The Hindu Business Line : DAP import prices may touch $500/t

New Delhi, July 29 The Government’s efforts to line up imports of di-ammonium phosphate (DAP) for the rabi season have failed to attract bids from international players till date. The global tender floated by Indian Potash Ltd (IPL) earlier this month closes on Monday.

Industry sources, however, said that bids are expected to come in on the last date and there are strong possibilities that international suppliers would make an offer price in excess of the contract price of $477-$480 per tonne applicable for the kharif season.

Huge Demand

“There are only a handful of DAP producers across the world and US-based Cargill is perceived to be driving the prices up. Given India’s huge demand and the time constraints that the Government has to meet, the market has turned into a sellers market. It would not be surprising if the offer price finally touches $500 per tonne,” said a senior industry source representing one of the foreign fertiliser manufacturers.

Apart from Cargill the other companies that are expected to submit their offers include Jordan Phosphate Mines Company and PhosAgro of Russia. The Department of Fertilisers has also told domestic manufactures to increase production in order to keep ready stock available at the time of sowing. DAP is a vital fertiliser for root establishment and formation that farmers apply before sowing as a basal dressing.

Sowing for the rabi crop usually starts around the beginning of October and the good monsoon recorded this years is expected to shoot up fertiliser demand.

Domestic Production

For the kharif season, the DAP requirement is officially projected at 4 million tonnes. While the domestic production stood at around 2.5 million tonnes, the remaining portion had to be imported. For the rabi season, generally the demand is expected to go up by around 10 per cent and the Government also takes this into account based on which imports are planned, officials said.

During 2006-07, around 2.87 mt of DAP was imported at an average price of $315 per tonne. This year until now IPL has imported around 1.5 mt of DAP at a price of $477-$480 per tonne. The average price during the kharif season stood at $477-$480 per tonne.

Even if the same price is retained for rabi imports the increase per tonne would be around $165 over last year’s prices. For an estimated import of 2.5 million tonnes for the full year, the increase in Government subsidy burden would stand at $412.5 million (around Rs 1,650 crore).

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