China's supply cut and global disturbances reduces India’s fertilizer imports

Production of di-ammonium phosphate (DAP) fell 7.3% in the April-October period while imports plunged nearly 30%, showed data from the Fertilizer Association of India (FAI), which represents fertilizer makers, importers and distributors. DAP is widely used in farming wheat, pulses and mustard, popular winter (rabi) crops.

The agriculture sector is India's largest employer, and poor yields resulting from insufficient soil nutrients could have an adverse impact on rural incomes and the wider economy.

“Due to disturbances in the global supply chain, we are not receiving enough raw materials required to manufacture fertilizers. Additionally, we are not getting sufficient raw materials from China, as the neighbouring country has stopped exporting key inputs, citing an uptick in their own domestic demand," FAI chairman N. Suresh Krishnan said.

While DAP production and imports have declined, other fertilizer types have shown mixed trends. Urea production slipped 1.3% till October, while NP/NPK production rose 10.9%, and single super phosphate (SSP) production rose 7.5%.

Overall production of fertilizers grew just 0.4% in October, contributing to a cumulative increase of 1.5% for the current fiscal year, the latest core sector data showed. Imports of urea fell 34.7%, NP/NPK 9.9%, and muriate of potash 4.5%.

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"India, being a major importer of phosphatic and potassium fertilizers, with about 60% of its supplies sourced from countries like Russia and Morocco, has faced significant price hikes due to supply chain disruptions. The government's subsidy initiative for these fertilizers, while helpful, has had limited impact because of the ongoing global shortage," said Chirag Jain, a partner at the policy think tank Grant Thornton Bharat. “Despite a favourable monsoon, the DAP shortage presents a major threat to India's overall Rabi crop production, particularly impacting the yields of wheat and potatoes," Jain added.

China has been increasingly directing fertilizers and raw materials to its own economy, while conflicts over the Red Sea and Ukraine have disrupted global supply chains.

“Of the six million tonnes of fertilizers that India imports, China used to supply about two million tonnes. This supply has now dropped to less than half a million tonnes. The resulting 1.5 million-tonne shortfall is due to increased global demand," Krishnan of FAI added.

At the Brazil G20 Summit, Prime Minister Narendra Modi had flagged the crisis, stating, “Countries of the Global South are most adversely impacted by the food, fuel and fertilizer crisis caused by global conflicts."

India imported a total of 10.65 million tonnes of phosphatic and potassic (P&K) fertilizers in FY24, with 2.25 million tonnes sourced from China, Union fertilizers minister to Union minister of state for fertilizers Anupriya Patel said in the Rajya Sabha in August. Seven million tonnes of urea were imported, of which 1.85 million tonnes came from China.

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“Due to the increased demand for food grains, our dependence on fertilizers has risen," said B.B. Singh, an agricultural scientist who retired as additional director general (pulses) at the Indian Council of Agricultural Research. "Farmers need to receive the required amount of soil nutrients at the right time. If, for some reason, they fail to get it on time, the yield of key rabi crops like wheat, pulses, oilseeds and potatoes could decline significantly," Singh said.

However, Krishnan of FAI said the (Rabi) season's demand has been met, and work is on to ensure availability for the next crop season in 2025.

Queries sent to the ministries of agriculture, chemicals and fertilizers as well as Chinese Embassy remained unanswered till press time.

India is a big buyer in the global DAP market, buying a fifth of the output. The annual demand for DAP in India is around 10 million tonnes.

“There is a shortfall in the production of key soil nutrients. However, it will not pose a problem for farmers. We are in discussions with industry stakeholders to ensure the availability of fertilizers for farmers. The fertilizer companies are a little reluctant to import DAP due to the rise in its landed cost, which has jumped from $510/tonne in May to $645/tonne," a government official said on the condition of anonymity.

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The government offers a subsidy of ₹21,911 per tonne for DAP and capped its retail price at ₹27,000 a tonne, which many manufacturers find unviable.

Answering a question in the Rajya Sabha on Tuesday, fertilizers minister Patel said the government has ensured a steady supply of fertilizers at affordable prices despite geopolitical tensions. This, she said, was achieved through special packages and the National Budget Subsidy scheme.

The minister also highlighted the efforts to diversify fertilizer sources. This includes engaging with fertilizer-rich countries and facilitating the signing of long-term agreements between Indian fertilizer companies and international suppliers, aimed at securing a steady supply of fertilizers, intermediates, and raw materials.

Sowing of rabi crops has reached 68% so far, with the total area covered under rabi crops rising 4.12% to 42.88 million hectares (Mha), agriculture ministry data released on Monday showed. Sowing of rabi crops begins in mid-October and continues till January.

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A Parliamentary Standing Committee on Chemicals & Fertilizers highlighted in its March 2023 report that India's food grain requirement is projected to reach 300 million tonnes by 2025, and to meet this demand, the country will need about 45 million tonnes of plant nutrients annually to sustain agricultural productivity and support the growing population.