"Even if a decision is taken today, supplies would reach the factories only by the end of May or beginning of June. But the next date for negotiating the price has not been decided yet. So there may not be any other way but to stop production."

Ambarish Mukherjee

New Delhi, April 16

NEGOTIATIONS between Indian phosphoric acid consumers and international suppliers have fallen through.

The date for the next round of negotiations has not been decided yet.

Consequently, DAP manufacturing units in the public sector, private sector and cooperatives may be forced to stop operations from May for want of the basic raw material.

Fertiliser industry sources told Business Line that Oswal Chemicals and Fertilisers have already stopped DAP production and no supplier till date has booked any vessel for shipments for April and May.

Industry sources said that it takes four to six weeks after booking for supplies to reach Indian ports.

"Even if a decision is taken today, supplies would reach the factories only by the end of May or beginning of June. But the next date for negotiating the price has not been decided yet. So there may not be any other way than to stop production," a highly placed industry official said.

Last year, the negotiated price was fixed at $402 per tonne of phosphoric acid leading to an increase of around Rs 750 crore in fertiliser subsidy.

This time the offer price is $488 per tonne.

India's requirement for this year is 2.25 million tonnes.

However, even at $488 per tonne, global suppliers have offered to supply only 1.5 m.t.

India's annual consumption of phosphoric acid is approximately 5 m.t., out of which 50 per cent is imported.

The domestic phosphoric acid manufacturers too are facing shortage of raw material because the country does not have enough rock phosphate, which is used in manufacturing phosphoric acid.

Last year the Government had increased subsidy for muriate of potash by around 85 per cent and for DAP by around 20 per cent.

This year, going by the existing rate, another 20 per cent increase for DAP subsidy is required, officials said.

Sources in the Fertiliser Association of India (FAI) said that FAI is no way involved in the negotiation process though the negotiations have taken place in FAI office by the Phosphoric Acid Consumer Group headed by the Managing Director of Tata Chemicals.

Stoppage of DAP production may result in serious shortage of fertiliser across the country as sowing for the kharif season begins in the middle of June, FAI officials said.

(This article was published in the Business Line print edition dated April 17, 2005)
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