Fertiliser prices likely to come down as India secures supplies till Dec

India has tied up adequate supplies of urea and diammonium phosphate (DAP) until December to meet its kharif and rabi demand this year. This may keep prices in check in the months to come in the domestic and international markets, said a senior government official.

DAP is the second-most consumed fertiliser in India because it contains both nitrogen (N) and phosphorus (P), which are primary macronutrients and part of 18 essential plant nutrients. India is among the world’s largest buyers of fertiliser, besides China, Brazil, and the US, and any spike or drop in demand has a direct bearing on world prices.

If prices of urea and DAP remain soft in the months to come, they could temper the need for further fund infusion towards fertiliser subsidy by the central government beyond the Rs 2/2.25-trillion estimated for 2022-23 (FY23).

The Budget Estimates for fertiliser subsidy for FY23 is Rs 1.05 trillion, which has already been overshot due to sharp rise in global prices of both finished fertilisers, along with their key raw materials (including natural gas) since the Russia-Ukraine stand-off.

“India has secured adequate supplies of urea until December, which might negate the need for any further urea imports for the rest of the year,” Minister of Chemicals and Fertilisers Mansukh Mandaviya told reporters.

He said DAP imports will have to happen since domestic production is inadequate.

Fertiliser demand usually peaks between April and June for the kharif harvest; between October and December for the rabi sowing season. DAP demand is higher during the rabi season, while N, P, and potassium (K) (or NPK in common labelling convention) go up during kharif.

India annually consumes around 30-35 million tonnes (mt) of urea, of which around 7-9 mt is imported. Domestic consumption of DAP is around 10-12.5 mt, of which local production is around 4-5 mt. The rest has to be imported.

According to official sources, India has on date urea stocks of around 7 mt, while another 1.6 mt is expected to be imported in the next few months.

The domestic production of urea from July to December is expected to be around 17.5 mt, while 2 mt is projected to be the savings due to use of nano urea in place of the conventional type.

While conventional urea has an efficiency of about 25 per cent, the efficiency of liquid nano urea can be as high as 85-90 per cent. Another 600,000 tonnes is expected to be produced from the newly commissioned Barauni and Sindhri urea plants. In total, this will make around 27.5 mt of urea until December, which will be enough to meet the requirements for kharif and rabi 2022. The average full-year consumption of urea is 30-35 mt per annum.

In the case of DAP, according to official assessment, India has 2.1 mt of DAP in stock as on June 6, while around 600,000 tonnes have already been imported and lying in ports. Domestic production of DAP between July and December is likely to be around 3 mt.

Together, according to official sources, this will mean India will have 6.2 mt of DAP in supply between now and December, which will be adequate to meet the demand of both kharif 2022 and subsequent rabi 2023.

Meanwhile, in urea imports, officials said that in FY23, India is expected to import around 5-5.5 mt of urea, down from the 6-9 mt it usually imports on average each year.