The global surge in fertiliser prices which are up by at least 20 percent from a month back, China’s suspension of urea exports and Russia’s discontinuation of fertiliser discounts to India, may make it challenging for Indian companies to accumulate stocks for the upcoming winter season when demand for DAP rises for the wheat crop.
India has expanded agricultural output every year and the consequent need for fertilisers has also risen. Indigenous production targets are not always met and even after imports, gaps remain between the requirements and availability.
Moneycontrol speaks to the Managing Director of Yara Fertilisers India Pvt Ltd, Sanjiv Kanwar, who says there may be challenges that crop up in some isolated pockets of the country but expects no widescale fertiliser shortages.
India has been importing fertiliser heavily from Russia and urea from China. Now that Russia has discontinued discounts and China has restricted exports of urea to India, how do you assess the current situation and the impact of this move on India?
India currently has sufficient stocks and is pretty much comfortable on the fertiliser side. I'll be very surprised if we see some shortages across the country. But India is a big country and challenges may crop up in isolated pockets, but I would be very surprised if we see some supply shortages.
Also read: China asks fertilizer makers to halt urea exports on price surge
This is an El Nino year. With fertiliser getting costlier as inflation rises, the government is walking a tightrope. How do you see this play out?
If you look at the data till July, we actually saw a reduction in consumption of fertilisers. Consumption may have risen in August, but let's not miss the fact that the main season for rabi sowing is upon us and farmers tend to pre-stock them. So, India is likely to see a sudden increase in demand, but this is a seasonal phenomenon where prices will rise.
The government is walking a tight rope and it's not a good rope to walk on, because on one side you're trying to help farmers get a better return. On the other side, you want to keep consumer prices low. I think it's not easy to win hearts on both sides. But I feel that you should allow market forces to play out and things will settle down eventually. The demand will come down and prices will come down with it.
However, for a long-term strategy, we need to find a way to be demand-driven, instead of the current supply-driven market. Technology will have a role to play here.
What are a few other countries/alternative sources for India to import from, which would give India fertilisers at such heavily discounted prices or in the quantities that we need?
I think traditionally if you look at it, when it comes to nitrogen fertilisers, India has bought from two, or three different sources. One source is obviously China, dominating imports of fertilisers for the last 10-15 years. But prior to that, it was the Middle East, which is four days sailing away from India. Another part, of course, is the CIS countries, the Russia region, from where you can always get urea. The DAP and the NPKs would generally come from, again, the Middle East like Jordan and Morocco. They are good sources for us. Meanwhile, private companies like IFFCO have joint venture partnerships with different countries. There are several sources from which we can easily definitely source our NPKs.
You were one of the few players who entered the fertiliser field in the 1990s. So how has the progression in the use of fertiliser been?
Since that time, fertiliser consumption has gone up by almost 2.5 times, which is really a steep growth. Initially, it was good to see the business grow, because you are having a positive impact on farm productivity. But for the last 10 odd years, production has plateaued, whereas fertiliser application has gone up, which means that nutrition use efficiency is coming down. This is further impacting soil health.
As we go forward, unless we do something rather dramatic in a very short period of time, I think we will continue to see a plateau with the rising population. And it's going to be challenging. I hope that fertiliser application becomes much more balanced as we go forward because when you look at our farm productivity, we are almost about 40-50 percent lower than China and Brazil. So, there's a lot of scope for improvement.
What is the kind of push that you think farmers need to adapt to this balancing act of fertilisers?
There, I think a lot of agronomic knowledge-sharing activities have to happen. We really need to go deep into the market. It's not going to happen without interacting with the farmers. At the end of the day, they need to understand that what they're using is not going to deliver the results that they need.
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