Ahead of kharif sowing, due to begin next month, India faces the challenge of meeting its requirement of fertilisers, supply of which has been disrupted in the wake of Russia’s invasion of Ukraine. While the government has maintained that there will be no fertiliser shortage for the upcoming season, the challenges include securing supply from new sources, costlier raw material, and logistics.

The pandemic has impacted fertiliser production, import and transportation across the world during the last two years. Major fertiliser exporters such as China have gradually reduced their exports in view of a dip in production. This has impacted countries such as India, which sources 40–45% of its phosphatic imports from China. Besides, there has been a surge in demand in regions like Europe, America, Brazil and Southeast Asia. While the demand has increased, the supply side has faced constraints.

At the Kharif Conference on April 19, Fertilizer Secretary Rajesh Kumar Chaturvedi said Morocco procures ammonia from Russia for manufacturing DAP (diammonium phosphate), supply of which has been affected in the wake of the “current geopolitical scenario”.

The kharif season (June–October) is very crucial for India’s food security as it accounts for almost half the year’s production of foodgrains, one-third of pulses and about two-thirds of oilseeds. Therefore, a sizeable quantity of fertiliser is required.

Every year, before the start of the cropping season, the Department of Agriculture and Farmers Welfare assesses the requirement of fertilisers and informs the Ministry of Chemical and Fertilizers to ensure the supply. For kharif 2022, the Centre has pegged the requirement at 354.34 LMT, of which urea accounts for 179 LMT, DAP for 58.82 LMT, muriate of potash (MoP) for 19.81 LMT, NPK (nitrogen, phosphate, potash) for 63.71 LMT, and SSP for 33 LMT.

The requirement varies each month according to demand, which is based on the time of crop sowing, which again varies from region to region. For instance, demand for urea peaks during the June–August period. The requirement is relatively low in March and April, and the government uses these two months preparing to ensure the supply of fertilisers for the kharif season.

As per data shared by Chaturvedi, the opening stock of fertiliser available for the kharif season is 125.5 LMT, or 35% of the requirement. Among individual fertilisers, the urea stock is 34.62% of the total requirement, DAP stock is 41.65%, MoP stock is 30.29%, NPK stock is 25.33% and SSP stock is 51.52%.

How much can be produced domestically?

The government estimates domestic production of fertilisers during the kharif season to touch 254.79 LMT, including 154.22 LMT of urea, 27.92 LMT of DAP, 48.65 LMT of NPK and 24 LMT of SSP.

Theoretically, the opening stock and the “expected” domestic production would be sufficient to meet the requirement. However, the war in Ukraine has disrupted the supply of raw materials that Indian companies import, which is expected to impact domestic production. In view of this, the government expects to import 104.72 LMT of fertilisers, most of it urea and DAP.

The “anticipated total availability” — opening stocks, domestic production and imports — will be 485.59 LMT.

Chaturvedi said at the conference: “Kharif me hamen koi dikkat aane ki sambhavna nahin hai. (We are unlikely to face any problem during the kharif season.).”

How have the disruptions in supply impacted prices?

There has been a steady increase in prices of raw material as well as logistics and freight costs in recent months. The disruption in the logistics chain during Covid has caused the average freight rates for ships to jump up to four times, source said. Besides, prices of fertilisers such as DAP and urea, and raw materials such as ammonia and phosphatic acid, have risen up to 250–300%.

In efforts at price control, the government has increased the Nutrients Based Subsidy (NBS) rates for kharif 2022. The NBS rates have been raised for nitrogen (N) by 389% from the last kharif season’s Rs 18.78 per kg to Rs 91.96 per kg for April-September 2022, for phosphate (P) by 60% from Rs 45.32/kg to to Rs 72.74/kg, for potash (K) by 150% from Rs 10.12/kg to Rs 25.31/kg, and for sulphur by 192% from Rs 2.37/kg to Rs 6.94/kg. The total fertiliser subsidy bill is expected to reach to Rs 2.5 lakh crore this financial year, up from Rs 1.62 crore in the revised estimates for the previous fiscal.

According to the Food Secretary, India has received shipments of 3.60 LMT of fertilisers from Russia since the beginning of the war on February 24. In addition to this, India has entered into a C2C (corporation to corporation) supply arrangement with Russian companies for 2.5 LMT DAP/NPK every year for 3 years. Russia had also assured additional quantities of DAP (4 LMT), MOP (10 LMT) and NPK (8 LMT).

India has made efforts to secure fertiliser supply from alternative sources such as Saudi Arabia and Iran. Chaturvedi said India is in talks with Iran, which has agreed to supply 15 LMT of urea every year under a long-term arrangement for three years. Under a short-term agreement, Indian companies and PSUs have secured 25 LMT of DAP/NPK from Saudi Arabia for 2022-23; Chaturvedi said supply has started and India is receiving 30,000 MT of DAP every month.

For domestic production of urea, the government is focusing on the Matix (West Bengal), Ramagundam (Telangana) and Gorakhpur (UP) plants, and is reviving two other units, at Sindri and Barauni. India has also clinched a long-term supply deal with Oman to get 10 LMT of urea per year, according to the source.

The requirement of potash during kharif 2022 is estimated at 19.81 LMT, against which an opening stock of 5 LMT is available. India expects to import 23.18 LMT, which will take the total availability to 28.18 LMT.

India depends on imports for potash, which is used for manufacturing fertilisers. In the wake of sanctions on Belarus and Russia, international prices of potash have increased from $445 per metric tonnes in December 2021 to $600 per MT last month.

With supply of potash from Belarus affected, India has now secured supply of 12 LMT potash from Canada, the Fertilizer Secretary said.

An additional quantity of 8.75 LMT was secured from alternative sources — Israel and Jordan — on March 21.

Sources said the government is exploring the option of domestically mining raw materials such as rock phosphate. The Centre has begun an inter-ministerial consultation to explore this option.

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What does the Centre expect of the state governments?

Ahead of the start of kharif sowing, the Centre has asked the states to ensure “micro-planning” of fertiliser movement as per requirement. It has asked them to ensure timely unloading of rakes for better utilisation of the rolling stock, to promote use of alternative fertilisers such as nano urea, and to take “strict” action against diversion, hoarding and black marketing of fertilisers.

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