India faces record fertiliser subsidy in 2021/22

Indo Gulf Industries

01/12/2021 02:06

(Repeats story published on Tuesday with no changes to text)
    By Nidhi Verma and Aftab Ahmed
    NEW DELHI, Nov 30 (Reuters) - India plans to increase
2021/22 fertiliser subsidies to a record of more than 1.55
trillion rupees ($20.64 billion) to avoid shortages amid a sharp
increase in global prices of the chemicals, sources familiar
with the matter said.
    The figure is almost double the amount budgeted for
fertiliser subsidies in the budget for this fiscal year ending
on March 31.
    India, the top importer of urea, is a major buyer of
diammonium phosphate (DAP) needed to feed its huge agriculture
sector which employs about 60% of the country's workforce and
accounts for 15% of $2.7 trillion economy.
    The government provides financial support to companies such
as National Fertilizer Ltd  NAFT.NS , Madras Fertiliser Ltd
 MDFT.NS , Rashtriya Chemical & Fertilisers Ltd  RSTC.NS ,
Chamabal Fertilsers & Chemicals Ltd  CHMB.NS  that sell
fertilisers at below-market rates.
    Global fertiliser prices have surged roughly 200% over the
past year after record rises in the price of the two main energy
sources - coal and natural gas - used to produce the crop
nutrients and new export restrictions on fertilizers by China https://www.reuters.com/business/energy/what-does-chinas-power-policy-shift-mean-metal-makers-other-energy-hogs-2021-10-13
 and Russia https://www.reuters.com/article/russia-fertilizers/update-2-russia-will-set-6-month-quotas-for-exports-of-nitrogen-fertilisers-idUSL1N2RU14O.
  urn:newsml:reuters.com:*:nL1N2RA0LE  urn:newsml:reuters.com:*:nL1N2RU14O
 
    In this fiscal year, New Delhi has already raised fertiliser
subsidies twice pushing up the 835.48-billion-rupee budgeted
support by 434.30 billion rupees.
    "This year is going to be one of the highest subsidy payout
because prices in international markets have gone up due to
various reasons including restriction by China on DAP exports,"
said one of the officials.
    
    DAP IMPORTS DELAYED
    India imports an average 60% of the 10-12 million tonnes of
its annual DAP consumption. "Of this 40% comes from China," a
second source said.
    He said some DAP parcels from China have been delayed due to
exports restriction. To avoid shortages, the government has also
decided to further enhance compensation to the firms importing
DAP after restriction by China. 
    "We have asked some of the NPK (nitrogen, phosphate and
potassium) manufacturers to switch to production of DAP," this 
source said, adding the fertiliser ministry has augmented
supplies to the districts with low stocks on a priority basis.
    "Earlier we were using 15 trains for supplies of fertiliser
in the country but since October we have doubled the number of
trains for supplies," this source said.
    However, farmers in India have complained about difficulties
in getting DPA. Demand for fertiliser rises during October and
November, a peak season for plantation of winter sown crops like
wheat. 
    "We had difficulty in buying DAP this time and prices are
also high," said Ravindra Kajal, a wheat grower from northern
state of Haryana.
    The finance ministry did not respond to Reuters email
seeking comment and the fertiliser ministry spokesperson did not
respond to calls.
    For years, India has capped the price of urea at 5360 rupees
($71.36) per tonne excluding taxes, while in the global markets
prices have surged to around $990/tonne, a third source said.
India imports about 30% of about 35 million tonnes of average
annual consumption of urea.
    According to the government data, urea prices surged by an
annual 144% in October to $690/tonne, while DAP prices rose by
84.3% on delivered basis to $682/tonne.
    India does not control prices of DAP but raises the subsidy
to keep an indirect check on retail prices. Retail prices of a
tonne of DAP in India hover around 25,000 rupees ($332.85),
whereas global prices have surged to about $750, the third
source said.
    
    ($1 = 75.1080 Indian rupees)

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Global urea prices surge to all-time highs after spikes in gas
prices curbed production & exports    https://tmsnrt.rs/3Ec6NhZ
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 (Additional reporting by Mayank Bhardwaj; editing by David
Evans)
 ((nidhi.verma@thomsonreuters.com; +91 11 49548031; Reuters
Messaging: nidhi.verma.thomsonreuters.com@reuters.net))