Agri Business

Zuari strikes first DAP import deal of 2011-12

Harish Damodaran New Delhi | Updated on March 12, 2018

Consignment of Di-Ammonium-Phosphate (DAP) fertiliser being unloaded from a goods wagon (file photo): R. Ashok   -  Business Line

Zuari Industries Ltd (ZIL) has contracted to import up to 10 lakh tonnes (lt) of di-ammonium phosphate (DAP) from Morocco's OCP Group at $ 612 a tonne, cost & freight (c&f).

“We have contracted for 5 lt, which could be increased to 10 lt. The shipment plan is to be worked out. Normally, arrivals start 60 days from the contracts being entered,” Mr Suresh Krishnan, Managing Director, ZIL, told Business Line.

ZIL's contract is the first for 2011-12, which is expected to see total DAP imports of 80 lt by India. ZIL and OCP, incidentally, own 40.225 per cent each in Paradeep Phosphates Ltd, with the Government holding the balance 19.55 per cent.

The $612-a-tonne price – which Mr Krishnan said was “the best rate we could have got” – may emerge as a benchmark for negotiations by other importers, including Coromandel International, Tata Chemicals, Indian Farmers Fertiliser Cooperative and Indian Potash Ltd. Suppliers led by the US-based phosphate export cartel, PhosChem, are said to be insisting now on a c&f rate of $ 640 a tonne.

At $612 a tonne, the landed cost works out to Rs 27,540 a tonne. To this, if the 5.15 per cent customs duty (Rs 1,420), stevedoring charges of Rs 700, bagging costs of Rs 200 and dealer's margin of Rs 275 are added, the total cost (net of internal freight) comes to around Rs 30,135 a tonne. Besides, importers are supposed to get a margin of Rs 600, taking the cost further to Rs 30,735 a tonne.

Against this, the maximum retail price (MRP) of DAP, though technically de-controlled, is currently at Rs 10,750 a tonne. Inclusive of the Rs 18,474 nutrient based subsidy (NBS) payable from April 1, companies would gross Rs 29,224 from sale of every tonne of DAP.

That leaves a gap of Rs 1,500 a tonne or Rs 75 a bag, which will have to be passed on to the farmer (probably after the coming assembly elections) or, alternatively, the Centre would have to shell out a higher subsidy.

The Rs 18,474 subsidy on DAP, due from April 1, has been fixed assuming a landed import parity price of $ 580 a tonne.

For 2010-11, the Centre had fixed the NBS rates on nitrogen (N), phosphorus (P), potash (K) and sulphur (S) with reference to corresponding import prices of $310 a tonne on urea, $ 500 on DAP, $370 on muriate of potash (MoP) and 190 a tonne on sulphur. For 2011-12, the Centre – in a bid to talk down world prices – initially, on November 19, pegged these reference prices lower at $280, $450, $350 and $125 a tonne. But with global prices showing no signs of easing, the Centre, on March 9, announced new NBS rates for 2011-12 based on higher landed prices of $350 for urea, $580 for DAP, $390 for MoP and $180 for sulphur.

“On hindsight, the move to slash the DAP reference price to $450 a tonne was a mistake. It may not have been impossible to strike DAP import deals in December at $520-530. Now, we are importing at $612, with even a $580 reference price proving insufficient,” an industry source pointed out.

Even on MoP, global suppliers are apparently pushing for a landed price of $420 a tonne, which is more than the current reference rate of $390 a tonne.

Published on March 28, 2011

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