Ministry calls for meeting on fertilizer shortage

The Ministry of Chemicals and Fertilizers has called for an urgent meeting with the industry this week to sort out the issue of fertilizer shortage ahead of the Rabi sowing season, which starts early next month.

Despite government doubling subsidy, fertilizer companies expect further rise in subsidy or de-control selling prices to instil confidence for importing high-cost raw material and bring supply back to normalcy.

In June, the Union Cabinet had raised subsidies of DAP (Diammonium Phosphate) and other non-urea fertilizers by ₹14,775 crore. However, DAP import prices have increased by $150 a tonne since then and domestic producers want the subsidy to be increased by ₹400-500 per 50 kg bag or allow industry to sell at ₹1,700 against the prevailing price of ₹1,200 a bag.

Low inventory

DAP inventory currently has more than halved to 1.5 million tonne against 3.6 mt held last year across India. The stock of DAP in North India (Punjab, Haryana, UP, Rajasthan, UK, Bihar, Jharkhand) has plunged to 0.7 mt against 2.1 mt last year.

According to Mobile Fertilizer Management System data, the average DAP consumption in the Rabi season in North India is about 3.5 mt.

The stock of MOP (Muriate of Potassium) is down 30 per cent at 0.75 mt this year against 1.07 mt held last year. MOP inventory needs to be higher as it is the key raw material to produce NPK (Nitrogen, phosphorous and potash) grades.

Rabi demand

DAP sales including imports at the consumer-end for last rabi was 64.14 lakh tonnes (lt), whereas the annual DAP sales were 109 lt. Imported MOP sales were at 18 lt last rabi while annually it was at 33 lt, said a fertilizer company executive.

Crops such as wheat, mustard, potato, sugarcane, maize need more fertilizer in northern and central states such as Punjab, Haryana, UP, Rajasthan, Madhya Pradesh, Bihar, Chhattisgarh, Jharkhand, Maharashtra, Gujarat and Karnataka, he added.

High cost

The prices of raw materials used for the manufacture of fertilizers has zoomed in last six months, posing a hurdle in the domestic supply of fertilizers.

Price of ammonia, one of the key raw materials, has increased by 65 per cent to $654 a tonne this month against $397 a tonne in March while phosphoric acid jumped 50 per cent to $1,160 a tonne ($755 a tonne) in the same period.

With the rise in raw material prices MOP have jumped 25 per cent to $280 a tonne against $224 in March. DAP price has increased 70 per cent to $675 a tonne.

Sabyasachi Majumdar, Senior Vice President, ICRA said the restart of imports will depend on the government decision to either raise subsidy rates or allow the industry to freely fix the retail prices for phosphatic fertilizers over the course of the next one month.

“We estimate that the government to raise DAP subsidy between ₹5000-6000 a tonne to keep retail prices at reasonable levels for the farmers, he added.

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