NEW DELHI/MUMBAI (Reuters) - India on Wednesday decided to cut the subsidies on phosphate and potash-based fertilisers in the fiscal year that began in April in an effort to rein in its fiscal deficit.
The cut for the second year in a row will limit Indian fertiliser companies’ ability to pass on falls in global fertiliser prices to local farmers and thereby stem any rebound in consumption of potash and phosphate based fertilisers which fell by nearly 30 percent last year.
It will also limit India’s imports of potash and phosphate. India imports all its potash and also buys about 90 percent of its phosphate from abroad.
The subsidy for diammonium phosphate (DAP) has been cut by 14 percent from a year ago to 12,350 rupees per tonne for 2013/14, and for muriate of potash (MoP) by 21.5 percent to 11,300 rupees per tonne, the government said in a statement.
“According to the new rates, the total subsidy for the potash and phosphate fertilisers for the financial year 2013-14 would be reduced by around 15 percent,” the statement said.
Reuters reported exclusively in February that India was planning to cut its fertiliser subsidy bill by at least 15 percent for the fiscal year 2013-14 by reducing subsidies for DAP and MoP.
In the last fiscal year, the government earmarked 305.76 billion rupees to subsidise phosphate and potash-based fertilisers.
“Fertiliser companies could have cut potash and phosphate prices sharply, had the government kept fertiliser subsidy steady. Now they can reduce prices marginally,” said a senior official with a fertiliser producer, who declined to be named.
India imported MoP at an average price of $490 a tonne last year, while prices of DAP hovered around $580 per tonne. This year India is buying MoP at $427 a tonne, while global DAP prices have fallen to about $525 a tonne.
Potash Corp POT.TO, Mosaic Co (MOS.N), Agrium Inc AGU.TO, Uralkali (URKA.MM), Arab Potash Co APOT.AM, ICL Israel Chemicals (ICL.TA) and Germany’s K+S AG (SDFGn.DE) are among the major potash suppliers to India.
Moroccan phosphate producer Office Cherifien des Phosphates (OCP), PhosChem and Russian fertiliser group Phosagro are key DAP suppliers to India.
Reporting by Mayank Bhardwaj and Rajendra Jadhav; editing by James Jukwey