Complex fertiliser prices rise as supplies fall short ahead of rabi sowing

Reports say Centre is contemplating another round of subsidy support

The acute shortage of Di-Ammonium Phosphate (DAP) has pushed up prices of the next best alternative NPK and other complex fertilisers as farmers scramble to replenish their inventories ahead of critical rabi sowing season.

In many markets of Madhya Pradesh, farmer leaders said that a 50-kilogram bag of NPK and also that of other complex fertilizers are selling at a price which is 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,” Ratings agency ICRA said in a recent research note.

Both DAP and NPK (nitrogen+phosphorus+potassium) are interchangeable and extensively used at the start of the sowing which in this case is the rabi season.

Trade and industry sources said that unless Centre once again extends the 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 which has made it necessary to raise the subsidy component for Nitrogen (N) and Potassium (K),” ICRA said.

Between March and September 2021 prices of raw materials like ammonia have increased by more than 65 per cent to $654 per tonnes from $397 per tonne (CFR rates).

Similarly, prices of phosphoric acid have gone up by more than 50 per cent to $1,160 per tonnes from $755 per tonnes.

This pressure of rising input costs has obviously led to an increase in the cost of fertilizers.

Prices of MOP (Muriate of phosphate), another complex fertilizer, has seen a spike of close to 25 per cent moving up from $224 per tonnes 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 Rs 500 per bag (50 kg each bag) to Rs 1200 per bag.

However, trade and industry sources this is insufficient as international prices have moved even further since then.

“We need another Rs 400-500 per bag of subsidy support to neutralize the impact or else imports will continue to be less leading to difficulty in supplies,” a senior industry official said.

He said in May 2021, subsidy support was given   mainly for phosphates (P), but this time, subsidy support is needed for N and K as well.

Reports appearing in sections of the press said that Centre is looking to provide an additional Rs 25,000 crore subsidy support for fertilizers but trade sources said it should cover all nutrients and not just phosphorus as was done in the May 2021 hike.

In NPK, the component of K (nitrogen) is more while in case of DAP (K is almost negligible but phosphorus is more). Urea has the highest concentration of nitrogen.

“Now just NPK rates have risen but fears that prices of DAP might 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 as well.

According to data sourced from the electronic Fertilizer Monitoring System (eFmS) as of September 2021, the stock of DAP stood at 1.5 million tonnes as against 3.6 million tonnes held last year across India, a shortfall of 2.1 million tonnes in DAP.

The current stock of DAP in North India (Punjab, Haryana, UP, Rajasthan, UK, Bihar, Jharkhand) is at 0.7 million tonnes as against 2.1 million tonnes from last year, a shortage of 1.4 million tonnes.

The average consumption of DAP in the Rabi season (Oct-Dec) for North India is 3.5 million MT.

For MOP (Muriate of Phosphate) too, the pan-India opening stock is less by 0.4 million tonnes. The current year stock stands at 0.75 million tonnes as against 1.07 million tonnes held last year.

The average consumption of MOP in rabi season (Oct-Dec) for all India is 0.8 million tonnes.

Icra in its report said that availability of fertiliser has become a major concern for the upcoming rabi season as systemic inventory levels are significantly below the historical levels which is partially due to strong offtake during FY2021, which led to depletion of fertiliser stocks in the country.