Having failed in a bid to avoid a price hike in the first two potash import deals for the financial year, fertiliser producers in India expected inward shipments of fertiliser minerals to drop during 2015/16.

Indian potash importers have concluded their first two deals of the year, of 1.3-million tonne and 80 000 t respectively with Canadian potash exporter Canpotex and Russia’s Urakali. Both the shipments would be at $332/t and remained fixed through the current year.

Senior government officials in the Department of Fertilisers said that the contracted price was a hike of $10/t over average price of shipments during previous financial year, and while price increases had been resisted, importers had clearly failed to negotiate deals with potash exporters, at last year’s prices.

However, having concluded two deals for the year, potash importers would set the price of $332/t as the ceiling for all other contracts for potash supplies for rest of the current year, the official said.

A section in the Department of Fertilisers was apprehensive that with the government keeping subsidy on potassic fertilisers unchanged for 2016/16, the higher contracted price for potash imports would push up retail prices of di-ammonia phosphate (DAP) and muriate of potash.

This, coupled with forecast of poor monsoon rains across the country, could depress demand for high-priced potassic fertilizers and imports of potash could dip by minimum of 50 000 t from a import estimate of five-million tontones during the year, the highest projected since 2011, the official added.

In fact, the government has ruled out any increase in subsidy to keep retail price of potassic fertilisers in check in wake of higher contracted price.

In 2010, the Indian government de-controlled potassic fertiliser prices, giving producers freedom to fix the maximum retail price (MRP). However, the government continued to provide a fixed subsidy announced each year based on retail price of fertilisers. Earlier this month, the government decided to keep the subsidies unchanged at previous year’s level of  $196 /t in case of DAP and $147/t for muriate of potash.

Officials said that forecast of poor monsoon, would not only depress demand for potassic fertilisers and resultant possible reduction in imports of five-million tonnes as estimated last month, there would be larger shift to urea by farmers as this was sold at government administered retail prices entailing higher subsidy element.

The Indian Meteorological Department in the first of the series of monsoon forecast last month said that the country “would face 33% probability of rains being less than 93% of long term average” or drought conditions.

Deficient rainfall for the second consecutive year would definitely lead to fall in fertiliser consumptions and the demand situation would only get aggravated by the rise in potash import prices which would have to be passed onto farmers in absence of higher subsidy allocation, the official said.

Source:miningweekly.com