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Rabi season, polls ahead: fertiliser stocks deplete after dip in imports

This comes ahead of the ensuing rabi planting season from October-November and also Assembly polls in Uttar Pradesh, Punjab and Uttarakhand, scheduled for February-March.

MOP stocks have similarly depleted to 10.12 lt, from their corresponding August-end levels of 20 lt, 24.76 lt and 18.20 lt for 2020, 2019 and 2018, respectively. (Representational)

Stocks of di-ammonium phosphate (DAP), muriate of potash (MOP) and other major non-urea fertilisers have dipped sharply. This comes ahead of the ensuing rabi planting season from October-November and also Assembly polls in Uttar Pradesh, Punjab and Uttarakhand, scheduled for February-March.

Latest data from the department of fertilisers shows DAP stocks in the country at only 21.59 lakh tonnes (lt) as on August 31, compared to 46.85 lt, 62.48 lt and 45.05 lt on the same day of 2020, 2019 and 2018, respectively.

MOP stocks have similarly depleted to 10.12 lt, from their corresponding August-end levels of 20 lt, 24.76 lt and 18.20 lt for 2020, 2019 and 2018, respectively.

The situation is no different in complex fertilisers containing different nitrogen (N), phosphorous (P), potassium (K) and sulphur (S) nutrient combinations. Their total stocks as on August 31 stood at 31.32 lt, while these were at 36.47 lt a year ago, and 53.69 lt and 41.76 lt on the same day of 2019 and 2018, respectively.

The current low stocks raise serious concerns over the availability of these key plant nutrients in the coming rabi season. And with elections approaching, especially in UP and Punjab where farm votes matter and the protests against the Modi government’s reform laws have barely died down, it could have political implications as well.

The precarious stocks have largely to do with soaring international prices, resulting in lower imports. The country is estimated to have imported only around 24 lt of DAP during April-August 2021, as against 35 lt in the same period last year. Imports of MOP and NP/NPK complexes have, likewise, dropped from 22.2 lt and 8.87 lt to 12.1 lt and 6.30 lt, respectively.

The landed price of imported DAP in India is now about $665 per tonne (cost plus freight), compared to $340-350 at this time last year. MOP prices have also gone up from $230 to $280 per tonne, even as there is talk of contracts for the remaining months of the year being renegotiated at $400 or more. Import prices (cost & freight) of fertiliser raw materials and intermediates, too, are quoting higher relative to a year ago: phosphoric acid ($1,160 vs. $625 per tonne), rock phosphate ($150 vs. $99), ammonia ($640-660 vs. $210-215) and sulphur ($205-215 vs. $75-80).

At $665 per tonne, the cost of DAP imports is roughly Rs 48,850. Adding 5 per cent customs duty and Rs 3,800 marketing & distribution costs takes it to over Rs 55,000 per tonne. DAP, at present, attracts a subsidy of Rs 24,231 per tonne. Deducting that would give a maximum retail price (MRP) of Rs 30,800 or so, at which the company/importer neither makes profit nor loss.

“The government is allowing us to sell only at Rs 24,000 per tonne. On every handymax ship of 40,000-50,000 tonnes, we would, then, incur a loss of Rs 28-35 crore. Why will anyone import today?” an industry source pointed out.

According to the source, there are two options before the government. The first is to permit companies to raise MRPs, which is already taking place in complexes. In the last one month alone, some companies have increased their MRPs from Rs 27,500 to Rs 29,000-29,500 per tonne for the ‘10:26:26’ NPK fertilisers, while from Rs 23,500 to Rs 24,000-25,000 for ‘20:20:0:13’. But this possibility does not exist in DAP, which is the country’s second most consumed (and also politically sensitive) fertiliser after urea.

The second option is to hike the nutrient based subsidy rates on N, P, K and S, which will make it viable for companies to import finished fertilisers or intermediates/raw materials.

“They need to make a decision fast so that the vessels arrive in time for the next season. The supply pipeline is drying up and any dithering can prove politically costly,” the source said.

The supply position is, thankfully, comfortable in urea. At 44.41 lt as on August 31, urea stocks are higher than the 43.53 lt a year ago. Stocks of single super phosphate (which has only 16 per cent ‘P’ as against 46 per cent in DAP) are also marginally up: 16.6 lt versus 15.1 lt in end-August 2020.

The India Meteorological Department Tuesday forecast September rains to be “above normal”, i.e. more than 110 per cent of the long period average. “These rains will help recharge groundwater aquifers and induce large-scale sowing in the coming rabi season after a not-so-good kharif. If fertiliser availability becomes an issue, it can trigger farmer unrest,” the source said.

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