The DAP gap: Is the ongoing shortage real, and can it be mitigated?

Wheat and potato farmers across the northern belt of the country are in a bind. The ongoing shortage of di-ammonium phosphate (DAP), among other problems, has doubled their cost of inputs.

 

As supplies of DAP have got squeezed, more and more growers are opting for complexes — mainly combinations of nitrogen, phosphorus, potash, and sulphur (NPKS) in various grades. The alternatives are being explored to ensure the sowing time for rabi crops does not pass them by as they wait for their bag of DAP.

 

However, a bag of NPKS is not the ideal replacement for DAP. A 50-kg bag of DAP contains 46 per cent phosphorus and 18 per cent nitrogen. On the other hand, a bag of the most common grade of NPKS (20:20:0:13) has only 20 per cent phosphorus.

 

“This means farmers have to apply two bags of NPKS, which straightaway means doubling of the expenditure on inputs, as both the plant nutrients are priced almost equally,” Ram Inaniya, a farmer leader and member of the Aam Kisan Union in Madhya Pradesh, tells Business Standard.

 

This also means that the final wheat price will have to cover for the increased input cost. “DAP is available in Madhya Pradesh, but only in select districts and outlets. In most places it is totally out of stock and farmers have to stand in long queues for hours to get hold of even one bag,” Inaniya says.

 

In some places, dealers are selling DAP in black at almost double the rate. 

 

Critical input, crucial time

 

DAP is the second most widely used fertiliser in the country after urea. More than 75 per cent of India’s annual DAP consumption happens during the rabi season, in the months of October and December, for crops such as wheat and potato.

 

Different grades of Nitrogen (N), Phosphorus (P), Potassium (K), and Muriate of Phosphate (MoP) are used as alternatives to DAP. India imports around half of its annual DAP requirement of 11 million tonnes (mt), while almost the entire raw material for making it domestically is imported.

 

In complexes (NPKS and others), the country domestically produces around 80 per cent of the requirement of nearly 11-12 million tonnes.

 

A few months back, Uttar Pradesh Agriculture Minister Surya Pratap Shahi flagged the inadequate stocks of DAP in the country and urged the Centre to ensure that supplies were readily available. Shahi recently met Union Fertiliser Minister J P Nadda and demanded supplies of at least 600,000 tonnes of DAP and 200,000 tonnes of NPK for November. He said the state had stocks of 234,000 tonnes of DAP and 263,000 tonnes of NPK, as of October-end.

 

Haryana has urged farmers to use DAP judiciously, while assuring them that adequate supplies were being arranged on a war-footing.

 

The Central government has repeatedly assured farmers that there is no shortage of DAP or any other plant nutrient, and supplies are being smoothened. It says reports in the media about a shortage of DAP in Punjab affecting the rabi crop are wrong.

 

The government has said that in October 2024, up to the 29th day of the month, 92,000 tonnes of DAP, 18,000 tonnes of NPKs, and 9,000 tonnes of SSP had been supplied to Punjab by the Centre, and that 90,000 tonnes of DAP, 49,000 tonnes of NPK, and 76,000 tonnes of SSP were available to the farmers in the state.

 

Further, in the first week of November, another 50,000 tonnes of DAP will be dispatched by the Centre to Punjab, it said. Domestic production of DAP and NPK, the Centre said, was optimum and there was no cause for worry.

 

Several farmers’ groups disagree.

 

Farmers’ side of story

 

All India Kisan Sabha (AIKS), the farmers’ front of the Communist Party of India (Marxist), says official data show a pronounced decline in the availability of urea, DAP, and MoP. Against the 3.45 million tonnes of DAP imported during April to September in 2023, only 1.97 million tonnes were imported in April-September this year, a drop of almost 43 per cent, says AIKS, adding that domestic production has fallen as well.

 

As a result, it says, as on October 1 this year (the start of the rabi sowing season), India had only 1.5-1.6 million tonnes of DAP stocks against the required 2.7-3.0 million tonnes.

 

“This is while the estimated demand during mid-October to mid-December for DAP is around 6 million tonnes,” AIKS said in a statement.

 

It further said farmers hit by DAP shortages, and also of urea, MoP, etc, were reportedly having to pay Rs 300-Rs 400 more than the government’s fixed MRP for DAP, which is Rs 1,350 for a 50-kg bag.

 

Subsidy, MRP

 

Imports declined as companies resisted buying more of DAP from the international markets as their margins got squeezed. While companies could not charge higher prices due to the unofficial cap in place since the Covid-19 pandemic, the subsidy, they say, was not adequate to cover the difference between the landed price and the sale price. Meanwhile, the landed price of DAP went up due to geopolitical tensions and the longer routes that ships sometimes have had to take due to the war in the Gulf and attacks of pirates.

 

The landed price of DAP, according to the rating agency ICRA, was around $597 per tonne in January 2024, which has climbed to $630-635 per tonne.

 

The Centre in October this year offered an additional Rs 3,500 per tonne subsidy on DAP, which will be with effect from April to December this year. Experts say the additional subsidy will help, but has come slightly late in the day.

 

“Even if you start importing in October, the ships will take at least a month or two to arrive,” says an industry expert.

 

Rating agency ICRA in a report released in October said the additional subsidy would result in positive contribution margins retrospectively for the first half of the current financial year. “However, with the increase in DAP prices recently, contribution margins have again turned negative,” it said. 

 

According to the ICRA’s calculation, before the special package, companies were making a loss of around Rs 5,949 for every tonne of DAP imported into the country. This loss would come down to around Rs 2,449 per tonne after the package (assuming $637/tonne is the landed price plus incidental expenses).

 

The additional subsidy might push up the overall budgetary allocation, but, ICRA said, the government remained committed to meet any extra requirement.