Indian fertiliser companies will delay entering new contracts for key soil nutrients DAP and MoP due to rupee weakness against the US dollar, which has pushed up import costs, a leading global fertiliser consultant has said.
"In any event, it now looks as if Indian contracts for the fertiliser year 2012-13 will be subjected to delays again and may perhaps not be determined until June-July," global fertiliser industry consultancy Fertecon said.
In its report, Fertecon said Indian companies will delay signing new contracts for DAP (di-ammonium phosphate) and MoP (muriate of potash) due to depreciation of the rupee against the US dollar, which is making imports costlier.
"Importers, meanwhile, continue to cite the present unprecedented depreciation of the Indian rupee, as this is making imports more expensive. Economists are warning that the value of the rupee is set to fall further," it said.
Meanwhile, the rupee appreciated by 17 paise to Rs 53.13 per dollar in early trade on the Interbank Foreign Exchange today as the US currency weakened against the euro and other major currencies.
The Indian currency had lost 20 paise to close at a two-week low of Rs 53.30/31 per dollar yesterday.
The rupee closed at Rs 53.10/11 against the US dollar in 2011, after witnessing an 18.79% depreciation in its value over the course of a roller-coaster year.
It slipped below the Rs 54 per dollar-level for the first time in history on December 15 last year, witnessing an all-time low of Rs 54.30 per dollar.
Another major factor in the delay in signing of fresh contracts is price-related demand destruction at the farmers' level, Fertecon said.
"With increasing prices at the farm-gate, farmers have either stopped buying or have reduced consumption, not just of potash, but of DAP as well, and moreover, NPKS (nitrogen, potash, potassium and sulphur), which have also increased in price due to the high cost of the raw materials used to produce them," it pointed out.
Prices of DAP rose by 84% to Rs 18,350 per tonne between July and September, 2011, while that of MoP more than doubled to Rs 11,300 per tonne.
The maximum retail price (MRP) of DAP and MoP stood at Rs 9,950 per tonne and Rs 5,055 per tonne, respectively, in the same period last year.
In December last year, Minister of State of Fertilisers Srikant Jena had said the government is apprehensive about the Nutrient Based Subsidy (NBS) policy on urea as Parliament members, people and farmers were complaining about the rising prices of phosphatic and potassium fertilisers.
Fertecon, however, said it is too early in the season to quantify the reduction in demand and the impact varies from region-to-region and crop-to-crop.
