Fertilisers set to turn dearer on rupee's slide

Vishwanath Kulkarni New Delhi | Updated on March 12, 2018


Even as planting for the current rabi season gets underway, farmers are in for a tough time on the fertiliser front. The reason: A weakening rupee that has made imported fertilisers costlier and companies passing these on to them.

The maximum retail price (MRP, net of local taxes) of di-ammonium phosphate (DAP) ruled at around Rs 11,000 a tonne at the start of this year's kharif season, which rose to Rs 14,000 towards the end. For the ongoing rabi season, companies started off by raising the price further to Rs 18,200 a tonne.

“Those hikes were only a result of global prices going up over the last few months. It doesn't take into account the rupee's depreciation, which is much more recent. To offset that, we may have to hike the MRPs further to Rs 20,000 or more”, said an official from a leading private phosphatic and complex nutrients company.

The same holds for muriate of potash (MOP), which was priced at Rs 6,300 a tonne at the start of this kharif and then raised to Rs 9,000 mid-way through the season. For the current rabi, companies announced a rate of around Rs 11,300, which, they now say, will have to be revised still upwards to Rs 12,600 or so in the light of the rupee's recent slide. The rupee has weakened by 18.5 per cent against the dollar till date since April this year.

No hike: Iffco

The country's largest fertiliser seller – Indian Farmers' Fertiliser Cooperative (Iffco) – has, however, indicated that it will not raise prices further now. “We have begun negotiations with our suppliers seeking discounts on the contracted prices to tide over the situation as we don't want to pass on the burden to farmers,” said Dr U.S. Awasthi, Managing Director of Iffco.

The co-operative, which imports fertilisers from about 10 suppliers located in the US, Russia, Japan, Morocco, Israel and Jordan, has sought a discount of $50 or 7.3 per cent on its originally contracted price of $677 a tonne (cost & freight, India) for DAP. A similar discount of $45 a tonne is being sought on complex fertilisers that contain various proportions of nitrogen (N), phosphorous (P) and potash (K).

“It is an unprecedented situation. I hope our suppliers understand this and support us or else we may have to invoke force majeure clause, cut imports and shut down our units,” Dr Awasthi told Business Line.

Costlier DAP, MOP and complexes on account of increase in global prices as well as a weak rupee have also created a piquant situation vis-à-vis urea, the MRP of which continues to be regulated by the Centre. Since the decontrol of all non-urea fertilisers since March 2010, the MRP of DAP has almost doubled (from a level of Rs 9,350 a tonne), while almost trebling for MOP (from Rs 4,455 a tonne). On the other hand, urea prices have risen by just 11 per cent, from Rs 4,830 to Rs 5,364.69 a tonne.

The disproportionate price increases have led to a sharp dip in DAP and MOP sales, even while farmers are applying more urea (see Table).

Besides higher urea sales, companies have also sought to maximise production of complexes that contain less P and K compared with high analysis fertilisers such as DAP and MOP. Thus, instead of selling DAP or MOP directly, they have been trying to push more complexes such as 12:32:16:0, 20:20:0:0 or 14:28:14:0 that contain less of these nutrients.

Published on November 22, 2011

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