The Union Fertilizer Ministry has given approval to import approximately 1.6 million tonnes (mt) of urea at a cost of $1.5 billion (nearly ₹11,500 crore), which would be shipped in on government account by Indian Potash Ltd (IPL) to help improve domestic supplies.
According to a Fertiliser Ministry official, approximately one million tonnes will arrive at ports on the West Coast, while 0.6 million tonnes will arrive on the East Coast. Following the government’s approval, up to 15 companies signed contracts for urea supply, as per the official.
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According to sources, the maximum quantity of 0.9 mt has been contracted at $981.64/tonne, while another 0.6 mt will cost $998.5, with a small quantity of less than a lakh tonne imported at around $960/tonne (all cost and freight basis).
Canalizing organizations
On November 3, the government removed public sector MMTC and STC while notifying IPL and National Fertiliser Ltd (NFL) as canalizing agencies for urea import on behalf of the government. Rashtriya Chemicals and Fertilizers (RCF) is still a channeling agency. Because the MRP of urea is fixed and the government bears the entire subsidy, imports are regulated to prevent price inflation.
While India produces 24-25 mt of urea per year, about 9-10 mt is imported to meet demand. The government assesses the urea requirement, and imports are permitted on a regular basis based on demand, supply, and prices. During April-July of this year, India was reported to have imported approximately one million tonnes of urea from China before the neighboring country banned export due to a domestic shortage. Russia and Egypt are now the primary sources.
IPL, which declined to be a canalizing agency in 2018 but was forced to do so this time, was successful in lowering import prices and securing an agreement from exporters to deliver at Indian ports by December 31. ‘It is a tremendous accomplishment to finalize the contracts in a matter of days, especially given that many countries are struggling to obtain urea after China, Russia, and Egypt restricted/tightened their supplies,’ an industry official said.
Despite the fact that some companies signed contracts for $1,000/tonne FOB to supply from Egypt, the participation of Russia’s largest producer Eurochem in the IPL tender aided in lowering prices, according to sources.
Urea accounts for 55% of the country’s total fertilizer consumption, which is expected to be around 61 million tonnes in 2019-20. Because non-urea (MoP, DAP, and complex) varieties are more expensive, farmers prefer to use more urea than is actually required. A 45-kg bag of urea costs ₹242 and a 50-kg bag costs ₹268, both prices exclusive of neem coating charges and applicable taxes, compared to ₹1,200 for a 50-kg bag of DAP. The MRP of urea has not been changed by the Centre since 2012 when it was increased by ₹50/tonne to ₹5,360.
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Supply-demand
According to Fertiliser Ministry data, the Urea requirement for the Kharif sowing season was 17.75 mt from April to September, while availability was 20.82 mt and sales were 16.56 mt. For the current rabi sowing season, demand has been set at 17.9 mt for the entire season, with availability at 5.44 mt as of November 24, and 4.41 mt of urea already sold since October 1. This leaves approximately 8 mt of urea available to farmers in the remaining period.
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