Urea demand during the rabi crop season to be low at 15 million tonne.

In what may help reduce India’s fertiliser subsidy outgo, the government expects the urea requirement to be low at around 15 million tonne (MT) for the rabi crop season which began on 1 October.

The rabi season starts in October and runs through March, and crops sown during the period are harvested in spring. The demand for urea during the last rabi season was 15.8 MT. In comparison, the kharif crop season falls between July and October, when the southwest monsoon spreads across the country.

To meet the demand, state-owned MMTC Ltd has already floated an initial tender to import around 1 MT of urea for the season.

“In a recent meeting with state officials, it was estimated that the total urea requirement during the current rabi season will be around 15.192 MT. The first tender of 980,000 tonne has been floated by MMTC which will be shipped shortly,” said a senior government official on condition of anonymity.

With the price of urea, the most commonly used fertiliser in India, being controlled and currently sold at a fixed price of Rs.5,360 per tonne, any savings will help the government, which has made a provision of Rs.70,000 crore on account of fertiliser subsidies in the Union budget of 2016-17. The industry is compensated in the form of subsidy for the difference between production cost and selling price.

The official added that the total demand for urea during the kharif season was around 14.7 MT, down from 15.4 MT last year.

InfraCircle reported on 18 May about India’s fertiliser demand for the kharif season remaining subdued despite the country receiving near-normal monsoon rains till now, after two successive years of drought.

A September report by rating agency Icra Ltd noted a good monsoon coupled with favourable agro-climatic conditions have improved the outlook for the fertiliser sector in the second half of financial year 2016-17 and is set to remain stable.

India’s annual urea demand is around 31 MT. The country witnessed a record production of 24.5 MT of urea for the financial year ended 31 March 2016. Due to an increase in the domestic production, urea import in the country during the last financial year also came down by around 3.4% to 8.47 MT compared with 8.75 MT in 2014-15. During April-August 2016, total imports of urea stood at 3.248 MT.

Another government official, who did not want to be named, said urea inventories have piled up in states due to less demand of the crop nutrient due to low purchasing power of farmers.

The rural economy, and especially agriculture, is one of the main focus areas of the National Democratic Alliance government. To ensure that farmers get adequate supply of crop nutrients, it ensured that states had adequate stock of fertilisers before the kharif season started and is also looking to revive shut feriliser units in the country.

While a MMTC spokesperson couldn’t be immediately contacted, queries emailed to the ministry of chemicals and fertilizers on 3 October remained unanswered.

Analysts believe that due to low consumption of urea this year, imports will be a tad lower.

“During the initial five months of the current financial year, urea sales of companies were lower. This may be attributed to neem-coating of urea which has curbed black marketing to a large extent. Also, delayed monsoon has affected sales of fertilisers,” said K. Ravichandran, senior vice-president and co-head, corporate ratings, at Icra.  

However, with good monsoon rains during the fag end of the season leading to good moisture condition, second half sales will be good, he added.

Apart from urea, diammonium phosphate and muriate of potash are the other main crop nutrients used by farmers in India.

Source : vccircle.com