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NACOF inks long-term supply pact for potash with Canada's Encanto

Encanto will supply minimum 5 mn tonnes of MOP annually for a period of 20 years

NACOF inks long-term supply pact for potash with Canada’s Encanto
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BS B2B Bureau Mumbai
Last Updated : Jan 20 2017 | 12:35 PM IST
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National Federation of Farmers' Procurement, Processing and Retailing Cooperatives of India Limited (NACOF) has entered into a long-term agreement to procure muriate of potash (MOP) – a key fertiliser - from the Canada-based Encanto Potash Corp.

As per the agreement, Encanto will supply minimum 5 million tonnes per year of MOP for a guaranteed period of twenty years to NACOF. Food security obtained via procurement of an alternative supply of MOP and eliminating middlemen for Indian farmers is a fundamental objective for NACOF.

NACOF is India's national farming cooperative established by the Joint Secretary and Central Registrar, Cooperative Societies under the Ministry of Agriculture, Government of India and representing farmers across 25 out of 29 states in India. NACOF has a 2016-2017 annual budget of $ 7.67 billion (about Rs 52,210 crore) and one of their primary goals is to enter into contracts and collaborate for the purchase, production, manufacture and marketing of raw materials, finished products and by-products, and also enter into joint marketing and exchange agreements with cooperative institutions, public sector undertakings or any other agency in india or abroad.

Stavros Daskos, president, Encanto, stated, “This is clearly a defining moment for our company and the industry. India imports 100 percent of its potash and is susceptible to cartel-like practices from producers that can hurt its national food security. Establishing long term offtake agreements are difficult and require a great amount of time and understanding of a country's food security policies and how they interface with the dynamics of a supply environment controlled by a small number of entities.”

In 2011-12 limited potash was imported by India as a result of its strategy against the pricing practices of producers. The reduced supply, a shift in foreign exchange rates and reductions in government subsidies all contributed to an increase in the retail price for MOP in India which reduced demand. The recent decline in price for potash and government efforts to promote the use of more potash based fertilisers set the stage for increased demand in India. Encanto Potash Corp strategy is aimed at focusing solely on addressing the current and future needs of India over the next twenty years.

Historically, potash consumption in India had reached around 6 million tonnes in 2010-11, and their aim, per the Ministries of Chemicals and Fertilizers, is to return to this level as potassium is required in large amounts to sustain and grow their crop based industry. The comparatively high retail cost of MOP and other potash-based fertilisers in India prompted many farmers to favour the use of fertilisers biased towards higher nitrogen content due to their lower cost. 

NACOF and Encanto believe a secure and stable supply of MOP at reasonable prices will incentivise India's farmers to progress to a balanced fertilisation program where the growth rate in consumption of potash-based fertilisers will be higher than the growth rate of consumption of alternate fertilisers. 

The Indian government has set an objective to double the farmer's income in the next five years, and continues its efforts to educate Indian farmers on the long term benefits and potential increases to crop yield that can be achieved from a balanced and strategic fertilisation program. Soil health assessments being provided by the Indian government and sustained marketing targeted at farmers will play an important role to help prevent over-use and misuse of urea fertilisers.

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First Published: Jan 20 2017 | 12:32 PM IST

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