You are currently viewing Skyrocketing global prices of fertilizer forces the Indian government to review Nutrient based Subsidy rate: Know the reason for the hike of international fertilizer prices

Skyrocketing global prices of fertilizer forces the Indian government to review Nutrient based Subsidy rate: Know the reason for the hike of international fertilizer prices

Di-Ammonium Phosphate (DAP) Prices have been significantly increased globally, due to various factors, which has increased to a level of US $ 665 CFR India in August 2021 from US $ 273 in June 2020 and there is a hike of 244%.

In current financial year, availability of fertilizers is going to be a big challenge for India as global fertilizer prices soar high continuously due to high demand in US.

High soar in prices of Corn, Wheat and CBOT Soya (almost more than double), encouraged US farmers to increase application rate of fertilizers on their crops, to get better yield and higher return and revenue. This resulted high demand of fertilizers in US and with demand pressure, nutrient (Nitrogen, Phosphorus and Potassium) supplies further aggravated and become constraints on nutrient supplies.

Countervailing duties against Moroccan and Russian Phosphate, imposed by US, further increased price pressure. EU sanctions on Belarussian exports, impacted around 15 – 20% impact on exports.

US and EU are not only the reason for high price soar in global fertilizer market. China also worsens the situation and put upward pressure on international prices by suspending imports.

China is the world largest producers and exporter of fertilizer. It has capacity of around 31% of the global urea capacity and 42% of the DAP capacity and exported around 5.46 MMT of urea (11% of global exports) and 5.84 MMT of DAP (32% of global exports) in FY’ 2020-21. Major share of urea (around 29%) and DAP (around 27%) is exported to India in the year 2020-21.

Chinese government have strictly instructed a number of Chinese fertilizer exporters to suspend fertilizer exports as they were found indulging in speculation and stockpiling during fertilizer prices soar in the Chinese market. Step was taken by Chinese government to meet the China domestic fertilizer demand during rising prices due to limited supplies and rising in energy costs, to protect farmers’ interest.

It is expected that international price will remain high throughout the remaining period of financial year 2021-22, however it is predicted that global prices may moderate by the end of second half of financial year 2022.

India depends on imports to meet the requirement of Indian farmers. We don’t see adding any additional capacity of P & K fertilizers in near future. P & K fertilizer demand in India is around 26 MMT (DAP 10.5 MMT, NPK 12.2 MMT & MOP 3.4 MMT), however production is hardly 14 MMT. There is gap of 12 MMT P & K fertilizers in India. India’s DAP consumption is around 10.5 MMT, as against India’s DAP production of around 3.8 MMT, there is a clear gap of around 6.7 MMT DAP.

Further climb in the raw material prices at international market during June to August 2021, is forcing the Indian government to review Nutrient based Subsidy rate to maintain availability and to keep fertilizer prices at affordable price to the farmers, across the country. US (Gulf) Spot price have increased by around US $ 130 per tons from US $ 534.13 to US $ 665 per ton.

India fertilizer subsidy budget for FY’ 2021-22 is INR 98323.26 crores (US $ 13.1 billion) including additional subsidy of INR 14775 crores (US $ 1.97 billion) for P & K fertilizers. Indian government increased the phosphatic subsidy rates in May 2021 when DAP international price was US $ 534.13 per ton (US Gulf Spot Price), to keep maximum retail price of P & K fertilizers at same level i.e., INR 1200 (US $ 16) per 50 Kg bag, to protect interest of Indian farmers. Department of Fertilisers estimated around INR 14,775 crore (US $ 1.97 billion) additional subsidy for revised NBS rates for P&K Fertilisers for the year 2021-22.

Indian government always keep farmers’ interest as its topmost priority and ensure to make availability of all the Fertilizers to the farmers before season, at affordable price, hence Indian government may further allocate additional subsidy not only for P & K fertilizers but for urea also.