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Saturday, September 25, 2021

Fertiliser shortage looms as global prices skyrocket

Supply crunch may hit during rabi season ahead of UP, Punjab polls.

Written by Harish Damodaran | New Delhi |
Updated: August 6, 2021 7:49:51 am
fertiliser sales monsoonLast year at this time, India had contracted urea imports at around $290 per tonne CFR (cost plus freight). Those prices are now at $510-515 per tonne. (File Photo)

A shortage of fertilisers is looming on the back of skyrocketing international prices whose effects, it is feared, may be felt during the coming rabi season ahead of the February-March Assembly elections in Uttar Pradesh, Punjab and Uttarakhand. The supply crunch is due to the overall bullish global agri-commodity markets, a “temporary suspension’ of exports by China and western economic sanctions against Belarus.

Industry data accessed by The Indian Express shows imports of all major fertilisers by India falling during April-July 2021 over April-July 2020. That includes urea (down from 23.43 lakh tonnes to 22.05 lakh tonnes), di-ammonium phosphate (24.06 lt to 22.03 lt), muriate of potash (16.06 lt to 10.33 lt) and complex fertilisers (6.43 lt to 5.45 lt).

But it isn’t only imports. Even domestic production has been lower for urea (78.82 lt in April-July 2021 against 82.18 lt in April-July 2020) and di-ammonium phosphate (11.11 lt against 12.66 lt). It has, however, gone up for fertilisers having lower nitrogen (N), phosphorus (P), potassium (K) and sulphur (S) content. Thus, output of NP/NPK complexes has increased (from 27.89 lt to 30.91 lt) along with that of single super phosphate (from 17.01 lt to 17.06 lt).

“There is no shortage for now or in the remaining part of the current kharif cropping season (June-September). The problem may arise in the rabi season after October,” said industry sources. The reason for that is soaring international prices, both of fertiliser products as well as their imported inputs.

Last year at this time, India had contracted urea imports at around $290 per tonne CFR (cost plus freight). Those prices are now at $510-515 per tonne. Import prices have similarly surged over the last one year for di-ammonium phosphate (from $330 to $630 per tonne) and intermediates such as phosphoric acid (from $625 to $998), ammonia ($205 to $670) and sulphur ($75 to $210). Morocco’s state-owned OCP has, moreover, raised its phosphoric acid price for the July-September 2021 quarter to $1,160 per tonne CFR, which Indian DAP manufacturers are saying is unviable for them.

The situation is equally tight in muriate of potash (MOP), where imports into India were coming at $230 per tonne a year ago. Indian companies, in April, signed contracts with major global MOP producers for supplying through December 2021 at $280 per tonne CFR. But with the US and European Union imposing sanctions against the Alexander Lukashenko regime in Belarus for alleged human rights abuses – the Eastern European country was India’s second largest MOP supplier in 2020-21 after Canada – there is talk of the $280 rate being renegotiated and fresh imports getting contracted at $400 levels.

Belarus apart, China is the other big source of uncertainty. In the last two years, it has been India’s biggest supplier of urea and No. 2 for di-ammonium phosphate after Saudi Arabia. Last week, China’s National Development and Reform Commission announced that it had summoned fertiliser firms for a discussion against speculation and hoarding of nutrients, following which they decided to temporarily suspend exports and assure supplies in the domestic market.

“The Narendra Modi government will have to take a call soon on hiking subsidy rates on N, K and S. Not doing that would force companies to either sharply hike retail prices or slash production and imports, resulting in reduced fertiliser availability during the rabi season. The stocks position will turn precarious by early- to mid-September,” the sources warned.

The Modi government had, on May 20, raised the per-kg subsidy rate on ‘P’ from Rs 14.888 to Rs 45.323, which is applicable till October 31. It ensured no or very little increases in the retail prices of di-ammonium phosphate, single super phosphate and other phosphorus-containing fertilisers for the kharif season. Whether similar upward revisions in the subsidy rates for other nutrients remains to be seen.

Interestingly, the Centre’s fertiliser subsidy bill had, during the previous UPA government’s time, massively shot up from Rs 32,490 crore in 2007-08 to Rs 76,603 crore in 2008-09. The increase — even higher, after adding the 20,000 crore of bonds issued to fertiliser firms in lieu of cash subsidy — happened when global urea, DAP and MOP prices had scaled record highs of $865, $1,230 and $1,060 per tonne, respectively during August-October 2008. That was again just months before the 2009 Lok Sabha elections, when the UPA returned to power.

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