The Hindu Business Line : Phosphoric acid pricing — Fertiliser cos, global suppliers to meet today

A SECOND round of discussions between Indian fertiliser manufacturers and international suppliers of phosphoric acid is slated for Thursday in Delhi to ward off the crisis facing di-ammonium phosphate (DAP) manufacturers.

Since no agreement could be reached on the pricing of phosphoric acid — the critical raw material for DAP manufacturers — some fertiliser units have already stopped production.

Currently, two manufacturers, namely, Oswal Chemicals and Fertilisers Ltd and Madras Fertilisers Ltd have stopped production of DAP and other companies such as Tata Chemicals and Gujarat State Fertiliser Corporation (GSFC) are operating at 50 per cent capacity, industry sources said.

DAP is used mainly during the first few weeks after sowing and the country needs around 2.4 million tonnes of DAP during the kharif season. This year, in the beginning of April, India had an opening stock of only 0.3 million tonnes.

DAP manufacturers have formed a joint negotiating committee with officials from the Government. Representatives from international suppliers of phosphoric acid such as OCP of Morocco, GCT from Tunisia and PhosChem from the US are currently in India for the talks.

Initially, the suppliers had asked for $500 per tonne of phosphoric acid and have finally come down to $485. According to a linear regression model formulated by the Department of Fertiliser, taking into consideration of phosphoric acid prices for the past 25 years, the price works out to $455 per tonne on cash purchases and around $462 for 120 days credit payment.

Last year, the negotiated price was fixed at $402 per tonne of phosphoric acid leading to an increase of around Rs 750 crore in fertiliser subsidy. This year the amount of extra subsidy that the Government would have to pay would depend on the final price. If it is fixed at $485 per tonne, the extra subsidy would be around another Rs 700-800 crore.

India's annual consumption of phosphoric acid is approximately 5 million tonnes out of which 50 per cent is imported. The domestic phosphoric acid manufacturers too are facing shortage of raw material because India doesn't have enough rock phosphate, which is used in manufacturing phosphoric acid.

According to Mr B.K. Saha, Director General of the Fertiliser Association of India (FAI), the situation is very serious and if a decision is not taken immediately on phosphoric acid supplies, kharif production could be seriously impacted.

Even if an agreement is reached on Thursday, shipments will take at least six to eight weeks to reach India. In case there is further delay, the rabi crop could also be affected because the bulk of fertiliser sales for this crop takes place in September. "If two consecutive crops suffer, the situation could be alarming," Mr Saha said.

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