The fertilizer story in 2017 was a tale of two halves. The first half saw urea off-take grow by a massive 48 percent year-on-year to a 5-year high of 2.7million tons. The second half was a contrasting story, with a 14 percent year-on-year decline in urea buying. The full year 2017 urea off-take still settled in at 5.86 million tons – up 6.6 percent year-on-year. The number is encouraging for the fact that this was the first full year positive growth in off-take in four years.
But all the efforts of keeping prices in check by offering a revised subsidy mechanism aimed at ensuring the benefits reach the farmers to the fullest – have not really transpired into a massive up tick in the usage of the all important nitrogenous fertilizer. Recall that the last Kharif season was the best ever in terms of urea application.
The urea off-take has dropped in every single month since the start of 2HCY18, barring August. All this after a revised subsidy mechanism was in place, and prices were relatively stable. Something tells that the farmers' economy has not really improved significantly of late, which also shows in rather constant farm yields across major crops.
In terms of spending patterns, total purchase of urea in CY17 amounted to Rs159 billion, as against Rs169 billion in CY16, urea constituted 56 percent. The number for DAP purchase virtually remained the same for both CY16 and CY17 at around Rs123 billion. The combined urea and DAP spending for CY17 stood at Rs285 billion, marginally lower by 1 percent over CY16.
It is heartening to see a much improved and balanced fertilizer application ratio, which has now come down from the highs of 4.4 in CY12 to a much respected 2.4. It still has some catching up to do to be at the ideal ratio of 1.75, but it will hugely depend on the continuation of subsidy on the phosphate fertilizer.
On the prices front, international prices have moved up gradually, now averaging around $280 per ton, up from $200-210 per ton not so long ago. The local prices have also started to show signs of upward movement, evident from a near 6 percent jump in last three months, which is now at an 18-month high.
The stockpile has also come down to just over 0.33 million tons, and might pave way for more imports in the months to come. The rising international prices offer more breathing space to local players, and they may now decide to regain some lost ground in the days of oversupply and rising international rates.
Things are much brighter on the phosphate front, as the CY17 DAP off-take was recorded as the best ever year. The DAP subsidy has surely done the trick, and there is increasing evidence of growing awareness of balances fertilization amongst the community.