Phase I has three jobs. It wets and mixes the raw materials so every straw touches nitrogen and water. It starts a fermentation in which heat-loving microbes eat the easy sugars. And it turns much of the added nitrogen into ammonia and microbial protein for Phase II to finish.
It is deliberately incomplete. ICAR-DMR describes compost after Phase I as having a heavy ammonia smell, a pH of about 8.2 to 8.5, moisture of 72 to 75 percent and ammonia around 800 to 1000 ppm. That is the expected state before pasteurising.