The Hindu Business Line : Supply situation tight for DAP this year

Supply gap
The requirement is officially projected at 39.08 lakh tonnes (lt), with domestic production estimated at 23.76 lt.
That leaves a gap of 15.32 lt to be met through imports.

New Delhi June 20 If the prospect of importing wheat at $300 a tonne — against last year's average of $205 — sounds ominous, it is no less with regard to import of nutrients, where the lack of a clear policy has further aggravated matters.

Take di-ammonium phosphate (DAP), a vital fertiliser for root establishment and formation that farmers apply before sowing as a basal dressing.

Domestic output

For the current kharif season, the DAP requirement is officially projected at 39.08 lakh tonnes (lt), with domestic production estimated at 23.76 lt. That leaves a gap of 15.32 lt to be met through imports.

In the past, DAP imports were mostly undertaken by the manufacturers — Indian Farmers Fertiliser Cooperative (Iffco), Tata Chemicals, DCM Shriram Consolidated, Rashtriya Chemicals & Fertilisers — to supplement their own production.

But this time, none of them has contracted a single tonne, citing high global prices and non-finalisation of a concession policy for decontrolled (phosphatic and potassic) fertilisers for the current fiscal.

Imports

During 2006-07, the country had imported 28.75 lt of DAP at an average price of $315 per tonne, cost & freight. This year, the only party to have contracted imports so far is Indian Potash Ltd (IPL) — 11 lt at a hefty $477-480 per tonne. Besides IPL, the Centre has also entrusted another state-owned company — MMTC Ltd — with importing the balance 4.32 lt, though the latter has reportedly not yet finalised any contract. Even against IPL's contracted 11 lt, actual arrivals are still to begin.

Total cost

"On $477-480 per tonne, if one adds the five per cent customs duty and bagging and internal freight cost of Rs 1,500, the total cost works out to Rs 22,000 per tonne at the distribution point. On the other hand, the maximum retail price (MRP, including a distribution margin of Rs 275) of DAP is Rs 9,350 per tonne. Given this huge gap of about Rs 13,000 and uncertainty over the Centre footing the difference, no private party has risked imports this time", sources said.

Policy

Since the expiry of the last policy for decontrolled fertilisers on March 31, 2007, the Centre has not notified any base concession rate to pay for the difference between cost of production/import and the MRP.

The rates during 2006-07 were fixed at Rs 5,206 per tonne for imported DAP and Rs 6,355 for indigenous DAP. "These levels are inadequate for both imports as well as indigenous DAP, for which the main raw material, phosphoric acid, has been contracted by manufacturers this year at $566.25 per tonne, against last year's $461.25", the sources pointed out.

While DAP availability would be `tight' this kharif, it may be even worse during the coming rabi season. "This time, the pressure has been on imports. In rabi, it could be domestic production that may fall short", they warned.

More Stories on : Exports & Imports | Fertilisers | Agricultural Policy

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Supply situation tight for DAP this year