, the subject matter of "Chemicals" was assigned to Ministry of Commerce and Industry. The importance of the fertilizer and chemical sectors was recognized in 1963 when the subjects concerned were placed in one Department in the newly set up Ministry of Petroleum and Chemicals. In 1975, with the appointment of a separate Cabinet Minister for Chemicals & Fertilizers, the Ministry of Chemicals & Fertilizers comprising the Department of Petroleum and the Department of Chemicals & Fertilizers came into being. A separate Ministry of Chemicals & Fertilizers came into existence in September, 1982 headed by a Cabinet Minister who is assisted by Minister of State. It was part of the Ministry of Agriculture till 1984. In June, 1991, it becomes part of newly created Ministry of Chemicals & Fertilizers. Department of Fertilizers came into existence as a separate Department in September, 1985 consequent upon the bifurcation of the then Ministry of Chemicals & Fertilizers. Thereafter, this Department was brought under the ambit of Ministry of Agriculture for a short duration. However, the earlier position was restored in 1992.
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BACKGROUND
Chemical fertilizers have played a vital role in the success of India's green revolution and consequent self - reliance in food grain production. The increase in fertilizer consumption has contributed significantly to sustainable production of food grains in the country. Government of India has been consistently pursuing policies conductive to increased availability and consumption of fertilizers in the country. The Retention Price Cum Subsidy Scheme (RPS) for indigenous nitrogenous fertilizer units was introduced by the Government of India in November 1977 to ensure a reasonable return on investment and to facilitate healthy development and growth of fertilizer industry. The Scheme was later extended to phosphatic and other complex fertilizers in February 1979 and Single Super Phosphate (SSP) in 1982. However, from August 1992, the Government has progressively decontrolled the prices and distribution of phosphatic and other complex fertilizers. At present, farm gate price of Urea is controlled by the Government whereas its distribution has been partially decontrolled from 1 April 2003. The Retention Price Scheme stimulated indigenous production and consumption of fertilizers in the country. However, for attaining greater internal efficiencies and global competitiveness, unit specific approach of RPS has been replaced by a group based concession scheme based on greater normative approach called the New Pricing Scheme 9NPS) from 1 April 2003. The Fertilizer Industry Coordination Committee (FICC) constituted on 1 December 1977 to administer and operate the Retention Price Scheme continues under the New Pricing Scheme for administration of the scheme for urea.
22
INDIAN FERTILIZER INDUSTRY
Indian Fertilizer industry is one of the vital industries for the Indian economy, since it manufacturers a very critical raw material for agriculture. The fertilizer industry especially the ammonia urea plants are energy demanding in their operation. The main objective of the fertilizer industry is to ensure the supply of primary and secondary nutrients in the required quantities. The fertilizer industry in India has performed a vital role in enabling the necessary increase in the use of plant nutrients for achieving the objectives of self-sufficiency in food grains production and accelerated and continuous agricultural growth. The fertilizer industry which is one of the most energy intensive sectors is very important from the context of environmental discussions. Due importance to increasing productivity through the implementation of competent and pollution free technologies in the manufacturing sector would be most desirable in combining economic, environmental and social development objectives. Pre Liberalization
In India per hectare consumption of fertilizer in 1950-51 was less than 1/4th of the global average. Production was by and large in the purview of public sector and cooperative sector. In 1977 the government introduced the Retention Price Scheme (RPS) with the goals of providing fertilizers to farmers at reasonable rates without affecting the profitability of the manufacturers. Under this policy the government would pay the manufacturers, the difference between the administered price (sale price) and the retention price (cost of production).
23
Over and above the retention price subsidy, the equated freight subsidy was introduced to enable the manufacturers to cover the cost of transportation. Post Liberalization
The policy of economic liberalization has its effect on the fertilizer industry too. The government in a move aimed at reducing subsidy, decontrolled all the phosphatic and potassic fertilizers in 1992.This strained the ratio of fertilizer utilization. With this policy of liberalization, the retention pricing scheme (RPS) which had been introduced in 1977, got confined only to urea. Post liberalization, the government strategized a long term fertilizer policy to be completed in three different phase, beginning in 2000-01 and ending in 2006-2007.
Phase 1: 2000-01 and 2001-02
? ? ? ? ? ?
Evaluate existing capacity. Increase in urea prices from time to time. Evaluate the possibility of a coal based expertise. Promote joint ventures. Finalize policy on fertilizer pricing and capacity enhancement. Eliminate distribution controls on urea and augment concession scheme to bio fertilizers.
24
Phase II (2002-03-2003-04)
? ? ? ? ? ?
Finalize decision on feedback. Long term strategy of increased capacity. Decide on extent of protection to local industry. Eliminate MRP and encourage productive investment. Reorganize the association between the industry and farmers. Judicious utilization of fertilizer and greater emphasis on ecofriendly fertilizer. Establish Fertilizer Policy Planning Board.
?
Phase III (2004-05-2006-07)
? ?
Removal of MRP Define government's role in decontrol setup and with respect to policy relating to LNG.
25
W.T.O. Implications The restriction on quantity of fertilizers to be imported has been eliminated from April 1, 2001.The proposed plan to establish a tariff rate quota (TRQ) for the import of urea has been deferred. The Government has planned to impose a higher tariff of 150-200 per cent on imported urea in future. This would lead to increase in prices of imported urea and be detrimental to the demand supply gap which is likely augment in future.
?
?
Future Trends India's demand for fertilizers in 2007-08 was 26 MM tons, which went up to 29 MM tons in 2008-09 against a supply of 20 MM tons in 2008-2009. The demand for fertilizers in 2011-12 is forecasted to be around 35.5 MM tons. More fertilizer projects are in the pipeline. Gujarat is expected to play a leading role in fertilizer production. Indian companies have penetrated the overseas market, signaling a new phase for the industry.
?
?
? ?
26
FERTILIZER COMPANIES IN INDIA
PUBLIC SECTOR
? ? ? ? ? ? ? ?
National Fertilizers Limited Fertilizers and Chemicals Travancore Ltd. Rashtriya Chemicals & Fertilizers Limited Madras Fertilizers Limited Paradeep Phosphates Limited Pyrites, Phosphates & Chemicals Limited Fertilizer Corporation of India Limited Projects & Development India Limited
COOPERATIVE SECTOR
? Indian Farmers Fertilizer Cooperative Ltd. ? Krishak Bharati Cooperative Limited
PRIVATE SECTOR
? ? ? ? ? ? ? ? ?
Gujarat State Fertilizer Company Limited Coromondel Fertilizers Limited Shriram Fertilizers & Chemicals Limited Zuari Industries Limited Southern Petrochemicals Industries Corporation Ltd. Mangalore Chemicals & Fertilizers Limited Gujarat Narmada Valley Fertilizers Co. Ltd. Deepak Fertilizers & Petrochemicals Ltd. Indo-Gulf Fertlizers & Chemicals Corporation Ltd.
27
? ? ? ? ? ?
Godavari Fertilizers & Chemicals Limited Nagarjuna Fertilizers & Chemicals Limited Chambal Fertilizers & Chemicals Limited Tata Chemicals Limited Oswal Chemicals & Fertilizers Limited Fertilizer Corporation of India Limited
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PRODUCTION PROCESS OF FERTILIZERS
UREA MANUFACTURING PROCESS Urea is produced from ammonia and carbon dioxide in two equilibrium reactions: 2NH3 + CO2 NH2COONH4 Ammonium carbonate NH2COONH4 NH2CONH2 + H2O Urea
Step 1 - Synthesis A mixture of compressed CO2 and ammonia at 240 bars is reacted to form Ammonium carbonate. This is an exothermic reaction, and heat is recovered by a boiler which reduces steam. If the mixture remains in the reactor long enough, the second reaction takes place: ammonium carbonate splits into water and urea. Step 2 - Purification
The major impurities in the mixture at this stage are water from the urea production reaction and unconsumed reactants (ammonia, carbon dioxide and ammonium carbonate). The unconsumed reactants are removed in three stages. Firstly, the pressure is reduced from 240 to 17 bars and the solution is heated, which causes the ammonium carbonate to decompose to ammonia and carbon dioxide: NH2COONH4 2NH3 + CO2
29
At the same time, some of the ammonia and carbon dioxide flash off. The pressure is then reduced to 2.0 bar and finally to -0.35 bar, with more ammonia and carbon dioxide being lost at each stage. By the time the mixture is at -0.35 bar a solution of urea dissolved in water and free of other impurities remains. At each stage the unconsumed reactants are absorbed into a water solution which is recycled to the secondary reactor. The excess ammonia is purified and used as feedstock to the primary reactor. Step 3 - Concentration 75% of the urea solution is heated under vacuum, which evaporates off some of the water, increasing the urea concentration from 68% w/w to 80% w/w. At this stage some urea crystals also form. The solution is then heated from 80 to 110oC to re dissolve these crystals prior to evaporation. In the evaporation stage molten urea (99% w/w) is produced at 140oC. The remaining 25% of the 68% w/w urea solution is processed under vacuum at 135OC in a two series evaporator-separator arrangement.
30
Step 4 - Granulation Urea is sold for fertilizer as 2 - 4 mm diameter granules. These granules are formed by spraying molten urea onto seed granules which are supported on a bed of air. This occurs in a granulator which receives the seed granules at one end and discharges enlarged granules at the other as molten urea is sprayed through nozzles. Dry, cool granules are classified using screens. Oversized granules are crushed and combined with undersized ones for use as seed. All dust and air from the granulator is removed by a fan into a dust scrubber, which removes the urea with a water solution then discharges the air to the atmosphere. The final product is cooled in air, weighed and conveyed to bulk storage ready for sale.
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THE POLICY ENVIRONMENT FOR FERTILIZERS
Due to continuous increase in the population of our country, need for food grains have been continuously increasing. In order to maintain the food security in the country, the supply and distribution of fertilizers should be timely and at constant rate. Thus the government preferred not to leave the supply and distribution and pricing of fertilizers to the market forces. The selling price of all the nitrogenous fertilizers is controlled by Government to make it affordable for the poor farmers and induce consumption. The price of phosphatic fertilizers were also controlled since March 1976 and under formal control since February 1979 for complex phosphatic material inducing DAP and since May 1982 for SSP. In a world of inflation and increasing prices of input/raw material including feedstock utilize such as power and water and services such as railway freight, cost of production was however higher. Under the Retention Pricing and Subsidy Scheme (RPS), the Government fixed a fair ex-factory price, commonly known as Retention price. Thus making fertilizer available at same price everywhere. Thus by these prescribed efficiency norms, Government reimburses the excess over net realization from sale price as subsidy to the producer. The cost of transport from plant to the consumption point is also compensated on a normative basis. So as to keep a check over the production and consumption of urea, Govt. has put urea under the ESSENTIAL COMMODITY ACT.
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REGULATIONS OF OTHER INTERNATIONAL TREATIES
IFA (International Fertilizer Association) developed a series of 12 principles for use in fertilizer operations globally. 1. All members shall demonstrate leadership and management commitment with regards to safety, security, health and environmental issues in fertilizer production, distribution and sales. 2. All members shall attempt for zero harm and adverse environmental impact whilst maintaining a healthy work place for all employees and contractual staff. 3. All members shall ensure that safety, security, health and environment issues are integrated into their corporate policy and receive the highest importance and priority. 4. All members shall ensure adequate financial and human resources for continual improvement of safety, security, health and the environment performance. 5. All members shall comply with local safety, security, health and environmental laws and strive to embrace international laws and best practices as much as possible. 6. All members shall establish and improve their safety, security, health and Environmental performance through annual objectives, targets or key performance indicators. 7. All members shall establish adequate procedures and controls to ensure that safety, security, health and environment are not put at risk at any time or in any form. 8. All members shall ensure that all employees and contractual staff have the right competence and are adequately trained and informed about safety, security, health and environment related to their specific activities, and shall encourage the participation of employees and
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contractual staff for further improvements.
9. All members shall adhere to the principles of hazard and risk assessment in evaluating all their activities to ensure that safety, security, health and environment standards are continually enhanced. 10. All members shall strive to subscribe to safety, security, health and environment management systems that will be subjected to internal and external auditing. 11. All members shall voluntarily share information with regards to experiences and lessons related to safety, health and the environment with all employees and contractual staff, and with other IFA members, unless under legal constraints or if the information is of proprietary nature. 12. All members shall strive to continually promote safety, security, health and environmental matters to enhance the social responsibility and accountability of the global fertilizer industry.
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ESSENTIAL COMMODITY ACT
The essential Commodity Act, 1955, was enacted by the government of India for the control of the production , supply and distribution of, and trade and commerce in, in certain commodities. The list of commodities is given in section 2 of Act did not include fertilizers. However, in exercise of the power conferred by sub clause (a) of section 2 of the Essential Commodity Act, 1955, the government declared “fertilizers” whether inorganic or mixed fertilizer to be an essential commodity for the purpose of the said act. The government of India issued the fertilizers (control) orders 1957, under section 3 of the essential commodity act, 1955. It came into force from 15-5-1957. These orders extend to the whole of India. It provides inter-alia. For control of prices of fertilizers; registration of dealers; registration of fertilizer mixture; restriction on the manufacture, storage and sale of fertilizers, disposal of substandard fertilizers; producer for drawing samples and methods of analysis of fertilizers. Fertilizer industry cannot sell/moves the fertilizer unless the movement ECA is given to them by the dept. of fertilizers i.e. ministry of agriculture. GOI gives ECA to different companies based on their production plan, based on the above; GOI gives season wise and month wise movement orders for the movement of the fertilizers. And after that company plans for movement on fertilizer to the various states on monthly basis. The dept. of fertilizer strictly monitors the movement plan of fertilizer and accordingly the fertilizers are moved from factory to the consumption center.
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FACTORS INFLUENCING FERTILIZER MARKETING
The factors which affect the marketing of fertilizers are: Ineffective distribution process Retailers Transport Credit facility to customers Lack of awareness in consumers Government policy and control Competitors Need and habitat of customer Weather condition Cropping pattern Nature of product Extensive services Seasonal demand Rigid and slow reaction to market change Uneducated target market
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FERTILIZER PLAN
The fertilizer is a product that helps a farmer in increasing the output from his cultivated land. Since the farming conditions vary from region to region in India, there are lots of uncertainties associated with agriculture. The main dimension for fertilizer plan includes:
- Sales forecast and sales plan - Supply and distribution plan a) Direct distribution plan b) Storage plan - Channel plan - Advertisement plan - Sales promotion plan
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OTHER DETERMINANTS
Determinants of fixed costs: 1. 2. 3. 4. Salaries & Wages Deprecation Allocated Costs Taxes
Determinants of variable costs: 1. Gas as Feed Stock 2. Gas as Fuel 3. Canal Water 4. Chemicals 5. Catalyst 6. Maintenances of Stores 7. Packing Materials 8. Containers 9. Contract Labors 10. Electricity Duty 11. Other Expenses (As allocated)
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GROWTH OF FERTILIZER INDUSTRY
As on 31 Jan 08, the country has an installed capacity of 120.61 lakh MT of nitrogen and 56.59 lakh MT of Phosphate. Presently, there are 56 large size fertilizer plants in the country manufacturing a wide range of nitrogenous, phosphatic and complex fertilizers. Out of these, 30 (as on date 28 are functioning) units produce urea, 21 units produce DAP and complex fertilizers, 5 units produce low analysis straight nitrogenous fertilizers and the remaining 9 manufacture ammonium sulphate asproduct. Besides, there are about 72 medium and small-scale units in operation producing SSP. The sector-wise installed capacity is given in the table below:Sector -wise and Nutrient - wise Installed Capacity of Fertilizer Manufacturing Units (as on 1st January, 2008)
S.No Sector
Capacity ( Lakh MT)
Percentage Share
Nitrogen Phosphatic Nitrogen Phosphatic 1 2 3 Total Public Sector 34.98 4.33 17.13 35.13 56.59 29.00 26.27 44.73 100.00 07.65 30.27 62.08 100.00
Cooperative 31.69 Sector Private Sector 53.94 120.61
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FEATURES/CONTRAINTS RELATED TO FERTILIZERS
Food, Shelter and Cloth are the basic three necessities of life and is very important for all of us. In India almost half of the population is dependent on agriculture for these things. Agriculture is very important source of bread and butter to the people in the country. Agriculture is directly associated with use of fertilizers and urea. In order to meet the demands of increasing population, production of food grains has to be increased. To increase the food grain production, fertilizers play a vital role. Various factors which are affected can be studied as: - Production is continuous but the demand is seasonal and at times, it is for too short period. - Fertilizer is to be marketed through a network of approximate 17,00,000 km of road and among this 50% of the area is un surfaced. Distribution is carried out through 2,50,000 retail points spread in various parts of the country. - Urea comes under Essential Commodity Act, thus the movement and distribution is completely controlled by Government. - In rural areas storage facilities are inadequate. - Demand highly depends on natural factors. - Large number of users with different consumer habits. - Bulky and hygroscopic nature of products, hence need lots of attention and care while handling and distribution. - High costs of carriage and freights. - Compulsion of using jute bags for packaging purposes, even though traders and farmers do not prefer them. - Changing cropping pattern also effects the consumption of urea in varied places. - Poor availability of wagons from railways. Many a times open wagon are supplied during rainy seasons. - Railway network is not spread properly and possess a big problem if the goods are to be supplied in rural areas.
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CHAMBAL FERTILIZER AND CHEMICAL LIMITED
INTRODUCTION
Chambal Fertilizers and Chemicals Limited is the largest private sector fertilizer producers in India. It was promoted by Zuari Industries Limited in the year 1985. Its two hi-tech nitrogenous fertilizer (urea) plants are located at Gadepan in Kota district of Rajasthan. Built at a price of over Rs. 25 billion (USD 500 million), the two plants produce about 2 million tons of Urea per annum. The first plant was commissioned in 1993 and second plant in 1999. These plants use state-of-the-art technology including that from Denmark, Italy, United States and Japan. Chambal Fertilizers caters to the need of the farmers in ten states in Northern, Central and Western regions of India and is the lead fertilizer supplier in the State of Rajasthan. The Company has a vast marketing network comprising 11 regional offices, 1,300 dealers and 20,000 village level outlets. The Company has donned the mantle of providing all agri-products through a ‘single window’ to enable the farmer to buy all products from one source. The Company dealers provide Urea and other agri-inputs like DAP (Di-Ammonium Phosphate), MOP (Murate of Potash), SSP(Single Super Phosphate), pesticides and seeds. Most of these products are sourced from reputed suppliers and sold under the ‘Uttam’ umbrella brand. Today, the Company has attained a leadership position in the pesticide business in North India.
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COMPANY PROFILE
CHAMBAL FERTILIZERS AND CHEMICALS LIMITED is a K. K. Birla group company and is promoted by ZUARI AGRO CHEMICALS LIMITED. It is incorporated on 7th May 1985 with the initial name of ARAVALI FERTILIZERS LIMITED. It got its certificate of commencement of business on 18th July 1985. Earlier the project was decided to be installed at SAWAIMADHOPUR in Rajasthan. Construction was started at SawaiMadhopur site and was subsequently shifted to the current location at GADEPAN in Kota and the company was renamed as CHAMBAL FERTILIZERS AND CHEMICALS LIMITED. It is a gas base project fulfilling its gas requirement from GAIL, through HBJ pipelines. Technology of the project was supplied by SNAMPROGETTI SPA of ITALY including the supply of technical knowhow, erection, commissioning and supervision of the plant. Project zero date was 1st January 1990 and the commercial production commenced on 1st January 1994. Company achieved 100% capacity utilization target within three months of its operation. Average daily production of UREA was around 2850 tons per day. The company planned for its first expansion plan and by the year 199900 its second unit had also started the production. The daily production has now reached to approx. 6000 tons per day. Technology for this project has been provided by TOYO ENGINEERING COMPANY, JAPAN on turnkey basis. Now the company is planning for further expansion by establishing a new unit by the year 2013-14. Chambal Fertilizers caters to the needs of the farmers in ten states in Northern, Central and Western regions of India and is the lead fertilizer supplier in the State of Rajasthan. The Company has a vast marketing network comprising 10 regional offices, 1,300 dealers and 20,000 village
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level outlets. The Company has donned the mantle of providing all agri-products through a 'single window’ to enable the farmer to buy all products from one source. The Company dealers provide Urea and other agri-inputs like DAP (Di-ammonium Phosphate), MOP (Murate of Potash), SSP (Single Super Phosphate), pesticides and seeds. Most of these products are sourced from reputed suppliers and sold under the 'Uttam’ umbrella brand. Today, the Company has attained a leadership position in the pesticide business in North India. In order to help farmers use fertilizers in a balanced way, the Company tests over 100,000 soil and irrigation water samples annually at its Agricultural Development Laboratories located at Agra and Sriganganagar. It then suggests the correct dosage of different fertilizers to be used based on crop planning and soil health. Today, Chambal Fertilizers has consolidated its position in agri-business and diversified into other sectors. These sectors or divisions are:
AGRI-BUSINESS DIVISION
Chambal’s Agri Business Division is one of the largest private sector fertilizer producers in India. Its two hi-tech nitrogenous fertilizer (urea) plants are located at Gadepan in Kota district of Rajasthan. Built at a price of over Rs. 25 billion (USD 500 million), the two plants produce about 2 million tons of Urea per annum Chambal Fertilizers and Chemicals Limited is one of the largest private sector fertilizer producers in India. It caters to the need of the farmers in ten states in Northern, Central and Western regions of India and is the lead fertilizer supplier in the State of Rajasthan. The Company has a vast marketing network comprising 11 regional offices, 1,300 dealers and 20,000 village level outlets.
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The Company has donned the mantle of providing all agri-products through a ‘single window’ to enable the farmer to buy all products from one source. The Company dealers provide Urea and other agri-inputs like DAP (Di-Ammonium Phosphate), MOP (Murate of Potash), SSP (Single Super Phosphate), pesticides and seeds. Most of these products are sourced from reputed suppliers and sold under the ‘Uttam’ umbrella brand. Today, the Company has attained a leadership position in the pesticide business in North India. To establish a closer bond and to provide personalized services, Chambal has also started the ‘Uttam Bandhan’ program under which crop and product demonstrations, field demonstrations and farmer meets are conducted. Soil and water testing are also conducted for free at Chambal’s laboratories and experts emphasize the balanced use of fertilizers. To encourage the new age farmer, a website, 'uttamkrishi.com', provides information on the weather, suitable cropping techniques and markets. ‘Hello Uttam’ telephonic helplines have been set up to answer the queries raised by farmers. Unemployed youth from villages are enrolled as ‘Uttam Krishi Sewaks’. They are trained in the latest techniques and provide specialized services to farmers.
SHIPPING DIVISION – INDIA STEAMSHIP
With the Indian economy booming and the associated need for oil security, Chambal Fertilizers and Chemicals Limited decided to enter the energy transportation sector through the acquisition of the India Steamship Company (ISS) Ltd., one of the oldest shipping companies in the country incorporated in 1928. ISS was merged with Chambal Fertilizers and Chemicals w.e.f September 2004 Today, India Steamship has a fleet capacity of over 600,000 DWT in the form of six Aframax tankers - ‘Ratna Urvi’, ‘Ratna Puja’, ‘Ratna Shruti’, ‘Ratna Shradha’, ‘Ratna Namrata’ and ‘Ratna Shalini’. Three new
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Aframax Tankers of about 105,000 DWT each joined the fleet between April and July 2008. The latest addition is ‘Ratna Shalini’ which joined the fleet in the first quarter of 2010. Chambal’s robust financial strength and market standing has added muscle to India Steamship. To enhance its competitiveness, India steamship is acquiring critical mass by adding tonnage by way of charting activities through a subsidiary in Singapore. What’s more, double hull vessels are being sourced, in line with international shipping standards. Simultaneously, its corporate strategy is being re-aligned to make it more agile and customer focused in today’s competitive global environment.
TEXTILE DIVISION – BIRLA TEXTILE MILLS LIMITED
Birla Textile Mills (BTM) was established in 2000 as division of Chambal. In less than a decade, BTM has emerged as leading name for textiles in India. It has a reputation for innovative products, impeccable quality and reliable service – attributes that are making it a partner of choice for demanding international customers. BTM has set up a 83,376 spindle capacity, state-of-the-art plant at Baddi, Himachal Pradesh. The product roster includes cotton and synthetic grey and dyed blended yarns in various counts for the domestic and world markets. The plant conforms to ISO 9001:2000 standards for its quality management systems. Presently, BTM exports around 25% of its aggregate production to countries in Europe and Asia. Looking ahead, exports will continue to be the key driver of BTM's growth strategy. Consequently, BTM is sharpening its competitive edge by adopting global manufacturing standards and management practices across the organization. Chambal Fertilizers has other business interests through its subsidiaries in the software and in the infrastructure sector:
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CFCL TECHNOLOGY LIMITED (ISGN)
With the aim to enter the sunrise sector of Software Technology, Chambal Fertilizers set up the India Software Group (ISG) in 1998 as its software arm. In an attempt to further expand in the overseas market the company soon acquired Nova soft Information Technology Corporation; A New Jersey, USA based company, along with its subsidiaries. After a decade in the business and years of experience in product development and applications maintenance, the combined entity - ISGN, decided to focus on providing technology solutions to the 3 trillion Dollar US mortgage market to capitalize on its strengths. The acquisition of Mortgage Hub Inc., a US based pioneer of web-based IT solutions and services, enabled ISGN’s plans of restructuring the mortgage industry. With a host of services and a clientele consisting of some of the largest lending organizations in the US, Mortgage Hub added greatly to the range of services on offer. A further expansion occurred with ISGN’s acquisition of the mortgage software division of the Fair Issac Corporation, a leading US based enterprise decision management solutions provider for global businesses and Dynatek a US based provider of mortgage automation software for retail and wholesale lenders. Today, ISGN is one of the most diverse and experienced providers of mortgage technology and services. Its industry leading solutions support the entire spectrum of the loan life cycle, from origination to settlement services, to support on core servicing, loss mitigation and home retention services. With the acquisition of Fiserv’s Fulfillment Services business, ISGN has expanded to 15 locations in the US, and 3 global centers. With 1500 employees supporting more than 1000 customers, ISGN delivers business impact to various lending institutions that include large global financial institutions, neighborhood banks, credit unions, and national lenders.
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ISGN has a market reputation of quality and an un-wavered focus on the mortgage industry. It has, since, 2005 laid foundations and emerged a formidable transformational leader that can help lenders create business impact, exceptional quality, innovative solutions, flexibility in engagement models and a comprehensive suite of mortgage products and services. ISGN’s un-paralleled value proposition is based on: Experience and best practices of working with more than 1000 customers, Scalability, experience and knowledge of more than 1500 employees, Global footprint- 15 locations in the US and 3 global centers.
CHAMBAL INFRASTRUCTURE VENTURES LIMITED
Chambal proposes to foray into infrastructure related business including the Power Sector. A wholly owned subsidiary of Chambal - Chambal Infrastructure Ventures Limited (CIVL) has been set up for the purpose. Chambal's endeavour in the power sector would be to build a major integrated power business, across various sectors, including fuel sourcing through coal mining to take advantage of the significant and expanding opportunities in the fast growing power sector in India
JOINT VENTURE
It also has a joint venture in Morocco for manufacturing phosphoric acid.
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CERTIFICATIONS
1. OHSAS 18001:1999 Certification by Det Norske Veritas (DNV). 2. Environment Management System ISO-14001:1996 Certification by Det Norske Veritas. 3. Quality Management System ISO-9001:2000 Certification by Det Norske Veritas
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AWARDS AND RECOGNITIONS
ASSOCIATE BODIES 1. 2008-09 West Central Railway Best Managed Siding Award - for Minimum average detention to Rakes. 2. 2008-09 West Central Railway Platinum Card Customer Award Railway Freight Payment Over Rs. 100 Crores. 3. 2002-03 The Fertilizer Association of India (FAI) - Award for Best Performance among Nitrogenous Fertilizer Plants. 4. 2001-02 The Fertilizer Association of India (FAI) - Best Technical Innovation Award . 5. 1999-2000 The Fertilizer Association of India (FAI) - First Prize in Production / Technical Discipline. 6. 1997-98 National Productivity Council, India - Shrestha Pramanpatra (Certificate of Excellence) for giving recognition to Production Performance in Fertilizer Industry. ENVIRONMENT, HEALTH AND SAFETY 1. 2009 International Fertilizer Association Green Leaf Trophy Award Laureate - ranked 4th for excellence in safety, health and environment in fertilizer production. 2. 2006, 2007, 2008 British Safety Council "Sword of Honour" for excellence in Occupational Health & Safety Management System. 3. 2006, 2007, 2008 British Safety Council Five Star Safety rating. 4. 2005-06, 2007 Greentech Foundation. "Safety Gold Award". 5. 2004-05, 2006-07 Greentech Foundation ‘Environment Gold Award’. 6. 2004-05 Greentech Foundation "Safety Silver Award". 7. 2006, 2007 Srishti Good Green Governance (G3) Award. 8. 2006 National Safety Awards (NSA) runner up in the category of Accident Free Year. 9. 2005 World Environment Foundation "Golden Peacock Environment Management Award". 10. 2004-06 National Safety Council (India) "Prashansa Patra", in recognition for Developing & Implementing Effective Management System & Procedures and Achieving Good Performance in Occupational Health & Safety (OHS)
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11. 2003-04, 2004-05 Fertilizer Association of India (FAI) "Environment Protection Award". 12. 2003-04 Rose Society of Rajasthan, Kota "Best Industrial Complex for Green belt and Horticulture Development". 13. 2003 Ministry of Environment and Forest (Government of India) short-listed for Indira Gandhi Paryavaran Puruskar. 14. 1998-99 Department of Forest, Kota Division "Award for best work in Forest development and Forest safety". OTHERS 1. 2009-10 Golden Peacock Award for Corporate Social Responsibility 2. 2006-07 Rajasthan Chamber of Commerce and Industry "RCCI Excellence Award" for "Annual Report Management". 3. 2005-06 Rajasthan Chamber of Commerce and Industry "RCCI Excellence Award" in recognition of Good Corporate Governance Practices. 4. 2004-05 Amity Business School, Noida "HR Excellence Award". 5. 2002-03 Mayaram Surjan Foundation, Raipur, Chattisgarh "Award for Excellence for best in house journal. 6. 2002-03 Rajasthan Chamber of Commerce and Industry "RCCI Excellence Award" in recognition of Good Corporate Governance Practice and disclosures in the Annual Report. 7. 2000-01 The Institute of Chartered Accountants of India (Rajasthan Chapter) "Best Annual Report/ Management Award" 8. 1998-99 The Income Tax Department, Rajasthan "Award for Highest Tax Payer in Rajasthan"
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SERVICES BY CFCL
Chambal provides a wide range of services to farmers to help improve agriculture and quality of life. The services which are provided are as follows: UTTAM BHANDHAN
Chambal’s Uttam Bandhan is a community welfare initiative that tries to enhance the farmer’s income and quality of life. Uttam Bandhan is spread out in ten states with around 80,000 farmers as its members. Services provided are customized taking a farmers' preference and packaging them according to the agro-climatic zones. Uttam Bandhan has had a cascading effect on around four farmers to a member.
UTTAM KRISHI SEWAKS
In the Uttam Bandhan programme the crucial link between the Company and the farmer is the Uttam Krishi Sewak. About 300 educated, unemployed youth from a rural background have been trained as Uttam Krishi Sewaks to provide best practices in agriculture and specialised services to farmers. They are self-employed and earn from commission on the sale of specialised products. Uttam Krishi Sewaks try and ensure that the farmers follow agricultural best practices. Through proper training, demonstrations, expert opinion, quality inputs and non-farm income, the Uttam Bandhan farmer has been a gainer in terms of not just increase in income but also quality of life
SOIL AND WATER TEST
Soil health is a matter of national concern. Soil and water samples are collected and tested for micro-nutrients and balanced inputs. Soil test reports are explained and the farmer is educated on the importance of proper soil health and micro-nutrients. Based on thousands of samples tested over the years, soil mapping is being done. The Agriculture Development Laboratories are located at Agra and Sriganganagar and satellite soil testing facilities have been set up elsewhere. The company does not charge any testing fee from Uttam Bandhan member farmers.
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DISSEMINATION OF INFORMATION
Crop and product demonstrations, field demonstrations and farmer meets are conducted regularly to educate farmers on latest farm practices. Farmers are given training on specialised services that vary from cultivation of medicinal and horticulture crops, vermi-culture and the use of bio-fertilizers. A dedicated farmer website uttamkrishi.com, farmer helpline- Hello Uttam and mailers such as ‘Chambal ki Chitthi’ are important channels to share information with farmers. Chambal also actively partners Government Departments, Agriculture Universities, Agriculture Research Stations and Krishi Vigyan Kendra’s under Public Private Partnership to serve the farmers.
ALTERNATE SOURCE OF INCOME
Uttam Bandhan looks beyond land and water to increase a farmer’s income. Breed improvement and Animal Health Care camps are regularly organized and farmers are educated on proper feed and mineral mixtures for good returns. Goat rearing, turkey farming, bee keeping, backyard, poultry etc. are other sources of income for farmers and Uttam Bandhan drives them to enhance income through proper training and making the facilities available at the doorstep.
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BUSINESS SCENARIO
The Government provides with the seasonal demand and requirement for each region. Hence the Government gives the company season wise allocation which is further allocated monthly for the movement of fertilizer to the various states based on the above. Thus the movement plan is compiled and finalized by the headquarters and passed on to the company’s Gadepan site where it is passed to concerned for movement planning/execution. Based on the monthly movement plan, the region calculates the economics keeping in view their budget and expenses on the various heads like transportation, warehousing, handling etc and accordingly indents are given for supply to the distribution department through head office. Regional offices services the trade / farmers by doing marketing development activities like sales promotion and technical services besides regular meet of dealers / traders by the marketing personnel. All these activities are controlled by the regional manager with the help of officers at districts and staff at regional levels.
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MARKETING DEPARTMENT AT CHAMBAL FERTILIZERS AND CHEMICALS LIMITED, GADEPAN
Marketing department at CHAMBAL FERTILIZERS AND CHEMICALS LIMITED, Gadepan consists of about 20 officials looking after following areas: Arrangement of transportation i.e. rail indents and road indents. Contracts(handling/transportation/warehousing) Imports(urea/DAP/MOP) Freight cost analysis, budgeting, MIS. Procurement of NAPHTHA(need based)
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SUPPLY AND DISTRIBUTION
Supplying the urea, based on State/GOI planned allocation from of production to the place of consumption is known as distribution. CHAMBAL FERTILIZERS AND CHEMICALS LIMITED after its first phase of expansion produces around 6000 tons of urea per day. This urea need to be despatched to its destination on time. There comes the role of supply and distribution department. They distribute the urea as per the Government orders. There are two means of distribution of urea from the site. 1) Railways 2) Movement by road The government provides subsidy on movement of urea besides production subsidy with a view to maintain uniformity of price. Thus based on up country locations demand, infrastructural availability and cost of movement, the company decides on the mode of transport i.e. rail or road. However there are certain pros and cons in both type of mode of transport. The main disadvantages in railways are: - Erratic supply of rakes by railway. - Indent acceptability –prerogative of railways. - Poor permeability of rail movement to up country locations v/s imperative presence of product at all times. - Only bulk movement is possible. Similarly there are certain limitations of the road movement, which are as under: High per ton freight cost. Bulk movement is not possible in short time. Truck availability is uncertain in season. Frequent rate fluctuations due to diesel price hike, restriction on overloading, union intervention, levy of taxes and octroi etc.
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CONSTRAINTS IN SUPPLY AND DISTRIBUTION OF FERTILIZERS
Supply and distribution is the heart of fertilizer marketing. Distribution of fertilizer is a complex procedure. The uniqueness of the fertilizer market, the uniqueness of fertilizer consumers, the uniqueness of the product and uniqueness of the farming operations create certain constraints in its distribution. These constraints can be: - Production is continuous but the demand is seasonal and at times, it is for too short period(famine period, change in cropping pattern etc.). - Fertilizer is to be marketed through a network of approximate 17,00,000 km of road and among this 50% of the area is unsurfaced. Distribution is carried out through 2,50,000 retail points spread in various parts of the country. - Urea comes under Essential Commodity Act, thus the movement and distribution is completely controlled by Government. - In rural areas storage facilities are inadequate. - Demand highly depends on natural factors. - Large number of users with different consumer habits. - Bulky and hygroscopic nature of products, hence need lots of attention and care while handling and distribution. - High costs of carriage and freights.
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MODES OF DISTRIBUTION
RAIL The major share of fertilizer is transported by RAILWAYS because of longer distances and bulky commodity. Railways have been sharing the major burden of transporting from supply counts to railheads. The company has 92:8 rail – road transport ratio in overall marketing area. There are nearly 7000 railway stations in country and 800 have been identified for the movement of bulk material like cement, food gain, fertilizer etc. The trains provided for movement of goods are called as “Rakes”. In proximity to railway stations there is a specified place for rake loading and un-loading. These are called as “rake points”. Fertilizer industry is using nearly 350 to 450 rake points for the purpose of movement of fertilizer distribution. The type of rakes provided by railways are briefed as under:
1) COVERED RAKES Name of Rake No. of wagons Carrying capacity(in metric ton) 64 64 58 58 Carrying capacity(no. of bags) 1276 1276 1052 1196
BCN A BCN HS BCN HL BCN
42 42 42 42
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2) OPEN RAKES
Name of Rake BOXN BOXN HS BOXN HL BOXN HA BOXN R
No. of wagons 59 59 59 59 59
Carrying capacity(in metric ton) 65 65 65 65 65
Carrying capacity(no. of bags) 880 880 880 960 960
a. Railway charges
Railway charges are levied as per railway receipt freight rates (tariff rates) Railway receipt freight = Charged weight per wagon * Number of wagons * Train load rate / wagon load rate (as per tariff rate in metric ton)
Foot notes: 1) Here charged weight refers to the weight of the total bags loaded. But it should not be less than 61 metric tons in case of open wagons. 2) If less than 40 wagons (in case of covered wagons) and 57 (in case of open wagons) are loaded, then per wagon load rate is taken otherwise train load rate is considered.
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b. Procedure of movement through rail
This department begins its work once the product reaches the rake point from where it is to be despatched. The product is loaded on the rake and a railway receipt is issued by railway. On showing of this railway receipt only, unloading of rake can be done on wharf at the destination rail head. This work is assigned to handling and transporting agent, whose duty is to unload the rake and send the goods to the warehouses / retailers / dealers as required. The company appoints H & T agent and their performances is periodically reviewed on the basis of: o Efficiency in timely conclusion of rake operations (no demurrage/wharfage). o Ensuring safety of material and quality (least possible cut and torn material/ losses). o Good liaison with railways and company officials.
Once the material is warehoused, the stocks are inspected by concerned marketing officer twice a month, regional officer once a month, and Gadepan officials once in three months. This is a surprise inspection to check: o Whether loading and unloading is done properly. o Proper stocking is done for counting purpose. o The cut and torned bags are repaired and properly weighed and sticked. o Whether tarpaulin is spread in the godowns before putting the bags. o The stock are not close to the walls and the pile is not more than 20 bags. o Maintenance of records or Joint Inspection Report which is prepared after each rake reaches its destination.
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c. Pros and cons of using Railways
ADVANTAGES: 1. 2. 3. 4. 5. 6. Railways are cost effective means for transportation. Railways run as per pre determined schedule. Railways are good for bulky movement of goods. Railways are safer and less prone to damages. Railways are faster means of transport. Environment friendly as compared to other means.
DIS-ADVANTAGES: 1. Railways are not cost effective if the goods are not in bulk. 2. Booking is to be done at least before a month, but accurate forecasting of demand is not possible. 3. Being a Govt. arm too much paper work is to be done. 4. Movement is limited only to those places where rail heads are present. 5. Railway movement is always limited to rail heads, so there is always dependence on movement by road for further movement.
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ROAD (By Trucks) Road movement is done by trucks. Movement by road is alternate mean of movement of goods from CFCL, Gadepan. The movement by road is preferred in many of the cases where smaller quantity is required over shorter distances/door step delivery. As per the laws of central Govt. road movement is restricted within the range of 500 kms. Due to this the road movement is limited to the states of Rajasthan and Madhya Pradesh only.
For the free flow movement of urea by means of road, CFCL has appointed transporters which provide for trucks on times. These transporters are selected on the basis of various grounds. Following things are checked on the appointment of transporters. o Market survey is done for competent parties having minimum two years of experience in transportation of bulk quantities including dealing with truckers and unions. o Parties must be having good market reputation/ sound financial position.
Along with this timely revision of rates is done with the consequent hike in diesel prices by Govt. of India as per contractual terms. The contract can be further extended subject to the recommendation of Regional Office through annual appraisal. The list of transporters responsible for the road movement of urea from CFCL Gadepan is as follows: 1) SER INDUSTRIES 2) L.N. CARRIER
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3) 4) 5) 6)
VARDHAMAN ROADLINES A.S. CORP. AND RAVI ROADLINES MANIDHARI TRANSPORT SHRI ADINATH CORP. The work starts as and when the urea is ready for despatch. Firstly the urea is loaded in trucks, as per the capacity of truck permissible by Govt. i.e. either 9 ton or 16 ton. The goods are transferred with utmost care and adequate penalties can be levied on transporters as per the contractual terms mutually agreed upon, if any damage occurs to the goods in transit.
a. Procedure of movement through road
b. Pros and cons of movement by road
ADVANTAGES: 1. Suitable for small quantities. 2. Movement is possible in remote areas as well where railways are not available. 3. Direct goods are supplied to ware houses unlike railways. 4. Saves a lot of loading and unloading cost. 5. Less paper work is involved, so becomes much easy to transport by movement by road than railways.
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DISADVANTAGES: 1. Not suitable for bulk transportation. 2. During busy season when demand for trucks is more, it becomes hard to get enough number of trucks for transportation. 3. High risk is involved in road transport. 4. Bulk movement in short time is not possible
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OPTIMAL RAIL ROAD MIX FOR DESPATCH OF UREA FROM CFCL GADEPAN (within 500kms.)
Urea is a product which comes under Essential Commodity Act. So as to make it available at all places at a constant affordable price it is subsidized by the Government. Further to insure the timely availability in desired timeframe at least possible cost that an optimal rail road mix is calculated prior to actual movement. Due to the regulation of Govt., road movement is restricted to 500 kms. Therefore the states of Rajasthan and Madhya Pradesh are the only states where supply can be made either by rail or road. The company has setup its three regional offices at Jaipur, Udaipur and Bhopal. These offices check and keep the record of the supply made to the warehouses of the districts coming under them both by rail and road. In case of rail movement of urea, it is moved to various rail heads. From there it is transported to warehouses by means of road.
The districts where urea is supplied by CFCL within 500 kms are as: RAJASTHAN KOTA BARAN BUNDI JHALAWAR TONK BHILWARA CHITTORGARH SAWAI MADHOPUR AJMER DAUSA JAIPUR KARAULI MADHYA PRADESH SHEOPUR KALAN NEEMUCH MANDSAUR GUNA SHIVPURI ASHOKNAGAR RAJGARH SHAJAPUR GWALIOR UJJAIN DATIA VIDISHA
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PRATAPGARH RAJSAMAND NAGAUR UDAIPUR BHARATPUR DHOLPUR SIKAR ALWAR BANSWARA DUNGARPUR JHUNJHUNU JODHPUR SIROHI CHURU BIKANER JALOR
MORENA RATLAM BHOPAL INDORE DEWAS BHIND SEHORE SAGAR DHAR RAISEN KHARGONE HOSHANGABAD JHABUA KHANDWA HARDA
In order to know the optimal rail road mix for the despatch of urea from CFCL Gadepan, a study was undertaken by us to ascertain the cost economics and various other related aspects. In case of movement by road, urea is loaded at CFCL, Gadepan and is directly sent to the district warehouses/ at stock dealer level, where as in case of railway, urea is sent to the respective rail heads (or the nearest rail head, if there is no rail head at that place). From there it is sent by movement by road to the warehouses.
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Following railheads undertake fertilizer rake operations for the below mentioned districts:
DISTRICT KOTA BARAN BUNDI JHALAWAR TONK BHILWARA CHITTORGARH SAWAI MADHOPUR AJMER DAUSA JAIPUR KARAULI PRATAPGARH RAJSAMAND NAGAUR UDAIPUR BHARATPUR DHOLPUR SIKAR ALWAR BANSWARA DUNGARPUR JHUNJHUNU JODHPUR SIROHI CHURU BIKANER JALOR SHEOPUR KALAN NEEMUCH MANDSAUR GUNA SHIVPURI
NEAREST RAIL HEAD KOTA BARAN KOTA BARAN KANAKPURA CHANDERIA CHANDERIA SAWAI MADHOPUR AJMER KANAKPURA KANAKPURA HINDON CITY CHANDERIA CHANDERIA NAGAUR RANA PRATAP NAGAR BHARATPUR BHARATPUR KANAKPURA ALWAR RANA PRATAP NAGAR RANA PRATAP NAGAR KANAKPURA BHAGAT KI KOTHI JAWAI BANDH LALGARH LALGARH BHAGAT KI KOTHI SHIVPURI RATLAM RATLAM SHIVPURI SHIVPURI
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ASHOKNAGAR RAJGARH SHAJAPUR GWALIOR UJJAIN DATIA VIDISHA MORENA RATLAM BHOPAL INDORE DEWAS BHIND SEHORE SAGAR DHAR RAISEN KHARGONE HOSHANGABAD JHABUA KHANDWA HARDA
SHIVPURI PACHORE SHAJAPUR GWALIOR VIKRAM NAGAR DATIA VIDISHA MORENA RATLAM NISHATPUR LAXMIBAI NAGAR DEWAS BHIND SEHORE SAGAR LAXMIBAI NAGAR MANDI DIP KHANDWA ITARSI MEGHNAGAR KHANDWA HARDA
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DATA ANALYSIS
The data related to various factors is collected. Various railheads were known and information regarding their distance from CFCL, Gadepan is collected. In case of rail despatch the urea is first transported from CFCL, Gadepan to the nearest railhead where the urea is to be supplied. From there on the urea is transported from railheads to the distributor warehouse by means road (trucks). On the basis of collected information regarding distance total freight is calculated as per railway norms. This gives the primary railway freight. From railheads to distributor warehouse urea is transported by road. This gives the secondary road freight. In case of direct movement of urea by road, it is sent directly from CFCL, Gadepan to the distributor warehouse. So primary road freight is obtained. A comparison is made between the total cost to each location by both the sources. This gives the preferred mode of transportation for each location. The analysis part is shown as:
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PF-1 (RAIL) It is the primary freight charged by railways as per its norms. This freight varies on the basis of nature of commodity, type of wagon, distance to be covered, or whether the load charges are as per no. of wagons or a complete rake.
PF-2 (ROAD) It is the primary freight charged by transporters for the secondary movement of urea from rail head to the respective destinations/go down locations.
TOTAL COST (RAIL+ROAD) The sum total of PF-1(rail) and PF-2(road) is the total cost incurred in transportation of urea by rail.
PF-1(ROAD) It is the primary and the only freight charged by the transporters to carry the urea from CFCL to the respective destinations/go down locations. For first few kms, a flat rate is charged on per metric ton basis and after that rate per ton per km are charged. LEAD Urea is supplied from CFCL, Gadepan to various dealers at different destinations within a district. The distance of these destinations fron CFCL, Gadepan varies. So a weighted average is taken out which is called as LEAD.
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Weighted average is taken because the quantity supplied to each destination in a district varies. So the weighted average gives the average distance from CFCL, Gadepan which when multiplied by quantity gives the actual ton.kms for that destination. RAILHEADS The place or Platform of railways where all the goods are loaded and unloaded is called as RAILHEADS.
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FINDINGS
Following were the observations in aforementioned studies undertaken.
TOTAL DESPATCH TO M.P. TILL 500 km. TOTAL DESPATCH TO RAJ TILL 500 km. TOTAL DESPATCH TILL 500 km. QUANTITY BY ROAD IN RAJ (preferred mode) QUANTITY BY ROAD IN M.P. (preferred mode) TOTAL QUANTITY BY ROAD(preferred mode) BALANCE QUANTITY BY RAIL PREFFERED ROAD % PREFFERED RAIL %
171638.8mt 385443mt 557082mt 116996mt 24173.5mt 141169.5mt 415912.5mt 25% 75%
(Here mt means metric tons)
On the analysis of collected data it has been notice that the railways are more cost effective mode of distribution of urea. All these conclusions are made on the basis of quantitative facts and figures, but there could be some qualitative aspects which will be having an effect on distribution of urea.
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Total despatch of urea in Rajasthan and Madhya Pradesh from CFCL, Gadepan (in MT) :
Total despatch(in MT)
450000 400000 350000 300000 250000 200000 150000 100000 50000 0 Rajasthan Madhya Pradesh Total despatch
FINDINGS ? Total despatch of urea in Rajasthan by Rail and Road from CFCL, Gadepan is 385443 metric tons. ? Total despatch of urea in Madhya Pradesh by Rail and Road from CFCL, Gadepan is 171638.8 metric tons.
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Table showing total despatch of urea in Rajasthan from CFCL, Gadepan (in MT):
Total despatch in Rajasthan(in MT)
300000 250000 200000 150000 116996 100000 50000 0 Road Rail 268447
Total despatch in Rajasthan
FINDINGS ? Total despatch of urea in Rajasthan by rail amounted for268447 metric tons. ? Total despatch of urea in Rajasthan by road amounted for 116996 metric tons.
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Table showing total despatch in Madhya Pradesh from CFCL’ Gadepan (in MT):
Total despatch in Madhya Pradesh(in MT)
160000 140000 120000 100000 80000 60000 40000 20000 0 Road Rail 24173.5 Total despatch in Madhya Pradesh 147465.5
FINDINGS ? Total despatch of urea in Madhya Pradesh by rail amounted for 147465.5 metric tons. ? Total despatch of urea in Madhya Pradesh by road amounted for 24173.5 metric tons.
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Table showing preferred mode of transport within 500 kms from CFCL, Gadepan:
Preffered mode of transport within 500 kms on the basis of quantity supplied
25%
road rail
75%
FINDINGS ? Within the range of 500 kms. From CFCL, Gadepan preferred mode of transportation is Rail and is favored for 75% of the total despatch, whereas road transportation amounted for 25% of the total despatch.
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SUGGESTIONS
On the basis of study it was found out that preferred mode of despatch of urea from CFCL, Gadepan is through rail. On the basis of past data it was found out that company was emphasizing too much on rail. Earlier the ratio was 92:8. After the study a new ratio of 75:25 is obtained. If this ratio is applied company can save a lot in transportation cost. The various suggestions made are as: ? Company should give more emphasis on road movement of urea from site, as the availability of rakes is uncertain during season. ? During rainy season road movement of goods is better option as trucks can be covered or parked, thus can be saved from unnecessary loses. ? Most of the rakes made available by railways are open type, thus led to losses due to seasonal problems. Railways provide 30% rebate on freight for coverage of these losses, but is not enough. So road movement can be preferred. ? During season time for agriculture, demand for trucks is higher by the company. But at the same time demand in other areas especially stone and other agri goods is also high. In order to overcome such problem it is suggested to increase the number of vendors for road transport. ? Company can go for its own transport system of road as after the completion of their third phase of production it will achieve an economy of scale. This would also help the company in easy transportation of their other related agrigoods like pesticides, D.A.P., M.O.P. as they are being transported in small quantity and thus rail transport are not cost effective.
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SWOT ANALYSIS
STRENGTH 1. Strong distribution channel 2. Good marketing and distribution department. 3. Govt supports in form of transport subsidy.
WEAKNESS 1. Demand is seasonal and uncertain. So it becomes difficult to ascertain the need of trucks and rakes for distribution.
OPPURTUNITIES 1. Company can start its own logistic supply. 2. There is no quota restriction by WTO, so there are more chances of export. 3. Economy of scale can be achieved after completion of CHAMBAL 3.
THREATS 1. Increasing price of fuel and gas. 2. Intervention of Unions. 3. Removal of subsidy. 4. Taxes. 5. Unavailability of required number of trucks and rakes during season time.
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BIBLIOGRAPHY
BOOKS:
? Kotler, Philip. Marketing Management. 13th Edition; Prentice Hall of India 2009. ? Kothari, C. R. Research Methodology. Second Revised Edition; New Age International (P) Publishers 2008
WEBSITES:
? www.chambalfertilizers.in ? www.departmentoffertilizer.com ? www.wikipedia.com ? www.fert.nic.in ? www.marketresearch.com
JOURNALS:
? Annual Report of CFCL ? Fertilizer Journal of India
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