The Hindu Business Line : Rise in phosphoric acid prices may lead to higher subsidy outgo

A MASSIVE 25 per cent increase in the price of phosphoric acid in the international market as compared to last year may lead to a higher subsidy outgo to the extent of Rs 750 crore this fiscal, according to officials in the Ministry of Chemicals and Fertilisers.

India requires five million tonnes of phosphoric acid annually for the manufacture of di-ammonium phosphate (DAP).

While 2.5 million tonnes is available from indigenous sources, the remaining 2.5 million tonnes has to be procured from abroad.

Imports are mainly from Morocco, Tunisia and South Africa. Last year, the import price of phosphoric acid was $ 356 per tonne.

This year, phosphoric acid manufacturers are saying that because of increase in the prices of sulphur and hike in freight rates, the prices of phosphoric acid have gone up.

"But our estimates do not justify such an abnormal increase that these companies are claiming," Ministry officials said.

"Currently, negotiations are going on and the sellers are asking for $ 450 per tonne and are refusing to bring it down to a mutually acceptable price," the officials said.

"Moreover, there is also a shortage in the international market, mainly because China is buying heavily.

"There is also a shortage of vessels as China has booked them in advance.

We are trying hard, but are unable to finalise any orders because of the high offer price," the officials added.

According to the Ministry's estimates, a $ 1 per tonne increase in the international price of phosphoric acid will result in Rs 8 crore increase in subsidy outgo.

"So, if the price increases from $ 356 to $ 450 per tonne, the subsidy outgo will go up by Rs 752 crore," officials said.

Almost all the fertiliser companies produce di-ammonium phosphate.

The largest manufacturer is IFFCO enjoying a 24 per cent market share.

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