Soaring global fertilizer prices will affect India's subsidy bill

Compound Fertilizer, Monoammonium Phosphate, Potassium Chloride, Potassium Fertilizer, Potassium Sulfate

In the past month, the landed price of urea imported from India has soared from $318-320 per ton to $395-410, and it had dropped to $285-290 at the end of June.

Prior to the key elections for the five state councils of Madhya Pradesh, Rajasthan, Chhattisgarh, Trengana, and Mizoram held later this year, the central government led by the Indian People's Party has a new concern: the global rebound in fertilizer and raw material prices.

Last month, the landed price of imported urea from India surged from $318-320 per ton to $395-410, and dropped to $285-290 at the end of June.

The same is true for diammonium phosphate, with a CIF price of $435-440 per ton in mid July. Two weeks ago, the price rose to $480, currently at $560 per ton.

In the past month and a half, the landed price of ammonia used for domestic production of diammonium phosphate has also increased from $300 to $310 per ton to $400 to $405.

An insider said: "The trend of international prices falling back from the high level after the Russia-Ukraine conflict last February has obviously reversed."

In July 2022, the import price of diammonium phosphate reached its peak at $950- $960 per ton; The price of urea from November 2021 to January of the following year is $900- $1000 per ton; Ammonia was $1575 in April 2022, and phosphoric acid was $1715 from July to September 2022.

The source said, "If the current trend continues, even the import price of $850 per ton determined with global suppliers from July to September must be reset next quarter

At the same time, the price of potassium chloride remains relatively low, at $319 per ton, dropping from $590 per ton to $422 in March and April June 2023. Russia currently maintains sufficient supply in the global potassium fertilizer market.

The rise in fertilizer prices has brought two problems to the Indian government. Firstly, there is the financial aspect. Allocate 1.75 trillion rupees in the 2023-24 union budget for fertilizer subsidies; With global prices falling, 45.113 billion rupees were used in the quarter from April to June, which is expected to further save expenses in the coming months.

Now it may be necessary to re-examine these calculations. In the year leading up to the national elections expected to be held from April to May 2024, the government will have no choice but to provide more funding for fertilizer subsidies, with the amount of fertilizer subsidies reaching 21513.935 billion rupees in 2022-23.

Related to this is the second issue, which is the political issue. The Modi government's goal is to import 6 million tons of diammonium phosphate within the next four months to ensure sufficient supply from November to December. At that time, crops including wheat, mustard, barley, fragrant beans, lentils, potatoes, garlic, and cumin will be sown in the states where parliamentary elections are planned.

Experts say the government is unlikely to compromise on the issue of fertilizer imports, nor is it likely to accept the image of farmers queuing for hours to buy a bag of urea or diammonium phosphate. If necessary, the government will make every effort to import and provide higher budget subsidies.

Compound Fertilizer, Monoammonium Phosphate, Nitrogen Fertilizer, Phosphate Fertilizer, Potassium Chloride, Potassium Fertilizer, Potassium Sulfate