The Ministry of Chemicals and Fertilizers has called an emergency meeting with the industry this week to address the issue of fertilizer shortages ahead of the Rabi sowing season, which begins early next month.
Despite the government’s doubling of subsidies, Fertilizers firms expect further increases in subsidies or de-control sales prices to inspire confidence in importing high-cost raw materials and restore supply to normalcy.
The Union Cabinet increased DAP (Diammonium Phosphate) and other non-urea fertilizer subsidies by ₹ 14,775 crores in June. However, DAP import prices have risen by $150 per tonne since then, and domestic producers want the subsidy increased by ₹400-500 per 50 kg bag, or allow the industry to sell at ₹1,700 instead of the current price of ₹1,200 per bag.
Inventory is low
DAP inventory in India has more than halved to 1.5 million tonne, down from 3.6 million tonne last year. DAP stocks in North India (Punjab, Haryana, UP, Rajasthan, UK, Bihar, Jharkhand) have fallen to 0.7 mt, down from 2.1 mt last year.
As per the Mobile Fertilizer Management System data, the mean DAP usage in North India during the Rabi season is around 3.5 mt.
MOP (Muriate of Potassium) stock is down 30% this year, at 0.75 mt, compared to 1.07 mt last year. MOP inventory should be increased because it is a critical raw material in the production of NPK (nitrogen, phosphorous, and potassium) grades.
Demand for Rabi
DAP sales at the consumer level, including imports, were 64.14 lakh tonnes (lt) in the previous rabi, compared to 109 lt in the previous year. According to a fertilizer company executive, imported MOP sales were at 18 lt last rabi, while annual sales were at 33 lt.
mustard, Wheat, potato, maize, and sugarcane, require more fertilizer in northern and central states like Haryana, Punjab, Rajasthan, Uttar Pradesh, Madhya Pradesh, Jharkhand, Bihar, Chhattisgarh, Gujarat, Maharashtra, and Karnataka, he added.
The prices of raw materials used in the manufacture of fertilizers have skyrocketed in the last six months, posing a challenge to domestic fertilizer supply.
The price of ammonia, one of the key raw materials, has risen by 65% this month to $654 per tonne, up from $397 per tonne in March, while phosphoric acid has increased by 50% to $1,160 per tonne ($755 per tonne) in the same period.
With the rise in raw material prices, MOP has increased by 25% to $280 per tonne, up from $224 in March. The price of DAP has risen by 70% to $675 per tonne.
According to Sabyasachi Majumdar, Senior Vice President, ICRA, the resumption of imports will be contingent on the government’s decision to either raise subsidy rates or allow the industry to freely fix retail prices for phosphatic fertilizers over the next month.
‘We foresee that the government will increase the DAP subsidy between ₹5,000 and ₹6,000 per tonne in order to keep retail prices at acceptable rates for farmers,’ he added.