Fertiliser shortage likely as firms cancel imports

NEW DELHI, APR 21: The country may be heading for serious shortages in phosphatic and potassic fertilisers as several private companies h...

NEW DELHI, APR 21: The country may be heading for serious shortages in phosphatic and potassic fertilisers as several private companies have cancelled over 16 lakh tonnes of fertiliser imports in the last six days. Nearly 11 lakh tonnes of diammonium phosphate (DAP) imports have either been cancelled or are in the process of being cancelled and five lakh tonnes of muriates of potash (MoP) have been cancelled.

Among the major companies which have cancelled import contracts are SPIC, Hindustan Lever Chemicals Ltd and Indian Potash Ltd (IPL). Companies depending on imported raw material like phosphoric acid and ammonia are also expected to curtail their production of DAP and switch over to produce low grade nitrogenous-phosphate fertilisers to minimise their losses.

The cancellation of import orders come in the wake of the recent ad hoc subsidy announced by the Ministry of Agriculture on April 13 which has sanctioned only Rs 3,000 per tonne as subsidy for imported DAP and MoP which, according to theindustry, is at least Rs 600 per tonne below the remunerative cost for importing these fertilisers.

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Last year the nearly 21 lakh tonnes of DAP was imported. During 1999-2000 it was estimated that this would touch 25 lakh tonnes as in February itself the industry had contracted around 18 lakh tonnes of DAP and 10 lakh tonnes of MoP. Now 11 lakh tonnes of DAP and five lakh tonnes of MoP already face cancellations, which may jeopardise the availability of these fertilisers.

With the meteorological department announcing a normal monsoon this year, the shortages may cause tremendous problems during the kharif seasons and may spill over to the rabi season later this year.

When contacted, Pratap Narayan, Director General of the Fertiliser Association of India (FAI), the apex body representing the fertiliser industry, confirmed that there was panic amongst importers who had cancelled substantial orders over the last few days. Narayan said “despite several letters to Finance Minister Yashwant Sinha and theMinistry of Agriculture giving details of the cost of production and imports, the Government has not bothered to consult the industry or protect their costs.”

According to Narayan, the price of imported DAP at $ 215 per tonne (c&f) (Rs 9,460 crore) added to which are customs duty of Rs 520 per tonne, handling costs of Rs 1,912 per tonne which also includes dealers’ margin and importer profits works out to a cost of Rs 11,892 per tonne. With the retail prices fixed at Rs 8,300 per tonne and subsidy of Rs 3,000 per tonne, there is still a gap in cost of imports.

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In addition, another fear that industry has relates to the way the Agriculture Ministry has worded the notification on ad hoc subsidies. While the notification on maximum retail prices for all fertilisers states that the prices that have been fixed will prevail from April 1, 1999 till March 31, 2000, the one on subsidies just talks of the subsidies being given “with effect from April 1, 1999”. This has given rise to fears that the paucity ofresources with the Government may force them to withdraw these concessions mid-way through the year.