New Delhi, which stood firm against the global potash cartel last year, has decided to defer fresh imports of the fertiliser to the end of the current fiscal year, in what might help the government considerably reduce subsidy outgo for the year.
India imports roughly 6 million tonnes of potash worth around $3 billion every year.
Since supplies got delayed last year due to prolonged price negotiations between Indian buyers and global suppliers like Canada?s Canpotex and Russia?s Uralkali, the country currently has sufficient stocks of the fertiliser, enabling it to put off fresh purchases.
Going by China?s recent import contracts, the fertiliser commands a price of $470 a tonne in global markets compared to the three prices ? $470, $490 and $530 ? at which India signed contracts for last fiscal.
Sluggish demand from India and the poor global macroeconomic scenario has had a sobering effect on the commodity?s price now. India expects potash prices to fall further.
Indian Farmers Fertiliser Co-operative (Iffco), the largest shareholder of Indian Potash, which is authorised to import the commodity, said it may not sign any fresh import contracts till the end of this year.
IFFCO managing director US Awasthi said since monsoon is not very active and that there is a 35% shortfall of rain, potash consumption has been affected, forcing the company to cut production. He said IFFCO has cut output by 25% this year. ?And we have not imported anything. I see a demand destruction of around 50%. It looks like we may not import potash till the end of this year,? Awasthi said in an interview to FE.
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 Rs 61,000 crore total subsidy earmarked for the sector this fiscal.
Awasthi said the government should explore the possibility of buying stakes in global suppliers to facilitate affordable supply of the commodity.
Indian Potash did not lift more than two-third of the roughly 6 million tonnes it contracted for last year as weakness in the rupee and delayed government subsidy receipts affected its liquidity. At present, companies sell potash at about Rs 12,040 a tonne to farmers, meeting the remaining cost with subsidy. Indian Potash supplies the imported fertiliser to other companies for retailing.