New Delhi: The Indian government has chosen not to bow down to global firms, which have been dictating prices, after reducing potash subsidies by 7% and phosphorus subsidies by 8% for the 2022-23 rabi season. According to sources, India imports the entire quantity of muriate of Potash (MoP) and more than 60% of Di-Ammonium Phosphate (DAP).

Industry experts predict that the nutrient-based subsidy for kharif 2023 will be significantly lower than the rabi levels, with Nitrogen at Rs 98.02/kg, Phosphate at Rs 66.93/kg, Potash at Rs 23.65/kg, and Sulphur at Rs 6.12/kg. The government has taken steps to make it easier for Indian companies to enter long-term contracts to source imported fertilizers, as global prices for potash and phosphorus have fallen since October-November last year.

Fertiliser Secretary Arun Singhal has stated that the decline of potash prices from $590/tonne to $422/tonne globally will contribute to the reduction of subsidies. Although price reductions will happen gradually, the drop in prices could be a natural reason to consider it. At present, MoP is subsidized by around 60%, and the question of whether to increase it or not remains debated.

The opposing viewpoint is that commercial plantations should not receive subsidies. Last year, the price gap between DAP, at Rs 1,350 per 50 kg bag, and MoP, costing farmers around Rs 1,700-1,750 each bag, resulted in higher DAP usage. As a result, DAP sales increased by 15% YoY to 101.35 lakh tonnes, while MoP sales declined by 35% to 15.21 LT between April-February of the current fiscal year, according to some experts.

As per sources, the most recent tender for imported urea was priced at $330/tonne (FOB, China) - a significant drop from the average of $475/tonne in February and $665/tonne in October 2022. Likewise, the cost of imported DAP (CFR, Mumbai) has declined to roughly $650/tonne at present, down from nearly $760/tonne in October 2022.

Despite substantial allowances made by the government during the previous fiscal year, the increased prices of imported potash are adversely impacting the tea plantation business in Kerala, with rates currently soaring at $33 per kg in comparison to $18 previously. However, potash supply appears to be sufficient currently.