Mumbai: India’s Tata Chemicals expects demand for some phosphate- and potassium-based fertilisers to fall by 15 to 20% this year as a weak rupee and lower government subsidy push up prices, a company official said.
Indian farms consumed 10.8 million tonnes of diammonium phosphate in the fiscal year that ended in March, while consumption of raw muriate of potash was 3 million tonnes, government data show.
“This year, the fertiliser (business) is certainly seeing pressure because of the depreciating rupee,” said P.K. Ghose, chief financial officer at Tata Chemicals, which earns about half its revenue from fertilisers.
The rupee has depreciated nearly 19% over the last 12 months, swelling the cost of fertilisers the company imports from Canada, Russia and the Middle East.
At the same time, India has slashed by a fifth the subsidy it gives to phosphate and potash-based fertilisers in 2012-13 as it tries to curb its fiscal deficit.
The scenario could prompt fertiliser producers to hike prices, Ghose said.
“If you need to make your operations viable, you need to increase price,” he told Reuters in an interview. But he did not say how much prices might be hiked to boost profitability.
Any fall in demand will cut into India’s imports of the two chemicals, since the country imports all its potash and about 90% of its phosphate.
A drop in consumption of diammonium phosphate and muriate of potash, also known as potassium chloride, would prompt farmers to turn to nitrogenous urea instead, since its price is still regulated by government, Ghose said.
An excessive use of urea and reduced use of the phosphate- and potassium-based fertilisers affect productivity, analysts say, but with India’s granaries overflowing with rice and wheat, the near-term risk of shortages is unlikely.
India is the world’s No.2 importer of potash, with major suppliers including Potash Corp, Mosaic Co, Agrium Inc, Uralkali, Arab Potash Co and ICL Israel Chemicals.
Moroccan phosphate producer Office Cherifien des Phosphates (OCP), PhosChem and Russian fertiliser group Phosagro are key suppliers of diammonium phosphate to India.
Tata Chemicals is the world’s second largest producer of soda ash after Brussels-based Solvay and runs production units in the United States, Europe, Kenya and India with total annual capacity of 5.5 million tonnes.
But it has seen European demand for soda ash drop up to 3%, especially from the automobile and construction sectors, Ghose said.
Valued at $1.42 billion, shares in Tata Chemicals closed Thursday at Rs312 each, up nearly 1%, while the broader stock market rose 1.05%.