Fertilizer companies are avoiding DAP imports

The prices of Di- Ammonium Phosphate (DAP) reaching around $640 per tonne in the global market and the fall in the value of rupee against the dollar has made the import of DAP a loss-making deal for fertilizer companies. Due to this, despite the instructions of the government, the companies are not making many deals for DAP imports. Fertilizer companies in the private sector have avoided the import of DAP. At the same time, importers in the cooperative sector are also adopting the strategy of taking a decision only after assessing the pros and cons. If the imports do not pick up in the next two months, then there may be a shortage of DAP in the upcoming Kharif season.

According to industry sources, most fertilizer companies are adopting a go slow strategy in the matter of imports. Fertilizer companies have fixed the maximum retail price (MRP) of DAP at Rs 1350 per bag (50 kg). The government wants this price to remain intact, although in the case of decontrolled fertilizers, the decision of the price is of the companies but in reality its price is indirectly controlled. Under the Nutrient Based Subsidy (NBS) scheme, the government is giving a subsidy of Rs 21911 per tonne on DAP for the current Rabi season from October 1, 2024 to March 31, 2025. Apart from this, fertilizer companies are also being given a special incentive of Rs 3500 per tonne. Companies earn an income of Rs 27000 per tonne from the sale of DAP. In such a situation, including subsidy and special incentives, the total realisation of companies on DAP is Rs 52400 per tonne. At the same time, the price of DAP in the global market is around $ 640 per tonne. At an exchange rate of Rs 87 per dollar, the import price of DAP is Rs 55680 per tonne. Apart from this, the cost including customs duty, port handling, bagging, dealer margin is around Rs 10,000. With these costs the DAP imports total cost is more than Rs 65000 per tonne. In such a situation, including the current subsidy, special incentives and the income of fertilizer companies from the sale of DAP at retail price and the import cost, the companies are incurring a loss of about Rs 12600 per tonne.

According to fertilizer industry sources, importing companies had also suffered losses in the last financial year. At present, this difference has increased further. In such a situation, import deals are decreasing and some private companies have not made import deals. The companies that produce DAP in the country are definitely continuing production because these companies have long term contracts with companies of exporting countries for raw materials rock phosphate and phosphoric acid.

Most of the consumption of DAP in the country is imported. Last year, due to loss in DAP import, the top management of a private company had to face strict questions from the board and ultimately there was a change in management.

According to the data of the fertilizer industry, in the current financial year (2024-25), from April 2024 to January 2025, there has been a decline of 16.2 percent in DAP imports and 14.1 percent in sales. At the same time, domestic production of DAP has declined by 9.1 percent. Between April 2024 and January 2025, 43.09 lakh tonnes of DAP was imported in the country, whereas in the same period last year, 51.44 lakh tonnes of DAP was imported. At the same time, production decreased from 37.67 lakh tonnes last year to 34.25 lakh tonnes. Similarly, between April 2024 and January 2025, DAP sales stood at 87.12 lakh tonnes, whereas in the same period last year, 101.46 lakh tonnes of DAP was sold in the country. The main reason for the decline in sales has been the low availability of DAP, which is evident from the import and production numbers. Due to the shortage of DAP in the Rabi season, farmers had to buy it on a large scale at a price higher than the MSP. According to industry sources, even though this came to the notice of both the government and the industry, no major steps were taken to stop it.
If the global prices of DAP do not decrease in the coming days or the government does not increase the subsidy, then farmers may face a crisis of availability of DAP in the Kharif season. In such a situation, some state governments are trying to have some option to make DAP availability to their farmers and one option is for the state governments to give additional subsidy to importers to make DAP available, but the industry says although is possible to do so but it is not a very practical option because there will be difficulties in implementing it.