Economic Prerequisites and Development Paths for Mineral Fertilizer Production in Western Siberia

(Methodological Issues)

V. B. Buran

(Presented by the scientific-methodological seminar of the Department of Industrial Economics and Enterprise Organization)

The economic and natural-geographical advantages of an economic region exert a favorable influence on the techno-economic indicators of production and on mineral and energy expenditures. The availability of labor resources has an especially beneficial effect on the development of labor-intensive industries. The initial level of development of a region’s economy predetermines the further rates of development of industries: the higher the energy and capital equipment per worker, and the more powerful the scientific-technical and experimental bases, the greater the prerequisites for the accelerated realization of the main directions of scientific and technological progress.

The labor savings achieved in one economic region must be preserved as a whole for social production. Therefore, it is necessary to examine the economic efficiency of the development of the mineral fertilizer industry in each economic region where favorable conditions exist or are being created for obtaining fertilizers with a high economic effect, as applied to the production-territorial specialization and integrated development of the region. Only through an economic substantiation of the territorial organization of mineral fertilizer production can the optimal volume of production in each region for the corresponding period be determined.

The role of Western Siberia in the production of mineral fertilizers within the territorial zone is characterized by the expedient concentration of the volume of production in the West Siberian region, which is determined by the qualitative aggregate of the following factors: potential raw-material and fuel-energy resources and their techno-economic indicators; the demand for mineral fertilizers; the techno-economic indicators of production and transportation to consumers of mineral fertilizers; and the availability of labor resources. Taking these factors into account jointly corresponds to considering the mineral fertilizer industry of Western Siberia within the intersectoral complex “raw-material and fuel-energy base—mineral fertilizer production—agriculture” of the specialized national-economic complex of the large West Siberian economic region. The intersectoral complex “raw-material and fuel-energy base—mineral fertilizer production—agriculture” may have branches involving the use of mineral fertilizers in other directions. For example,

the production of mineral fertilizers—the synthetic-materials industry through the use of urea in the production of plastics, while about 3% of the output of the phosphoric-fertilizer industry is directed to industrial purposes.

The production of mineral fertilizers in an interbranch complex can be replaced by other industries: nitrogen fertilizers—by branches of the synthetic-materials industry (capron, nitron, etc.); phosphate fertilizers—by the production of technical phosphorus salts (trisodium phosphate, disodium phosphate, etc.).

The presence of corresponding and substituting links in the complex has a direct influence on the volume of mineral-fertilizer production and on the volume of output of intermediate products for their production. In order to account for corresponding links, the volume of production of mineral fertilizers for agriculture must be adjusted for the demand for them in other branches of the national economy. Substituting links are also taken into account by adjusting the demand of the mineral-fertilizer industry for intermediate products by the magnitude of the demand from other branches. Under these conditions, the production of mineral fertilizers for agriculture is regarded as a branch which, alongside other branches of the national economy of the economic region, requires additional resources: raw materials, fuel, energy, labor, etc.

The production of mineral fertilizers may develop through complementary links with the processing industry, in which the complex, together with target products, yields either mineral fertilizers directly (ammonium sulfate in coke chemistry, in the production of caprolactam), or raw materials for the production of mineral fertilizers (phosphate raw material in the beneficiation of complex ores), or intermediate products (electrolytic hydrogen). In such cases the volume of mineral-fertilizer production is directly dependent on the yield, in complex production, of fertilizers themselves, raw materials, or intermediate products directed to processing in the fertilizer industry.

A comparison of economic regions by the technical-and-economic indicators of the raw-material and fuel-and-energy base and of mineral-fertilizer production makes it possible to identify regions where fertilizers can be obtained with the lowest social costs at individual geographic points. Such a comparison is carried out according to the minimum of reduced national-economic costs:

\[ C + E_{\mathrm{n}} \cdot K \to \text{minimum}, \tag{1} \]

where \(C\) is the cost of producing a unit of measurement of mineral fertilizers, rubles;

\(K\) is specific capital investment, rubles;

\(E_{\mathrm{n}}\) is the normative coefficient of comparative economic efficiency.

As a result of calculating the reduced national-economic costs, a series is obtained in which the points of possible mineral-fertilizer production can be arranged in order of increasing reduced costs. However, this series does not provide grounds for determining the volume of production at each specific point, since it does not reflect all the variables of production volume at the given geographic point. It characterizes only the linkage: raw-material and fuel-and-energy base—production of mineral fertilizers of the regional interbranch complex, since it generalizes the technical-and-economic indicators from the raw-material and fuel-and-energy base to fertilizer production,

but does not take into account the needs of agriculture and the costs of delivery to the fertilizer distribution zones.

In substantiating the volume of production of mineral fertilizers in an economic region, it is necessary to take into account, along with the regional factors in the location of the fertilizer industry—the availability and effectiveness of raw materials, fuel, energy, water, etc., and provision with labor resources—the region’s agricultural demand for fertilizers. The assumption that the volume of mineral-fertilizer production may be determined solely on the basis of an assessment of resources and production contradicts the theory of the territorial organization of production, since it fails to take into consideration the other side of the process of the production-territorial specialization of economic regions—interregional exchange—as well as the process of integrating the branches of a region, namely interbranch links, in particular production links with the region’s agriculture.

The production-territorial specialization and integrated development of the economy of an economic region are based on using the region’s favorable conditions to increase the productivity of all social labor, both through saving labor in the production process and in the process of circulation. Therefore, it is necessary to determine economic efficiency throughout the entire interbranch regional complex: raw-material base, fuel-and-energy base—production of mineral fertilizers—agriculture. Taking into account the link “production of mineral fertilizers—agriculture” ensures achievement of maximum economy in the consumption of mineral fertilizers. This is carried out by economically substantiating the optimal radius of fertilizer distribution with the use of technical-and-economic indicators for their transportation by agricultural zones. The calculation is made according to reduced national-economic costs for the transportation of fertilizers, for which the cost price and specific capital investments per one ton-kilometer are calculated.

The costs of transporting freight may be calculated according to tariffs and according to cost price. To resolve questions connected with the location of production, only the cost price of transportation can be used, since uniform tariffs do not reflect the real costs in individual directions (freight intensity, train weight, the ratio of freight flows by direction, etc.) and deviate from actual costs.

The calculation of the optimal radius of distribution consists in finding the variant of supplying agriculture with the lowest costs for the production and delivery of mineral fertilizers, which is done by comparing variants according to national-economic costs. In the economic literature, the method for calculating optimal consumption zones has been developed quite fully. The condition for determining the boundary of a zone is that production of the product at a given geographic point will be economically justified if the reduced national-economic costs of producing and transporting this product to the regions of consumption are less than those incurred when fertilizers are supplied from another possible production point or when they are produced at the place of consumption. This theoretical premise is described by the following equation:

\[ (C_n + E_{\mathrm{n}}\cdot K_n) + (C_{\mathrm{t}} + E_{\mathrm{n}}\cdot K_{\mathrm{t}})_n \cdot P_{\max} = \]
\[ = (C_k + E_{\mathrm{n}}\cdot K_k) + (P - P_{\max})\cdot (C_{\mathrm{t}} + E_{\mathrm{n}}\cdot K_{\mathrm{t}})_k, \tag{2} \]

where \((C_n + E_{\mathrm{n}}\cdot K_n)\) are the reduced national-economic costs of producing the product in the \(n\)-th region;

\((C_k + E_{\mathrm{н}}\cdot K_k)\) — reduced national-economic costs in the \(k\)-th district;

\((C_{\mathrm{т}} + E_{\mathrm{н}}\cdot K_{\mathrm{т}})_n\) — reduced national-economic costs for transportation from the \(n\)-th district;

\((C_{\mathrm{т}} + E_{\mathrm{н}}\cdot K_{\mathrm{т}})_k\) — reduced national-economic costs for transportation from the \(k\)-th district;

\(P_{\max}\) — the maximum possible rational distance for transporting fertilizers (the transportation radius);

\(P\) — the distance between the \(n\)-th and \(k\)-th production points.

Then, from equation (2), the optimal radius for transporting mineral fertilizers \((P_{\max})\) is determined as the ratio:

\[ P_{\max} = \frac{ (C_k + E_{\mathrm{н}}\cdot K_k) - (C_n + E_{\mathrm{н}}\cdot K_n) + (C_{\mathrm{т}} + E_{\mathrm{н}}\cdot K_{\mathrm{т}})_k \cdot P }{ (C_{\mathrm{т}} + E_{\mathrm{н}}\cdot K_{\mathrm{т}})_k + (C_{\mathrm{т}} + E_{\mathrm{н}}\cdot K_{\mathrm{т}})_n }. \tag{3} \]

The boundaries of the distribution zone for fertilizers from a specific point encompass a definite agricultural district which, owing to its production specialization and soil-and-climatic conditions, requires the corresponding quantity of mineral fertilizers. This quantity of mineral fertilizers, with industrial demand taken into account, determines the maximum possible, economically justified annual production program of the enterprise at the geographic point under consideration.

To determine the capacity of mineral-fertilizer production at a specific geographic point, limiting factors in terms of resources, complexing links with other branches, and technological methods are taken into account; in this case the minimum capacity is the capacity of one technological line. If it turns out that the possible production capacity determined by the limiting factors corresponds to the demand of agriculture in the optimal distribution zone and to industrial demand for mineral fertilizers, then the problem is solved. If the possible capacity exceeds the requirements, the volume of production is determined by the amount of necessary consumption; with the reverse relationship between possible capacities and requirements, the volume of production corresponds to the capacities determined by the limiting factors. In the latter case, the optimal transportation radius is adjusted in favor of another enterprise.