India likely to delay potash contracts until September

Written by Gireesh Chandra Prasad | Gireesh Chandra Prasad | Prashant Mukherjee | New Delhi | Updated: Jun 19 2012, 09:27am hrs
India on Monday said it may not sign potash purchase contracts with global suppliers at least until this September as the worlds second largest importer of the fertiliser has sufficient stock.

The move may not be pleasing to global suppliers like Belarusian Potash Company (BPC), ICL Fertilisers of Israel and Canadas Canpotex that are confronting a subdued market for their produce due to the weak global macroeconomic climate and inventory pile-up with buyers. By delaying purchase deals, India may also be able to make some savings on the subsidy on potash, which together with that on phosphorous account for nearly half of the R61,000 crore total subsidy earmarked for the sector this fiscal.

We will not go for potash imports till September as companies have sufficient stock to meet the Kharif requirements, fertiliser secretary, Ajay Bhattacharya told FE. Contracts were signed last fiscal after protracted price negotiations and a brief potash holiday announced by Indian customers, which led to delayed arrival of the fertiliser and piling up of inventories.

The secretary declined to comment on the price that may be acceptable to Indian buyers, saying it is a commercial decision to be made by parties to the contract.

Indian Potash Ltd, that is authorised to import potash for the country, had agreed to buy about 5.5 million tonne for $490 a unit last fiscal but did not lift more than two-third of the quantity as the weakness in rupee and the delayed government subsidy receipts affected its liquidity. At present, companies sell potash at R12,040 a tonne to farmers, meeting the remaining cost with subsidy.

China has, in the meantime, moved to quarterly purchase deals to avoid such uncertainty and has signed contracts with Russian miner Uralkali for the second quarter at $470 a tonne.

India partially deregulated potash in 2010 to give some pricing freedom to domestic retailers but the government still cushions the price volatility with a fixed amount of subsidy decided at the beginning of the year.

The fact that Indian customers could not accept the entire contracted fertilisers in the last fiscal has had a sobering effect on the world potash market.

Uralkali chief executive Vladislav Baumgertner recently said he is confident of signing export contracts with Indian customers by August.