The over four-month-long deadlock over prices between Indian fertiliser companies and international muriate of potash (MOP) suppliers has finally ended.

Coromandel International Ltd (CIL), Indian Potash Ltd (IPL), Tata Chemicals, Zuari Industries and Indian Farmers Fertiliser Cooperative, on Wednesday night, clinched a deal with a global supply cartel to import the nutrient at a landed cost of $470 a tonne till December and at $530 for the remaining three months of this fiscal.

Fair deal

“It is a good deal, as we were adamant on not paying a single cent more than the $470-a-tonne rate offered in June to Chinese buyers for supplies till December. In our case, we have been extended a 180-day credit facility as well, which makes it even better”, claimed a fertiliser industry official.

He termed even the $530 price payable during January-March as ‘reasonable' in the context of current spot deals happening at $ 550-plus a tonne.

“We don't see world prices easing from here, as demand is likely to remain robust and the recent flooding at the Belarusian Potash Company's (BPC) Belaruskali mine may constrain supplies. It is better to lock ourselves at these rates”, the official added.

For 2010-11, Indian firms had jointly negotiated a price of $370 a tonne (cost & freight, Indian ports) with the MOP cartel that consists of BPC, Canada's Canpotex, Israel's ICL Fertilisers and Arab Potash Company of Jordan.

Less imports

The country imported nearly 64 lakh tonnes (lt) of MOP during last fiscal worth some $2.35 billion.

“This year, imports will be lower, as not a single new contract was struck during the first four months. Whatever material has been imported and used this kharif season is against contracts entered into during 2010-11,” the official pointed out.

The MOP from the new contracts – signed after the impasse with suppliers being broken – will be ready for use only in the ensuing Rabi planting season.

“Our first vessel of 20,000 tonnes will arrive by mid-September,'' said Dr G. Ravi Prasad, President (Marketing) of CIL, which has already contracted five lt of imports from Canpotex and ICL.

Of the five lt that CIL will be importing in 2011-12 – half of what it did in the previous fiscal – 2.5 will be at $470 and the balance half at $530 a tonne.

IPL imported 36 lt on 2010-11. this fiscal it will import 27-28 lt, of which roughly 65 per cent will be at $470 and 35 per cent at $530 a tonne, the company's Managing Director, Mr P.S. Gahlot, told Business Line .

Zuari Industries imported 10 lt of MOP last fiscal.

“This year, it may be lower, though we will definitely import the five lt required for our own captive production of NPK fertilisers,'' said Mr Suresh Krishnan, Managing Director.

Import parity price

At the start of this fiscal, Indian companies were not prepared to pay more than $420 a tonne, which is the Centre's benchmark import parity price (IPP) used to compute the subsidy payable on potash, both for direct use and as ingredient for NPK fertilisers. Towards late-May, they sweetened the offer to $445-450, which was again below the $500-plus being demanded by the global cartel.

The final compromise deal agreed to by the two sides will require a hike in maximum retail prices (MRP) charged to farmers.

The MRP, currently at Rs 6,300 a tonne, is expected to go up to Rs 7,500.

The only way this can be averted is through an increase in the IPP from $420 a tonne, which the Centre is unlikely to concede. Since March 31, 2010, the MRP of MOP has gone up from Rs 4,455 to Rs 6,300 a tonne.

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