Iran sanctions could swell India's urea import bill

With the new US sanctions on Iran, our urea import cost is likely to rise. In 2017-18, our import was 6 million tonnes  (mt) and a third of this was from Iran, which supplies 4.5 mt annually to the world market.

If, due to sanctions, these supplies don’t come to the market, global prices will shoot up.

India was importing urea via the UAE route and making payment in dirhams (the latter's currency) during the earlier sanctions period. Now, global urea traders are worried if the UAE would oblige this time, say sources.

Urea prices have already been on a rise for a year. Since July 2017, these have risen by a fifth, to $255 a tonne. China has cut urea production on environmental grounds and this has made the market tighter.

“Iran was an important source for import and its share had increased to 34 per cent in 2017-18, compared to 27 per cent the previous year, due to less availability, especially from China. It’s very early to assess the impact on import and prices. Presently, we are expecting prices to remain soft over the next few months,” said Deepak Chitroda, an analyst from London-based CRU.

Two months earlier, the Government of India floated a tender to import a million tonnes of urea through Indian Potash, a canalising agency. A major chunk of this was allocated to those importing from Iran. Part of these consignments have already landed here but those yet to arrive “could be in trouble because making payments for these will now be a contentious issue”, said a source.

Of cheer is an expected rise in domestic production capacities, with one mt expected to come on stream this year. The government is also trying to to limit consumption. Some months earlier, it had told fertiliser companies to pack urea in 45-kg bags, instead of the earlier 50-kg ones.