MAR 26 – India’s fertiliser supplies are under pressure after disruptions to shipping routes due to the war in the Middle East, raising concerns about lower farm produce and higher food prices.
India, the world’s second-largest fertiliser user after China, depends heavily on imports of both raw materials and finished products – much of which comes from the Gulf, passing through the Strait of Hormuz, where shipping has been disrupted.
Prime Minister Narendra Modi has said his government has taken measures to ensure fertiliser supplies are not affected and to protect farmers from any impact.
Analysts say current stocks are enough for the upcoming sowing season, but this may change if the war stretches on.
Nitrogen fertilisers such as urea – the most widely used in India – are crucial for farmers because many major food crops, including rice and wheat, cannot absorb adequate nitrogen directly from the air.
India uses nearly 40 million tonnes of urea annually, supported by government subsidies, and supply disruptions could affect planting decisions.
Farmers in northern states of Punjab and Haryana – which are major grain-producing regions – say they are not yet feeling the stress as the key sowing season (June-July) approaches. They typically start buying urea for this season from May.
Currently, supplies are available through farmer cooperatives as well as warehouses run by manufacturers and distributors, but there are worries about the future.
“We don’t know how long the stock will last if the war stretches any further,” said Manpreet Singh Grewal, president of a farmers’ collective linked to Punjab Agricultural University.
India had urea stocks of about 6.2 million tonnes as of 19 March, according to government data.
Fertiliser use peaks during the June-to-September monsoon crop season, which analysts say the current stocks should be able to support under normal conditions.
Some experts warn that the situation could worsen if disruptions continue.
India’s fertiliser production is “surely going to be impacted” because of the disruption, Siraj Hussain, a former federal secretary of agriculture and farmers’ welfare in India, told the BBC. “The government should be preparing for a shortage of urea and other fertilisers for the monsoon harvest.”
He points out that in many parts of India, farmers use more urea than recommended, applying “more nutrients than crops can absorb”.
“This means a temporary shortage may not significantly affect yields in those areas. However, supplies would need to be ensured in regions where fertiliser use is lower, as crops in those areas could be more vulnerable,” he says.
Executives at two fertiliser companies, who did not want to be identified, told the BBC that shortages could emerge later in the season if the conflict continues – though the timing and scale would depend on how long supply disruptions persist.
AFP via Getty ImagesNatural gas is the main raw material used to make urea and India imports about 85% of it, mostly from the Gulf region.
“Up to four weeks [of supply disruptions] are absorbable via local production or imports from other regions. Anything more than that would become more concerning,” Alberto Persona, director of fertiliser and sustainability analytics at S&P Global Energy, told the BBC.
Fertiliser plants in India are getting only around 70% of their gas needs currently, following a government order issued earlier this month. Industry insiders say this has led to some manufacturers cutting production.
To be sure, the supply squeeze is not limited to India. Global fertiliser prices have risen sharply in recent weeks, with urea prices climbing and gas prices across Asia increasing.
Higher costs and reduced availability may lead some farmers to cut fertiliser use – even though its immediate impact on output is likely to be limited.
“The risk on crop yields is genuinely small for the next crop season, but becomes increasingly important for the future ones,” Persona said.
Experts add that any movement in food prices may depend more on market expectations than immediate changes in crop output.
“The real problem with prices is that they are not always driven by market fundamentals – expectations play an important role,” Persona said.
Modi has said India has taken steps to increase domestic fertiliser production and diversify import sources to reduce reliance on a few countries.
On Wednesday, Agriculture Minister Shivraj Singh Chouhan asked officials to ensure an equitable and uninterrupted supply of fertilisers.
The crisis may also increase the government’s subsidy burden, says Hussain, as higher global prices push up the cost of supplying fertilisers at controlled rates to farmers.
Now, much depends on how long the conflict continues, with analysts saying supply chains could stabilise within weeks if shipping resumes at the normal pace.
By BBC
