Complex fertiliser prices rise
Supplies fall ahead of rabi sowing
An acute shortage of diammonia phosphate (DAP) has pushed up prices of the next best alternative nitrogen+phosphorus+potassium (NPK) and other complex fertilisers as farmers scramble to replenish their inventories ahead of the critical rabi sowing season.
At many markets in Madhya Pradesh, farmer leaders said a 50-kg bag of NPK or other complex fertilisers are selling at prices, which are 25-50 per cent more than last year.
“Phosphatic manufacturers have shifted production primarily to NPK grades amid elevated input prices of phosphoric acid and ammonia,” said ratings agency ICRA, in a recent research note.
Both DAP and NPK are interchangeable depending on the crop and extensively used at the start of sowing, which in this case is the rabi season.
Trade and industry sources said unless the Centre once again extends subsidy support covering all nutrients and not just phosphate (as was done in May 2021), it will be difficult for them to hold on to the current prices.
“Ammonia and potash prices have risen significantly since May 2021. This has made it necessary to raise the subsidy component for nitrogen and potassium,” ICRA said.
Between March and September 2021, prices of raw materials like ammonia have increased by more than 65 per cent to $654 per tonne from $397 per tonne.
Similarly, prices of phosphoric acid have gone up by more than 50 per cent to $1,160 per tonne from $755 per tonne.
This pressure of rising input costs has obviously led to an increase in the cost of fertilisers. Prices of muriate of phosphate (MOP), another complex fertiliser, has seen a spike of close to 25 per cent, moving up from $224 per tonne to $280 per tonne between March and September 2021.
The Centre, in May 2021, had increased the subsidy on DAP by a whopping 140 per cent from ~500 per bag (50 kg each bag) to ~1,200. However, trade and industry sources this is insufficient as international prices have moved up even further since then.
“We need another ~400500 per bag of subsidy in case of DAP to neutralise the impact or else imports will continue to be less, leading to difficulty in supplies,” an industry official said. He said in May 2021, subsidy support was given mainly for phosphates, but this time, subsidy support is needed for nitrogen and potassium as well.
Reports appearing in sections of the press said the Centre is looking to provide an additional ~25,000-crore subsidy support for fertilisers.
However, trade sources said it should cover all nutrients and not just phosphorus as was done in the May 2021 hike. “Now, just NPK rates have risen but there are fears that prices of DAP may also rise if supplies continue to remain low,” Bhagwan Meena, general secretary of Kisan Swaraj Sagathan, told Business Standard. This, he said, could impact the production cost of potato and chana farmers the most along with other crops.
According to data sourced from the electronic Fertiliser Monitoring System (efms), as of September 2021, the stock of DAP stood at 1.5 million tonnes. This is against 3.6 million tonnes held last year across India, a shortfall of 2.1 million tonnes.
The current stock of DAP in North India (Punjab, Haryana, UP, Rajasthan, Uttarakhand, Bihar and Jharkhand) is at 0.7 million tonnes against 2.1 million tonnes last year, a shortage of 1.4 million tonnes.
The average consumption of DAP in the rabi season (October-december) for North India is 3.5 million tonnes.
For MOP, too, the panindian opening stock is less by 0.4 million tonnes. The current year stock stands at 0.75 million tonnes against 1.07 million tonnes held last year.