Higher prices likely to cut fertiliser demand 10-15 %

IPL has recently contracted supply of 500,000 tonne to 700,000 tonne of DAP at $580 per tonne from Phosphate Chemicals Export Association (PhosChem), the largest exporter of concentrated phosphate from North America.

Suresh Krishnan, MD, Zuari Industries , said: “But it’s little early for demand projection. Let the monsoon settle down. Whatever the price rise, it’d be only to offset part of our increased input cost,” he said.

Besides inducing less use of phosphatic fertilisers, higher DAP prices may result in a shift in usage pattern.

“Farmers need fertiliser at the time of sowing. If DAP becomes unaffordable for them, they may shift to comparatively cheaper single super phosphate and other complex fertilisers. The consumption of urea will not increase due to this. Farmers are now well aware of the ill-effects of the over usage of urea,” said Kapil Mehan, managing director, Coromandel International, a fertiliser company.

India imports a quarter of urea, 100% of potash and almost 70% of DAP. Demand for fertiliser normally peaks in summer because farmers heavily invest in nutrients for cash crops such as rice, cotton and sugar cane.
While urea price is still regulated, the government has cut the subsidy on DAP and other fertilisers by 27% since April 2012. The depreciating rupee is compounding the woes of fertiliser companies because the import cost of raw material as well as finished fertilizer has gone up.

The government has projected the country’s fertiliser requirement to be at 61.27 million tonne in 2012-13 as against 58.69 million tonne last year. The requirement of urea is expected to be at 32 million tonne, DAP at 13.24 million tonne, potash at 4.69 million tonne and complex nutrients at 11.25 million tonne.