The Hindu Business Line : High global prices spoil fertiliser party

New Delhi, June 11 The main problem on the fertiliser front is spiralling international prices, coupled with stagnant domestic production. And this, at a time when remunerative rates for most crops has led to a perceptible increase in nutrient demand from farmers, to the point of inducing riots in some places.

Average price

In 2000-01, the average price of imported urea at Indian ports was $114 a tonne (cost & freight) and as low as $86 a tonne in the preceding year. Still, ironically not a single tonne was imported in 2000-01.

But in 2007-08, the country ended up importing an all-time-high 69.28 lakh tonnes (lt). The average landed cost (other than that that imported through Oman India Fertiliser Company or OMIFCO) was $344 a tonne.

Saving grace

Currently, spot prices of urea (West Asian origin) are ruling at about $450 a tonne, which would touch $480-485 a tonne after freight is added.

The saving grace here has been OMIFCO, a 25:25:50 joint venture of the Indian Farmers’ Fertiliser Cooperative (Iffco), Krishak Bharati Cooperative (Kribhco) and the Oman Oil Company. Under a long-term supply contract, OMIFCO urea was imported at $155 a tonne in 2005-06, $168 a tonne in 2006-07 and $180 a tonne last fiscal.

Insulation against volatility

With imports of 17 lt annually, the OMIFCO route has, to an extent, helped in insulating the country against the huge volatility in international prices.

Even more problematic is the situation vis-À-vis di-ammonium phosphate (DAP). The average landed price, which stood at $179 a tonne in 2000-01 and $174 a tonne in 2001-02, shot up to $644 a tonne is 2007-08. Currently, DAP is quoting at $1,200 a tonne, free-on-board US Gulf ports. Taking freight costs of $100 plus, the landed cost now would be above $1,300 a tonne.

Again, the period from 2000-01 to 2004-05, when DAP prices ruled easy, were also years that saw very little imports. The last couple of years have witnessed a combination of both high prices as well as record imports.

The recourse to imports has taken place, even as domestic production of urea and DAP has remained stagnant at 190-200 lt and 45-50 lt for a decade or so.

Increasing offtake

On the other hand, urea consumption has gone up from 200 lt to over 261 since 2000-01, while rising from 60 lt to 73 lt in the case of DAP.

“The Government did not plan for such an increase in demand. And neither did it foresee global prices rise so much on the back of skyrocketing crude prices”, an industry observer pointed out.