Fertiliser Challenge

In News

• Recently, the war in Ukraine has disrupted fertiliser supply ahead of sowing for the Kharif season.

Current scenario on Fertilisers

• Kharif season: The Kharif season is very crucial for India’s food security as it accounts for almost half the year’s production of foodgrains, one-third of pulses and about two-thirds of oilseeds.
  • Therefore, a sizable quantity of fertiliser is required.
• The country’s opening stocks are estimated at around 2.5 million tonnes of di-ammonium phosphate (DAP), 0.5 mt of muriate of potash (MOP), and one mt of complex fertilisers containing varying proportions of nitrogen, phosphorous, potash and sulphur (NPKS).
• Trend: India annually consumes 9-10 mt each of DAP and NPKS complexes, besides 4.5-5 mt of MOP.
  • Roughly 45 per cent of sales happen during April-September and 55 per cent in the balance October-March period.
  • Demand for urea peaks during the June–August period.
• Potash: India depends on imports for potash, which is used for manufacturing fertilisers.
  • In the wake of sanctions on Belarus and Russia, international prices of potash have increased.
  • India has now secured supply of potash from Canada.
  • An additional quantity was secured from alternative sources Israel and Jordan.

Major Issues/ Challenges

• India is facing a tight supply position in fertilisers, especially of phosphatic and potassic nutrients.
  • Retail food inflation has hit a 7.68 per cent mark.
• The challenges include securing supply from new sources, costlier raw material, and logistics.
  • The pandemic has impacted fertiliser production, import and transportation across the world.
• Major fertiliser exporters such as China have gradually reduced their exports in view of a dip in production.
  • This has impacted countries such as India, which sources 40–45% of its phosphatic imports from China.
• There has been a surge in demand in regions like Europe, America, Brazil and Southeast Asia.
  • While the demand has increased, the supply side has faced constraints.
• There has been a steady increase in prices of raw material as well as logistics and freight costs.            
  • The disruption in the logistics chain during COVID has caused the average freight rates for ships to jump up to four times.
  • Besides, prices of fertilisers such as DAP and urea, and raw materials such as ammonia and phosphatic acid, have risen up to 250–300%.
• The total fertiliser subsidy bill is expected to reach Rs 2.5 lakh crore this financial year, up from Rs 1.62 crore in the revised estimates for the previous fiscal.

Way Forward/ Government’s stand

• Theoretically, the opening stock and the expected domestic production would be sufficient to meet the requirement.
  • However, the war in Ukraine has disrupted the supply of raw materials that Indian companies import, which is expected to impact domestic production.
• In efforts at price control, the government has increased the Nutrients Based Subsidy (NBS) rates for Kharif 2022.
  • The NBS rates have been raised for nitrogen (N) by 389%.
  • For potash (K) by 150%
  • For sulphur by 192%
• India has received shipments of 3.60 LMT of fertilisers from Russia since the beginning of the war.
  • India has entered into a C2C (corporation to corporation) supply arrangement with Russian companies.
• India has made efforts to secure fertiliser supply from alternative sources such as Saudi Arabia and Iran.
  • India has also clinched a long-term supply deal with Oman to get urea.
• For domestic production of urea, the government is focusing on the Matix (West Bengal), Ramagundam (Telangana) and Gorakhpur (UP) plants, and is reviving two other units, at Sindri and Barauni.
• The government is exploring the option of domestically mining raw materials such as rock phosphate.
• The Centre has asked the states to ensure micro-planning of fertiliser movement as per requirement.
  • It has asked them to ensure timely unloading of rakes for better utilisation of the rolling stock, to promote the use of alternative fertilisers such as nano urea, and to take strict action against diversion, hoarding and black marketing of fertilisers.

Source: IE