Wayward monsoon slows fertiliser consumption

Deficient rains, estimated at 22 per cent below normal so far this season, have resulted in a fall in fertiliser consumption in the quarter ended June. This has affected sales of companies concerned, as well as imports.

Typically, quarters ending June see a rise in fertiliser consumption, owing to the ensuing sowing season for kharif crops.

While the fertiliser industry recorded a fall of about 10 per cent in sales of major fertiliser nutrients in the quarter, compared to the year-ago period, industry majors like Indian Farmers Fertiliser Cooperative (Iffco) and Indian Potash Limited saw sales fall as much as 50 per. Iffco recorded a fall of 8.7 per cent in urea sales, while the fall in di-ammonium phosphate (DAP) and other NPK complexes was 37.8 per cent. The fall has been steep for IPL, with muriate of potash sales falling 50 per cent to 0.22 million tonnes (mt) in the quarter, against 0.44 mt.

For the industry, the fall has been steady across fertilisers. Urea sales fell from 5.9 mt in the year-ago period to 5.5 mt, DAP sales declined from 1.4 mt to 1.2 mt and sales of other NPK complexes fell from 1.9 mt to 1.6 mt earlier.

With the fall in consumption, the import of fertilisers, too, has taken a hit. According to industry data, urea imports almost halved to 0.74 mt in the first quarter from 1.43 mt in the corresponding period last year. DAP imports have fallen to 0.83 mt, against 0.95 mt in the year-ago period. Imports of other NP/NPK complexes slid to 0.1 mt, against 0.24 mt.

Analysts, however, feel it is too early to predict what effect the fall in fertiliser consumption and fertiliser import would have on fertiliser subsidy. Total fertiliser subsidy stood at Rs 67,199 crore in 2011-12, against the Budget estimate of just Rs 49,999 crore. This financial year, it is pegged at Rs 60,974 crore.

Agriculture experts have already predicted a lower yield, particularly in those of oilseeds, coarse grains, a few vegetables and fodder, and this would lead into a rise in inflation. Ashok Gulati, chairman of the Commission for Agricultural Costs and Prices, said a fall of about 10 per cent in fertiliser consumption would surely reduce yield 10-15 per cent. “We will have to separately take a look at the situation for wheat, rice, coarse cereals, etc, to judge the situation in a proper manner,” he said.

The increasing inventory of fertilisers is adding to the industry’s woes. According to an analysis by a brokerage firm, the fall in subsidy for phosphatic and potassic fertilisers under the nutrient-based subsidy scheme for the current financial year saw manufacturers and importers of these products selling large quantities to retailers in the quarter ended March. This led to a pile-up of inventory at the retail level.

In March, the government had reduced the subsidy on nitrogen, phosphate and potash under the nutrient-based subsidy scheme. Subsidy on 1 kg of nitrogen, phosphate and potash for this financial year was fixed at Rs 24, Rs 21.8 and Rs 24, against Rs 27.15, Rs 32.33 and Rs 26.76 in 2011-12, respectively.