Why farmers can look forward to a good rabi season

The same goes for prices. The government last week raised the minimum support prices (MSP) of two key rabi crops: wheat (from Rs 2,015 to Rs 2,125 per quintal) and mustard (Rs 5,050 to Rs 5,450/quintal). The Rs 110/quintal increase for wheat exceeded the Rs 40 and Rs 50 per quintal increase of the preceding two years. In mustard, the Rs 400/quintal higher MSP followed a similar record hike for last year’s crop.

With open market prices ruling above even the new MSPs, farmers have added incentive to plant both crops.

Situation on the nutrient front

What is the situation with plant nutrients — basically nitrogen (N), phosphorus (P), potassium (K) and sulphur (S) — embodied in fertilisers?

In December-January 2021-22, urea (containing 46% N) was being imported at $900-1,000 per tonne (landed price, inclusive of ocean freight). Import prices of di-ammonium phosphate (DAP, the country’s second-most consumed fertiliser that has 18% N and 46% P), peaked at $950-960 per tonne in July. Fertiliser inputs topped $1,715 per tonne for phosphoric acid in July-September, and reached $1,600 for ammonia and $500-525 for sulphur in April-May.

Those prices have since eased considerably.

The latest import contracts (cost plus freight) by Indian companies have been at $650-655 per tonne for urea, $720-740 for DAP, $1,175 for phosphoric acid, $850-900 for ammonia, and $130-135 for sulphur.

Only in muriate of potash (MOP, which contains 60% K), landed prices have remained elevated at $590 per tonne, as against $280 last October. India imports substantial quantities of MOP from Belarus and Russia. The war in Ukraine has disrupted supplies from these two countries. India’s total MOP imports stood at 5.09 million tonnes (mt) in 2020-21 (April- March), which fell to 2.91 mt in 2021-22, and to an estimated 1.5 mt this April-September.

“In MOP, availability is as much an issue as prices. Other suppliers (mainly Canada, Israel, and Jordan) haven’t filled the void left by Belarus and Russia,” an industry expert said.

Compensating for kharif

Leaving out MOP, the supply position in fertilisers is comfortable ahead of the rabi cropping season. “There’s no shortage, particularly of urea and DAP. The situation is overall better than in kharif (where plantings mostly happen with the southwest monsoon rains from June-July),” the industry expert said.

This augurs well for all rabi crops. These include not just wheat and mustard, but also chana (chickpea), masur (red lentil), matar (field pea), potato, onion, barley, rabi maize (grown mainly in Bihar), garlic, jeera (cumin), dhaniya (coriander) and saunf (fennel). Rice is a major rabi crop in West Bengal, Assam, Telangana, Andhra Pradesh, Tamil Nadu, Karnataka, Odisha, and Chhattisgarh.

The kharif season wasn’t great this time in many parts of the country, whether due to deficient rainfall during the main sowing period (June-July) or excess rain after September when the crop was closer to harvesting. Farmers would, therefore, want to compensate for any kharif losses during this rabi. That will, in turn, translate into huge fertiliser demand — more so when soil moisture conditions and prices are also good.

The downside

The accompanying table shows that urea and DAP sales by companies during April-September were 3.9% and 23.3% higher respectively over the same period of 2021. However, sales of MOP and complex fertilisers (containing N, P, K and S in different proportions) fell by nearly 51% and 17%.

This has to do with the central government heavily subsidising urea and DAP. The maximum retail price (MRP) of neem-coated urea is currently fixed at Rs 5,628 per tonne. Companies are obliged to sell to farmers at this price, with their higher cost of production or imports reimbursed by the government.

Since the MRP has been kept unchanged, even as international prices — including of imported natural gas feedstock — have mounted, it has pushed up the subsidy payable to companies. Even for DAP, the government has asked companies not to charge more than Rs 27,000 per tonne, while paying them a fixed per-tonne subsidy that has been more than doubled from Rs 24,231 to Rs 50,013 between kharif 2021 and 2022.

On the other hand, the subsidy hasn’t gone up for other fertilisers, commensurate with the higher import costs of end-products or raw materials and intermediates.

Take MOP, whose landed cost alone at $590 per tonne is around Rs 48,675. Adding other costs (customs duty, GST, port handling charges, bagging, transport, storage, trade margins, etc) takes it to over Rs 55,000 per tonne. Deducting the subsidy of Rs 15,186 per tonne, companies can make money at an MRP of Rs 40,000, but they aren’t being allowed to charge more than Rs 34,000. In other words, they are now losing Rs 6,000 on every tonne, and are hence not interested in selling MOP.

“The MRP of urea is today officially fixed at Rs 5,628 per tonne. There is technically no price control in other fertilisers. But their per-tonne MRPs are unofficially fixed at Rs 27,000 for DAP, Rs 34,000 for MOP and Rs 29,000-31,000 for complexes. Also, why will farmers pay more for MOP or complexes such as 10:26:26, 12:32:16 and 20:20:0:13, when urea and DAP are retailing much cheaper?,” an official at a fertiliser company pointed out.

The perverse side to this is that farmers are ending up over-applying urea and DAP, while not using MOP, single super phosphate, and other fertilisers that have a more balanced nutrient profile. The implications for soil health, ultimately impacting crop yields, may not be small.