National Fertilizer Development Centre (NFDC) released the latest fertiliser statistics for April 2012 and the picture it paints continues to be bleak. The Kharif season has begun on a weak note as far as fertilizer application to the crops is concerned, as evident by a five-year low urea off-take at 308,000 tons for April.
The cumulative urea off-take for January-April CY12 is also reeling at a five-year low, and in comparison to the same period last year, it is down by 22 percent. Skyrocketing urea price is one reason for the slow off-take, but the urea price of late has not increased significantly, as the availability of cheap imported urea has resulted in a halt to increase in prices.
Moreover, there is a strong anticipation in the farmers community that the oversupply situation in the urea market, as the urea inventory is sitting on an all-time high, would result in further price easing, as local manufactures are finding it hard to find buyers, as evident by their plummeting sales in the past three months.
Rumour mill is also grinding news that the government might abolish or slash the General Sales Tax on urea, which would result in a considerable decrease in prices. That, plus more planned imports in the pipeline is adding to the farmers reluctance to queue up for urea off-take at present. In fact, local players have already responded by slashing urea prices by Rs140 per bag on account of the presence of cheap imported urea to boost their sales. The numbers for May might show improved off-take.
What is alarming is that the farmer is still reluctant to apply a balanced mix of DAP fertiliser, as the prices are considered too high at current level of Rs4,000 per bag. The Urea: DAP application ratio has continued to worsen, as it currently stands at 9.12:1, which is a far cry from an ideal ratio of 2.5:1. For DAP off-take to improve, the government may have to consider restoring the subsidy on phosphate fertilisers, which was discontinued two years back.
It appears that the upcoming budget will dictate the fate of fertiliser off-take for the rest of the calendar year, as restoration of DAP subsidy or withdrawal of GST on urea can restore the confidence amongst farmers. Should none of it happen, an expected increase in urea price on account of feedstock gas price revision in July, could deliver a telling blow to fertiliser off-take in the country.