FIPPI Urges Industry to Adhere to FCO Regulations Amid Government Scrutiny on Urea Diversion

The Federation of Indian Plywood and Panel Industry (FIPPI) has issued an important advisory to all its primary and affiliated members, urging strict adherence to the Fertilizer (Control) Order, 1985 (FCO) under the Essential Commodities Act, 1955 (ECA), regarding the use of technical-grade urea.

The directive follows a recent high-level meeting held on October 16, 2025, between a FIPPI delegation — comprising Shri N.K. Agarwal, Patron, FIPPI, and Dr. M.P. Singh, Director General, FIPPI — and the Secretary, Department of Fertilizers, Government of India. During the meeting, the Secretary expressed serious concern over the alleged diversion of agricultural urea by sections of the plywood and panel industry, which reportedly caused an estimated loss of ₹20,000 crore to the exchequer.

According to FIPPI, the interaction lasted for about 40 minutes and was marked by strong government emphasis on immediate corrective measures. The Department of Fertilizers reportedly plans to forward the issue to the Economic Offence Wing of the Revenue Department for further investigation, with enquiries and raids expected in the coming days. The matter has been discussed at the highest levels, including the Prime Minister’s Office (PMO) and with several Members of Parliament (MPs).

In its statement, FIPPI reaffirmed the plywood and panel sector’s commitment to cooperate fully with the government to ensure traceability, regulation, and responsible use of technical-grade urea. The association also highlighted challenges faced by the industry in sourcing technical-grade urea, which remains limited in domestic availability and is largely imported, creating trade vulnerabilities.

FIPPI further proposed that the government should facilitate the establishment of a network of industrial dealers, as provided under the FCO, aligned with the distribution of plywood and panel industries across India. This would help augment the supply of industrial-grade urea and ensure proper channelization.

To offer clarity to policymakers, FIPPI provided an industry-wide estimate, stating that even with full production utilization — 12 million CBM of plywood, 4 million CBM of MDF, and 4 million CBM of particle board — the total requirement of technical-grade urea would be around 5 lakh tonnes, valued at approximately ₹2,500 crore (at ₹50 per kg).

This figure, FIPPI noted, should dispel the perception that urea diversion causes losses worth ₹20,000 crore annually.

The federation has urged the government to introduce a notified price mechanism for technical-grade urea to support industrial use, particularly for MSMEs, which struggle with high raw material costs. However, the government has not yet indicated any immediate steps to ensure the availability of technical-grade urea at regulated prices.

In the meantime, FIPPI has strongly advised all plywood and panel manufacturers to strictly avoid the use of agricultural urea and to procure only technical-grade urea for industrial purposes. Under Section 25 of the FCO, fertilizers are meant solely for agricultural use to improve soil productivity and cannot be used for industrial purposes. Violation of this provision may attract severe penal action under the Essential Commodities Act, 1955, which carries stringent penalties.

Concluding the advisory, Dr. M.P. Singh, Director General, FIPPI, emphasized that the sector must “continue efforts to ensure compliance and work collectively toward securing fair policy support for technical-grade urea availability.”

The development marks a critical moment for India’s plywood and panel industry, which relies heavily on urea-based adhesives for manufacturing. The government’s recent scrutiny underscores the need for transparent sourcing, regulatory compliance, and industry-wide responsibility to safeguard both business sustainability and national economic interests.

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