The systemic inventory of phosphatic fertilisers in the Indian markets has dipped sharply, triggering concern for the upcoming rabi season. The dip in phosphatic fertilisers has been caused by a decline in imports, elevated international prices and limited availability in the international markets, while domestic demand remained stable.
Ratings agency ICRA, however, expects that the Indian authorities will step in to alleviate the stress on the trade by improving the subsidy charges below the Nutrient Primarily based Subsidy (NBS) scheme over the course of one month to make sure that there is satisfactory availability for the upcoming rabi season.
While the industry has been facing resistance from the government for raising the retail price of DAP, the retail price for other complex grades has been raised to the extent of Rs. 500-1000 per tonne to pass on the impact of the raw material price inflation.
ICRA estimates that the government might want to increase the subsidy for DAP in the region of Rs 5000-6000 a tonne to ensure trade profitability and maintain affordable retail costs for the farmers.
According to ICRA, the Indian fertiliser industry remains dependent on imports to meet the domestic demand as domestic supplies remain limited. The import reliance on urea continues to remain significant given the delay in the commissioning of the new urea plants which would have resulted in increased domestic production. In the case of DAP, the import reliance will continue given no additional capacities are coming up in India in the segment.
Additionally, the imported urea prices reaching $ 510 per tonne and the expectation of natural gas prices to rise further with depleting natural gas inventories across the globe will put upward pressure on urea prices. “As a result, we expect the current fertiliser subsidy budget to fall short of the total requirement for the year in absence of additional budgetary allocation by the government of India. Given the recent actions in ensuring adequate budgetary allocation for the fertiliser subsidy budget, we expect that the government will allocate additional funds in conjunction with the revision in the NBS rates for phosphatic fertilisers,” ICRA said.