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Citation Information

Type Working Paper
Title India’s fertilizer industry: Productivity and energy efficiency
Author(s)
Publication (Day/Month/Year) 1999
URL http://india.lbl.gov/sites/default/files/41846.pdf
Abstract
Historical estimates of productivity growth in India’s fertilizer sector vary from indicating
an improvement to a decline in the sector’s productivity. The variance may be traced to
the time period of study, source of data for analysis, and type of indices and econometric
specifications used for reporting productivity growth. We derive both growth accounting
and econometric estimates of productivity growth for this sector. Our results show that
over the observed period from 1973-74 to 1993-94 productivity increased by 2.3% p.a. as
indicated by the Translog index. Calculations of the Kendrick and Solow index support
this finding. The increase took place during the era of total control when a retention price
system and distribution control was in effect. The retention price system was coupled with
relatively high norms on capacity utilization which supported productivity increase. With
liberalization of the fertilizer sector and reduction of subsidies productivity declined
substantially since the early 1990s, despite an increase in capacity utilization. Using a
translog specification the econometric analysis reveals that technical progress in India’s
fertilizer sector has been biased towards the use of energy, while it has been capital and
labor saving. The analysis of current changes in structure and energy efficiency in the
sector demonstrates the major role policies and fiscal incentives play in the Indian fertilizer
sector. Substantial energy savings and carbon reduction potential exists. Energy policies
can help overcome barriers to the adoption of energy efficiency measures in giving proper
incentives and correcting distorted prices.

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