Fertiliser sales - down the drain

National Fertilizer Development Centre (NFDC) released the latest fertiliser statistics for February 2012 and the picture it paints is anything but rosy. Farmers did not queue up to buy much urea during February 2012 as only 160,000 tons were sold - the lowest in 25 years. There does not seem to be any apparent reason for this drastic drip on urea off-take as prices remained pretty much intact at the previous months level. A plausible reason could either be less than optimal crop production or delay in the upcoming Kharif crop season. Urea application during the Rabi season FY12 so far has been the lowest in five years, which should be a cause of concern. It explains that farmers are not willing to spend more than a certain amount on urea as its prices have increased manifold in the past two years. Moreover, the crop yields have been declining consistently in the previous few years as fertiliser application has remained less than optimal. Moreover, DAP fertiliser application has also suffered a great deal as expensive urea hinders the farmers ability to spend on phosphate fertilisers such as DAP. Consequently, DAP off-take during February 2012 was a paltry 12,000 tons, reminiscent of 2008 when DAP off-take almost came to a halt due to high prices and absence of subsidy on DAP. DAP application for FY12 Rabi season so far has also remained below par - at 517,000 tons. This is also the lowest DAP off-take reported in the last five years - which tells the sorry tale of affairs. The farmers economy might have improved but that has failed to show in their fertiliser application pattern as they continue to spend nearly the same amount on fertilisers which they were spending three years back - which naturally means lesser fertiliser applied as the product prices have increased significantly. More worrisome is the fact that the urea, DAP application ratio has been on a continuous decline, which does not bode well for crop yields for the current season. There is little that the government can do regarding the DAP prices as subsidies are no more an option but surely the government can ensure uninterrupted feedstock gas supply to the fertiliser units which could bring down the urea prices by as much as Rs300-400/bag from current levels - and could help a long way in machining improved yields and better application ratio.