To curb black-marketing in urea, the Centre in December released a “record” 3.7 million tonnes (mt) into the market, by stepping up imports.
The usual monthly requirement of the fertiliser, whose supply is regulated, is 2.5-3 mt.
The demand for urea peaks towards end December and early January. India produces approximately 22 mt of urea against the annual consumption of 30 mt. The difference is met by imports.
Sources in the Chemicals and Fertiliser Ministry admit to a demand-supply gap building up from October-November.
They point to lower imports compared to last year for the imbalance in the early part of the ongoing Rabi season. According to data available with Fertiliser Association of India, India imported 0.9 mt (16 per cent) less urea during April-November 2014 against the same period last year.
The shortfall has led to the emergence of a black-market in the fertiliser. According to reports available from across northern and eastern India, urea has been selling at a heavy premium over the stipulated price of ₹5,360 a tonne in the last two months. Confirming this, sources in two major fertiliser makers pointed to the drop in domestic production for the situation.
Three naphtha-based facilities (Madras Fertilizers, Southern Petrochemical Industries, and Mangalore Chemicals and Fertilizers) have stopped producing due to subsidy issues.
A blast in a gas pipeline network in Andhra Pradesh affected operations of Nagarjuna Fertilizers and Chemicals.
“The net result is that we started the season with a shortfall of 0.8 mt. When compared with the monthly demand, the gap was significant,” an official said.
The problem got compounded by a drop in supplies from the Oman-based joint venture of IFFCO, Kribhco and Oman Oil Company (OCC). Supplies from this venture, with which India has a long-term offtake agreement, have been down following the hike in gas prices by the West Asian nation. To make up, the Ministry of Chemicals and Fertilisers stepped up direct imports from other sources.
The improved supplies cooled the black-market. According to a top dealer in West Bengal, the premium has come down from 30 per cent to 5 per cent over the last two weeks.
Fertiliser producers, however, feel the problem will recur. “Black-marketing of urea is not new. It is the result of stagnant domestic production. The only way to solve this problem is to end the subsidy regime leading to investments in urea manufacturing,” said a manufacturer.