FocusIndia proposes 10% rise in urea prices on rupee depreciation

29 May 2012 06:09  [Source: ICIS news]

By Ajoy K Das

India planning to raise urea priceKOLKATA (ICIS)--India intends to increase urea’s retail price by about 10% to $105.86/tonne (€84.69/tonne) but is wary of stiff opposition from political parties and farmers’ lobby, a senior official in Ministry of Chemicals and Fertilizer said on Tuesday.

“Given the politically sensitive nature of the decision, the price hike proposal has been submitted to the Cabinet Committee on Economic Affairs ((CCEA), the highest decision-making body of the government, for necessary action,” the official said.

Urea’s current price in India stands at about $96.22/tonne.

“The rapid depreciation of the rupee against the dollar has made urea retail price increase inevitable to check government’s subsidy bill in maintaining price of domestic and imported urea,” he added.

In 2011-12 the government spent $4.43bn in subsidizing domestic production and imports of fertilizers. The country imports around 9m tonne of urea to meet a domestic demand of 30m tonne/year.

The Indian currency has depreciated 6.2% against the dollar since end-April and 13% against the dollar since February 2012.

On Monday the Indian rupee (Rs) closed at 55.18 to a dollar, extending gains of 82 paise against the dollar, the highest in the last two months.

But fertilizer industry sources said that this will have little impact on the government’s subsidy bill since imports last year averaged at Rs44.50 to the dollar.

Producers of partially regulated fertilizers too were considering increasing retail prices by around 30% within the next few weeks.

“We will raise prices by 30% within weeks. Price increase from rupee depreciation will have to be passed on to the consumer. Other producers too will have to increase prices to stay in business,” said P S Gahlot, managing director, India Potash Limited, one of the largest importers of fertilizer in the country.

The current retail price of di-ammonium phosphate (DAP) averaged at around $341.72/tonne and muriate of phosphate (MOP) at around $211.35/tonne.

According to Ministry of Chemicals and Fertilisers, the domestic demand in the country in 2012-13 was expected to rise to 61.27m tonnes against 58.69m tonnes in the previous year.

In the current year, demand for urea was forecast by the ministry at 32m tonnes, DAP at 13.24m tonnes, potash 4.69m tonnes and complex nutrient at 11.25m tonnes. 

India was fully dependant on imports to meet requirements of phosphatic and potassic fertilizers.

($1 = €0.80)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Ajoy K Das
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