Disproportionate price increases within fertilisers are clearly playing out, with sales of di-ammonium phosphate (DAP) and muriate of potash (MOP) falling sharply in the current kharif season even as farmers have stepped up consumption of relatively cheaper urea.
During April-August, fertiliser firms have sold 37.45 lakh tonnes (lt) of DAP, which is 21.6 per cent lower than the 47.75 lt that they did in the corresponding five months of 2010. MOP offtake slumped even more – by 58.5 per cent, from 15.53 lt to 6.45 lt.
On the other hand, urea sales have increased by 11 per cent, from 101.72 lt in April-August 2010 to 112.94 lt in April-August 2011. This is not seen as a particularly healthy trend, given that the soil nutrient balance in Indian soils is already excessively tilted in favour of nitrogen (N). The very idea of introducing the nutrient-based subsidy (NBS) regime was to rebalance fertiliser usage more in favour of phosphorous (P), potassium (K), sulphur (S) and other macro- and micro-nutrients.
Urea consumption
The main reason for higher consumption of urea (which contains 46 per cent N) is that it is yet to be part of the NBS, with its maximum retail price (MRP) still administered by the Centre. Since March 31, 2010 – when all other fertilisers were brought under NBS and their prices decontrolled – the MRP of urea (exclusive of local taxes) has gone up by 11 per cent, from Rs 4,830 to Rs 5,364.69 a tonne.
As against this, companies have hiked the MRP of DAP from Rs 9,350 to Rs 15,200, with some even charging Rs 15,400 a tonne (almost a 65 per cent jump). Prices of MOP (60 per cent K) have been raised by as much as 91 per cent – from Rs 4,455 to Rs 8,500 a tonne. Even single super phosphate (which contains 16 per cent P, compared with the higher 46 per cent for DAP) is today retailing at Rs 4,500 a tonne, against Rs 3,000 prior to decontrol.
Costly imports
The situation could, moreover, turn worse in the coming days, as hardening international prices coupled with a weakening rupee would increase cost of imports. Companies are likely to pass on these to farmers – especially in the case of non-urea fertilisers, where they have the freedom to.
For April-September, around 30 lt of DAP imports were contracted at a landed cost of around $612 a tonne. For the second half of 2011-12, the few deal struck have been at $677 or so and these would be at the current exchange rate of almost Rs 48-to-the-dollar.
While MOP imports of about 60 lt for the current fiscal have been finalised at an average $490 a tonne cost & freight India, the effective cost in rupee terms would still go up because of the currency's recent depreciation.
There are no such issues in urea where the Centre is yet to take a final decision on either raising MRPs or bringing the fertiliser under NBS. Besides urea, sales of complex fertilisers – containing varying proportions of N, P, K and S – have also been higher this year, at 40.51 lt during April-August, as against 37.93 lt in the corresponding five months of the previous fiscal.
“Given the limited global availability of DAP and MOP, we have sought to maximise production of complexes having lower P or K content. So, instead of converting phosphoric acid to DAP (18:46:0:0) or selling MOP directly, we have been producing more of 12:32:16:0, 20:20:0:0 or 14:28:14:0 that have less of these nutrients,” an industry source said.
The unfortunate thing, he added, is that the monsoon has been very good this year and its late withdrawal augurs well for the ensuing rabi season as well.
But the supply constraints and price increases in fertilisers could somewhat dampen the bright prospects on the soil moisture front.