How the rise in global fertiliser prices will hit India’s subsidy bill
general elections next year. Prices of fertilisers such as urea, di-ammonium phosphate (DAP) and ammonia shot up over the past month after falling towards the end of June. The trend of international prices cooling off from the highs sparked by Russia’s invasion of Ukraine in February 2022 has reversed.
As India relies heavily on imports to boost crop productivity, Mint explains how the rising prices of fertilisers will hit India’s subsidy burden and import bills. Landed prices of imported urea in India have gone up to $395-410 a tonne from $318-320 last month, after falling as low as $285-290 towards the end of June. Landed prices of DAP rose to $560 a tonne from $435-440 in mid-July.
In the case of ammonia, an imported intermediate used for domestic DAP production, prices climbed to $400-405 a tonne from $300-310 about 90 days ago. At their peak, import prices of DAP touched $950-960 a tonne in July 2022. Even before the war, Urea prices were at $900-1,000 a tonne in November 2021-January 2022, while the price of ammonia was at $1,575 in April 2022 and phosphoric acid at $1,715 in July-September last year.
If the current uptrend continues, even the $850-a-tonne import price fixed with global suppliers for the July-September quarter may have to be reset in October-December. On the other hand, prices of muriate of potash are still reasonably low at $319 a tonne as Russia is reportedly keeping the global potash market well supplied for now. Prices dropped to $422 a tonne in April-June from $590 in March.
The rise in fertiliser prices creates two problems for the Indian government. The first is fiscal. The Union Budget for 2023-24 allocated ₹1.75 trillion towards the fertiliser subsidy; of which only ₹45,113 crore was used
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