The government is planning to increase the import of muriate of potash (MOP), a granular fertiliser with 60 percent potash content, from Russia as the Red Sea crisis has pushed up freight charges for fertilisers sourced from the Middle East and has led to delays in shipments, multiple officials told Moneycontrol.
"The disruptions in the Red Sea can led to a 20 percent fall in the import diammonium phosphate (DAP) and muriate of potash (MOP) from Jordan and Israel in the coming months if the disruptions continue," a senior government official said.
Israel constitutes 10-15 percent of MOP exports to India, while Jordan constitutes 25-30 percent. The disruption in the Red Sea, a key shipping channel, has significantly affected India's imports of the key fertiliser.
The official cited above added that the country is in talks with Russia and Belarus to import more MOP to make up for the fall in imports from the Middle East.
Russia is already the largest supplier of MOP to India and accounts for nearly 60 percent of India's MOP imports. India's fertiliser imports from Russia surged 246 percent to a record 4.35 million tonnes in 2022-23 as Russian companies gave discounts to the global market price for MOP, DAP, urea and NPK (nitrogen, phosphorus and potassium) fertilisers.
Russia's aggressive selling last year eroded the Indian market share of other fertiliser exporters including China, Egypt, Jordan and the United Arab Emirates.
Another government official told Moneycontrol that due to attacks by Houthi rebels on ships in the Red Sea, a large portion of Indian imports of MOP and DAP is facing delays of up to 15 days, and a significant number of shipments have been cancelled as well.
"Globally, MOP prices have been falling since October 2023, and due to the disruptions caused in the Middle East it has become cheaper for India to import MOP from Russia," the second official said.
The price of MOP fell to around $290 per tonne in February 2024 from $319 per tonne in October 2023, the second official said, adding that while the price of MOP had dropped, insurance premiums for shipments from Jordan and Israel had risen nearly 15 percent, making it more viable for India to import from Russia.
Government officials also said that India is in discussion with Russian companies to reintroduce discounts on fertilisers, something they had ended in August 2023 due to tightening global supplies.
Last month, Union Chemicals and Fertilisers Minister Mansukh Mandaviya had said that India is planning to ink a long-term contract with Mauritania for importing rock phosphate, a key fertiliser ingredient, after the Russia-Ukraine war and Red Sea crisis hit supplies and pushed up global prices.
“To meet our rock phosphate demand, in the past two years, we have entered long-term contracts with several countries, including Morocco, Jordan, Oman, Russia and Saudi Arabia," Mandaviya had said. Apart from these countries, India has similar agreements with Senegal, Israel, Canada and Jordan.
Mandaviya added that India will keep exploring pacts with more countries so that there is no dependency on one or a certain bloc.
"Now we are looking at Egypt and Mauritania to sign long-term agreements for three years to improve the availability of phosphatic fertilisers like DAP and NPK as these countries have rock phosphate and phosphoric acid," Mandaviya added.
India imports nearly 5 million tonnes of phosphate rock, 2.5 million tonnes of phosphoric acid and 3 million tonnes of DAP annually.
In the case of DAP, around 60 percent of the supply is imported. In addition, 25 percent of urea and 15 percent of NPK fertiliser requirements are met from overseas.
In a written reply to the Rajya Sabha, Minister of State for Chemicals and Fertilisers Bhagwanth Khuba said the Department of Fertilisers is regularly monitoring the status of fertiliser ships in close coordination with the Ministry of Ports, Shipping and Waterways, Ministry of Defence, Ministry of External Affairs and the Indian Navy to provide security to the shipments.
"So far, seven ships carrying fertilisers have been rerouted from the Red Sea," he said.
"Further, in the light of ongoing disturbances in the Red Sea, a committee has been constituted in the department to examine the matters related to the Red Sea crisis," the minister said.
As per reports, the Red Sea crisis has extended shipment timelines by nearly 15 days and hiked freight costs.
Last week, the Union Cabinet, chaired by Prime Minister Narendra Modi, approved a subsidy of Rs 24,420 crore for phosphatic and potassic (P&K) fertilisers, adding three new grades to aid farmers and enhance the productivity of oilseeds and pulses.
The Cabinet approved the Department of Fertilisers' proposal to set nutrient-based subsidy rates for the 2024-25 kharif sowing season, which runs from April to September.
“Despite rising prices of fertilisers in the global market, we have decided to keep the prices the same as the last season," Information and Broadcasting Minister Anurag Thakur said at a media briefing after the Cabinet meeting.
The subsidy on phosphatic fertilisers has been increased to Rs 28.72 per kg for the 2024 kharif season from Rs 20.82 per kg in the 2023 rabi season. However, the subsidy on nitrogenous, potassic and sulphuric fertilisers has been kept unchanged for the 2024 kharif season.
The subsidy on DAP will continue at Rs 4,500 per tonne.
As such, DAP-based fertilisers will be available for Rs 1,350 per bag, while MOP fertilisers will be available for Rs 1,670 a bag, and NPK fertilisers for Rs 1,470 per bag.
Last year a subsidy of Rs 38,000 crore was announced for the 2023-24 kharif season.
India annually consumes 30-35 million tonnes of urea, of which imports constitute 4-5 million tonnes, while the domestic consumption of DAP is 10-12.5 million tonnes, of which local production is only 4-5 million tonnes.
Interestingly, the average landed prices of imported fertilisers and key raw material between April and December 2023 gave a mixed picture.
According to data from S&P Global between April 2023 and December 2023 the price of MOP fell from $422 to $319 per tonne. However, the landed price of DAP rose from $568 per tonne in April 2023 to $587 per tonne in December 2023, while that of urea went up from $333 per tonne in April 2023 to $402 per tonne in December 2023.
In the case of key raw materials, the price of landed phosphoric acid came down from $1,050 per tonne in April 2023 to $985 per tonne over the same period, while that of sulphur fell from $122 per tonne to $98 per tonne. Average spot ammonia rates, however, increased from $271 per tonne in April 2023 to $520 a tonne in December 2023.
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