The landed costs of ammonia, an imported intermediate used for home DAP manufacturing, have additionally climbed from $300-310 to $400-405 per tonne within the final one-and-a-half months.

“The trend of international prices easing off, from the highs scaled immediately after Russia’s invasion of Ukraine in February last year, has clearly reversed,” stated an business supply.

At their peak, import costs of DAP touched $950-960 per tonne in July 2022; urea was at $900-1,000 per tonne in November-January 2021-22 (even earlier than the warfare); ammonia was at $1,575 in April 2022 and phosphoric acid at $1,715 in July-September 2022.

“If the current trend continues, even the $850 per tonne import price fixed for July-September with global suppliers, will have to be reset in the coming quarter,” stated the supply.

Meanwhile, muriate of potash remains to be priced moderately low at $319 per tonne, having fallen from $590 per tonne until March 2023 and $422 in April-June. Russia is protecting the worldwide potash market effectively provided for now.

For the Modi authorities, the pattern of reversal of worldwide costs presents two issues.

The first is fiscal. The Union Budget for 2023-24 had supplied Rs 175,100 crore in direction of fertiliser subsidy. Of that, solely Rs 45,112.53 crore was spent in the course of the April-June quarter, with falling international costs then promising additional financial savings within the remaining months.

Those calculations might now must be revisited. In a yr that results in the nationwide elections — anticipated to be held in April-May 2024 — the federal government may have no choice however to offer extra in direction of fertiliser subsidy, the invoice for which touched Rs 2,51,339.35 crore in 2022-23.

Related to that is the second downside, which is political. The Modi authorities has focused DAP imports of 6 million tonnes over the following 4 months, to make sure sufficient provide in November-December. That is the time for sowing of rabi crops – together with wheat, mustard, barley, chana, masur, potato, garlic and jeera – in addition to elections in the important thing states the place these are grown.

“The government wouldn’t want any shortage of fertilisers or visuals of farmers standing in long lines for hours to get the odd bag of DAP or urea at that point. It will definitely go the whole hog to import and budget for higher subsidy, if necessary,” stated the supply.