Urea bucks the trend as it is out of the ambit of the nutrient-based regime
Even as India is set to harvest a bumper agricultural crop in 2013-14 – record production of rice, wheat, maize, pulses, oilseeds and cotton – consumption of fertilisers is seen to decline for a second successive year.
Total fertiliser consumption in the country rose every year from 2002-03 to 2011-12, when it peaked at 59 million tonnes (mt).
But last year, it fell bellow 54 mt. Based on the trend of sales by companies during April-January, consumption could dip further in 2013-14.
“It won’t cross 52 mt: 31 mt urea, 7 mt di-ammonium phosphate (DAP), 6.5 mt NP/NPK complexes, 4 mt single super phosphate (SSP), 2.5 mt muriate of potash (MOP) and one mt of other fertilisers,” industry sources told Business Line.
Blessed by NBS
The declining consumption has been across all non-urea fertilisers, especially in so-called low-analysis products such as SSP and NP/NPK complexes.
Sales of these fertilisers had received a boost initially after the Centre ushered in a nutrient-based subsidy (NBS) system from April 2010.
The new regime – linking subsidy payable to the nutrient composition of individual fertilisers as against being limited to specific products (urea, DAP, MOP) – made it more attractive for firms to market SSP and complexes with varying proportions of nitrogen, phosphorous, potash and sulphur.
Between 2009-10 and 2011-12, combined consumption of SSP (having lower phosphorus than DAP, but containing sulphur) and complexes like 10:26:26 and 12:32:16 (alternatives to both DAP and MOP) zoomed from 10.7 mt to 15.1 mt.
Since then, however, there has been a plunge in consumption of not only these ‘low-analysis’ fertilisers to a likely 10.5 mt this fiscal, but even DAP and MOP.
Only urea has continued to register increased consumption.
The reason: Urea being kept outside the purview of NBS and its administered maximum retail price (MRP) going up only marginally from ₹4,830 to ₹5,360 a tonne since April 2010.
On the other hand, the corresponding increases in MRPs have been from ₹9,350 to ₹22,500 for DAP, ₹4,455 to ₹16,000 for MOP, and ₹7,197 to ₹20,900 for 10:26:26.
“The price differentials over urea were manageable till around October 2011, when DAP was retailing at ₹14,000 and most complexes at ₹11,000-12,000 a tonne. But from kharif 2012, the gap became too large, leading to farmers applying more urea and less of other fertilisers,” the sources pointed out.
The villain here was urea prices that were left unchanged, while companies had no option but to raise MRPs for other fertilisers, with international prices of both inputs and finished nutrients going up alongside a depreciating rupee.
While landed prices of DAP eased from an average $580 a tonne (cost & freight) in 2012-13 to a low of $340 in October, they have started firming up again to $500 levels in line with the overall El Nino-induced spike in global agri-commodity prices.
“We have reduced MRPs that had touched ₹24,000-26,000 for DAP and ₹17,000-18,000 for MOP at one point. But now, we may have to raise them again, which will further distort nutrient application by farmers,” the sources added.