Financial Daily from THE HINDU group of publications
Friday, Aug 20, 2004
Industry & Economy - Fertilisers
Phosphoric acid shortage may force fertiliser units to cut production
New Delhi , Aug. 19
THE country may face a serious shortage of phosphatic and other complex fertilisers in a few weeks.
Early this week, the phosphorus-based fertiliser producers informed the Government that they would not be able to continue production since the basic raw material, phosphoric acid, was not available.
An unusual increase in the prices of phosphoric acid in the international market this year has hit the domestic di-ammonium phosphate (DAP) producers hard. While most DAP manufacturers have cut down production drastically, others informed the Government that they would shut down operations due to non-availability of the acid.
Sources in the fertiliser industry told Business Line that companies such as Gujarat State Fertiliser Corporation, Tata Chemicals Ltd and Madras Fertilisers Ltd have drastically cut down production and are operating their plants at less than 50 per cent capacity utilisation.
On the other hand, companies like Hindustan Lever Chemicals Ltd, Godavari Chemicals and Fertilisers Ltd are thinking of suspending production, as they are unable to procure phosphoric acid from the international market at "reasonable" prices. They have informed the Government of this.
The problem is that the Government is unable to decide on the subsidy to be paid to the fertiliser companies to maintain production at desired levels.
As per industry calculations, one tonne of phosphoric acid is used to make 2.13 tonnes of DAP, whereas in complex fertilisers, one tonne of the acid is needed to produce four tonnes of DAP.
According to estimates, the subsidy that the Government has to pay for an increase in prices of phosphoric acid runs to more than Rs 1,200 crore.
Annually, India requires five million tonnes of phosphoric acid for manufacturing DAP. Of this, 2.5 mt is available from indigenous sources while the remaining 2.5 mt is imported, mainly from Morocco, Tunisia and South Africa. Last year, the import price was $356 a tonne.
This year, phosphoric acid manufacturers say that owing to an increase in the prices of sulphur and a hike in the freight rates, phosphoric acid prices have gone up. Currently, phosphoric acid is available to Indian DAP producers at around $398 a tonne, while DAP is available at a high price of around $270 a tonne.
The situation has worsened because the same foreign company supplies both the raw material and the finished product, sources said.
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