Fertiliser sales may have declined by 11 per cent year-on-year during the first four months of the current financial year, but this will have only a moderate impact on the total annual sales volume, rating agency ICRA said on Wednesday.
The fertiliser sales were high last year because farmers resorted to panic buying ahead of the kharif season last year as they were worried about the availability during the Covid-19-related lockdown.
Sabyasachi Majumdar, Senior Vice-President & Group Head at ICRA, said, Panic buying by the farmers in the backdrop the lockdown had led to record sales in the kharif season of FY21 which petered off during the rest of the year as inventory de-stocking at farmer level led to lower offtake in the second half.
While the overall fertiliser sales volume decline looks steep in the current kharif season, we expect the sales volume for full FY22 to be only marginally lower than FY21,” Majumdar said.
Also read: Fertiliser subsidy, import up in 3 years
Fertiliser production volumes remained largely stable in the first four months of FY22 compared to the corresponding period in FY21 whereas imports have declined by nearly 16 per cent. The combined (production and import) volumes have declined by only 6 per cent during this period whereas the retail sales have declined by 11 per cent, indicating availability of fertiliser inventory with the fertiliser companies.
However, with limited availability of DAP in the international markets and steep rise in import prices, the availability of the same for the upcoming rabi season will remain a key monitorable, as the situation may further exacerbate with China banning fertiliser exports.
“Given the continued rise in raw material prices, P&K players have started resorting to price actions to pass on the impact of raw material price increase to farmers. In July 2021, Indian P&K players increased the prices of NPK fertiliser by 3-6 per cent, while DAP prices remained stable,” said Ravish Mehta, Senior Analyst at ICRA,
“While DAP, urea and NPK have already witnessed price increases in the international markets, the potash price rise is yet to impact India. We expect the potash prices to rise sharply in any new contract renegotiation that takes place in the industry,” Mehta said.
Indian fertiliser industry, however, complained that international prices of raw materials have gone up further. “International prices of DAP and of inputs like ammonia and phosphoric acid went up still higher after the increase in subsidy, which further pushed the cost of PK fertilizers. It became extremely difficult for industry to maintain viability of operations,” said Satish Chander, Director General of Fertiliser Association of India.
“The misery was further accentuated due to non-availability of sufficient supplies in the international market. While, supplies for kharif crop season have been ensured, there is a challenge to arrange the import of sufficient raw materials and finished fertilisers to fulfil the requirement of the rabi crop season,” he added.