Costlier raw materials forced hike in fertiliser prices: Iffco chief

Indian Farmers Fertiliser Cooperative (Iffco) has defended its decision to raise prices of di-ammonium phosphate (DAP) and complexes twice during the current month.

“We had no option, given the soaring import cost of final product as well as raw material,” the Managing Director of the country's largest fertiliser concern, Dr U.S. Awasthi, told Business Line.

He made particular mention of two ingredients used in the manufacture of DAP – ammonia and sulphur. In the last one month alone, landed prices of ammonia have gone up from around $460 to $525 a tonne, while corresponding rising from $220 to 250 a tonne for sulphur.

For every tonne of DAP manufactured, fertiliser plants use about 220 kg of ammonia. An increase of $65 a tonne in ammonia prices, then, pushes up DAP production costs by around $14 or Rs 630 a tonne. Even landed prices of phosphoric acid have moved up by around $150 a tonne (see Table).

The higher import costs have been the main reason for Iffco hiking its maximum retail price of DAP from Rs 10,750 to Rs 12,000 a tonne in the current month, while hiking the same for ‘10:26:26' and ‘12:32:16' complex fertilisers from Rs 8,997 and Rs 9,437 to Rs 10,800 and Rs 11,200 a tonne, respectively.

According to Dr Awasthi, these increases were required not only to cover import cost escalations, but also send a signal to farmers to reduce fertiliser consumption. “Fertilisers should be priced slightly expensive so as to induce farmers to not use them injudiciously. One has to realise that we are entirely dependent on imports of potash and phosphates, whether in final product form or as rock phosphate, phosphoric acid, sulphur or ammonia,” he noted.

Even in the case of urea, “we cannot produce beyond 20 million tonnes (mt), of which four mt is high-cost urea”, Dr Awasthi pointed out. The country, therefore, has no option, but to scale down consumption, which is the only way to “cool down the minds of foreign suppliers”.

Between 2003-04 and 2010-11, India's urea consumption has gone up from 19.77 mt to 28.22 mt, while increasing from 5.62 mt to 11.10 mt for DAP, from 1.84 mt to 3.89 mt for muriate of potash, and from 4.76 mt to 9.83 mt for complexes.

Iffco is currently undertaking a ‘Save the Soil Campaign', where, Dr Awasthi claimed, “we have shown that you can reduce fertiliser consumption by 10-15 per cent and still raise oilseeds and pulses yields by 15 per cent and wheat by 10 per cent”.

This, he said, is possible by promoting use of green manure (to increase organic carbon in the soil), bio-fertiliser treatment of seed (for nitrogen fixation) and incorporating enriched nutrient supplements into the soil through phospho-sulpho-nitro (PSN) compost.

“By improving the health of the soil, you can produce more with the same or even less fertilisers. We intend, though our three-year campaign (which started last April), to have demonstration plots covering all the districts of the country”, Dr Awasthi added.