Agri Business

Policy makers turn jittery as unsold fertiliser stocks pile up

Vishwanath Kulkarni Harish Damodaran New Delhi | Updated on March 12, 2018 Published on January 27, 2013

Growing worry: The fertiliser industry is expected to start the next financial year with record high stocks of close to 8 million tonnes. — V. Ganesan

Glut attributed to poor offtake by farmers, rise in prices

It is not just surplus foodgrain stocks in Government godowns that is giving policy makers the nightmares.

The coming days could see a similar crisis with regard to unsold fertiliser stocks, disposing of which may eventually lead to a burden on the exchequer.

The fertiliser industry is expected to start the next financial year with record high stocks of close to 8 million tonnes.

According to estimates, as on April 1, the opening stocks of di-ammonium phosphate (DAP) alone would be about 3.1 million tonnes (mt). This includes 0.6 mt with the companies and another 2.5 mt that they have already sold and billed to dealers, but would go unlifted by farmers.

Similarly, there would be around 2.4 mt stocks of complex fertilisers (containing different ratios of nitrogen, phosphorous, potash and sulphur), which includes 0.4 mt with companies and 2 mt with the trade. In addition, there will be 1.5 mt of muriate of potash (MoP), which includes 0.5 mt lying in various ports.

If one were to also add opening urea stocks of 0.8-0.9 mt to these, the total would work out to 7.8 mt or more. This is as opposed to less than 3 mt at the start of the current financial year.

Industry sources attribute the unprecedented surplus stocks situation to two factors. The first is the erratic monsoon rains that led to poor offtake by farmers. Second, the prices of decontrolled non-urea fertilisers shot up following the Government’s move to cut nutrient-based subsidy rates on these.

Retail prices

Since Rabi 2011, retail prices of DAP have increased by almost a third, from about Rs 18,200 to Rs 24,000 a tonne, while MoP shot up from Rs 12,000 to Rs 17,000 a tonne. The farm gate prices of single super phosphate also soared from Rs 4,800 to Rs 7,800 and that of 10:26:26, a popular complex fertiliser, from Rs 16,000 to Rs 22,000 a tonne.

Nobody was prepared for this, including the Government. And nobody knows what really to do about it, sources said. The only consolation, they added, was that there would be very little appetite for purchases by Indian companies, which would, in turn, impact global prices as well.

For once, Indian firms can hope to negotiate better prices from a market — whether for potash or DAP — that was hitherto controlled by a cartel of global suppliers. There has already been a softening, with landed DAP prices in India currently quoting at $520 a tonne, against $580 last year. Phosphoric acid prices, too, have eased now to $770 a tonne, from $1,080 in April-June and $835 during October-December.

These could go down further, opening up the possibility to contract small shipments at attractive rates, sources said.

But not everyone can exercise this option, given that the bigger players are saddled with older stocks contracted at higher rates when the rupee was at Rs 56/dollar.

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Published on January 27, 2013
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