Sales of complex fertilisers soar thanks to new subsidy regime

The Hindu Business Line dt.21.4.2011

 

New Delhi, April 20: 

Sales of complex fertilisers have registered a 20 per cent jump in 2010-11, following the introduction of a nutrient-based subsidy (NBS) regime.

The fiscal that ended on March 31 saw fertiliser firms selling 98.3 lakh tonnes (lt) of complexes, containing various proportions of nitrogen (N), phosphorous (P), potash (K) and sulphur (S). This was roughly a fifth more than the 81.9 lt they did in 2009-10.

On the other hand, despatches of conventional fertilisers such as urea and di-ammonium phosphate (DAP) recorded lower growth – 6.7 per cent and 9.3 per cent respectively – while even falling by 16.8 per cent in the case of muriate of potash (MOP).

The spurt in complex sales is largely being ascribed to the NBS, effective since April 1, 2010. Under it, subsidy is provided on fertilisers based on their N, P, K or S content. This was as against the earlier system, where the subsidy was limited to specific products (urea, DAP, MOP) with no real linkage to nutrient content.

Value proposition

The NBS subsidy is currently Rs 27.481 for a kg of N, with these at Rs 29.407 on P, Rs 24.628 on K and Rs 1.692 on S. That translates into a subsidy of Rs 16,648 on a tonne of the popular NPK complex, 12:32:16, enabling it to be retailed at around Rs 9,500. Lower prices (against Rs 10,750 for DAP) and the presence of K (unlike in DAP, which only has 18 per cent N and 46 per cent P) makes it a value proposition for farmers.

“Not only farmers, even companies are finding attractive to market complexes because their prices can be raised quietly without inviting the attention that DAP or MOP would,” an industry source noted.

The Indian Farmers Fertiliser Cooperative (Iffco) – the leading player in complexes along with Coromandel International Ltd – has virtually stopped making DAP at its Kandla plant, which is now only producing 10:26:26 and 12:32:16 complexes. Even MOP is being increasingly incorporated into complexes, as evidenced by imports that have gone up despite the dip in direct sales.

The other indicator of the increasing preference for complexes is imports, which touched a record 11.7 lt in 2010-11. The importers included Indian Potash Ltd (7.38 lt), Iffco (1.32 lt), Zuari Industries (0.77 lt), Mangalore Chemicals & Fertilisers (0.31 lt) and Rashtriya Chemicals & Fertilisers (0.30 lt), besides the likes of Nagarjuna Fertilisers that do not manufacture complexes.

According to the source, complex sales would have easily scaled the 100 lt-mark, but for the political upheavals in North Africa and West Asia.

“The disruption in supply of rock phosphate, phosphoric acid, ammonia and sulphur from these countries impacted our production. Moreover, the cost of these raw materials, too, went up,” he added.

As a result, the year-on-year sales growth for complexes, which amounted to over 29 per cent during April-January, slowed down to 20 per cent by the fiscal-end.

DAP price increase?

Meanwhile, most companies are said to have effected, or are planning to, increase retail prices of DAP by around Rs 600 a tonne for the coming kharif planting season. The maximum retail price, excluding local levies, will go up from Rs 10,750 to Rs 11,350 a tonne. In addition, firms are passing on the one per cent excise duty levied in the recent Union Budget to the farmer.