Fertilizer off-take in January 2018 got off to a good start. Urea off-take went up by 33 percent year-on-year, also slightly higher than the 5-year January average. This comes at the back of near 7 percent increase in CY17 urea off-take, which also happened to be the first full year positive growth in off-take in four years.
That is only one side of the story though. The cumulative urea off-take for the ongoing Rabi season has been far from satisfactory. With two months to go in the Rabi season, the off-take to date stands at 2.2 million tons – down 8 percent year-on-year. Urea prices have slowly inched up from Rs1,335 per bag in the last Kharif season to Rs1,396 per bag in the ongoing Rabi season. But this alone does not reason enough for slower off-take growth this season.
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.
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. The demand for some reason has not strengthened, which goes on to show there are issues more than just subsidy alone when it comes to the Rabi crops this season.
But the local manufactures would not complain, as slowly but surely, a surge in local urea prices has been witnessed. The rising international urea prices have also played a vital role, as they peaked at $310 per ton – up from $220 per ton just a year ago. This offers enough cushions to local manufactures to lower the discounts, and breathe better.
Also, urea inventory has also down to just over 0.25 million tons, – lowest in three years, and might pave way for more imports in the months to come.
Things are much brighter on the phosphate front, as the CY17 DAP off-take was recorded as the best ever year. January off-take at 92,000 tons also seems promising, but the cumulative Rabi season DAP off-take reads a similar picture like urea – down 16 percent year-on-year. DAP prices have also increased sharply in the last four months, and it will require continuation or even increase in subsidy to keep the dream of balanced fertilization alive. The DAP subsidy has surely done the trick, and there is increasing evidence of growing awareness of balances fertilization amongst the community.