Cash crunch hits fertiliser import
India is tiding over a fertiliser shortage, triggered partly by a cash crunch at the government’s end, a person familiar with the development told HT, requesting anonymity.delhi Updated: Oct 26, 2011 01:49 IST
India is tiding over a fertiliser shortage, triggered partly by a cash crunch at the government’s end, a person familiar with the development told HT, requesting anonymity.
The cash-flow problem has caused the government to hold back fertiliser subsidy payments to importers since October 15, he said. A weakening rupee, measured against the dollar, and high international prices have also contributed to the crisis.
Domestic fertiliser prices have doubled. This could further stoke runaway food inflation and pose risks to winter-crop operations commencing next month, analysts say.
Indian manufacturers rely heavily on imports to meet domestic fertiliser needs. The government picks up a substantial part of this bill in the form of a subsidy worth Rs 49,980.25 crore annually to make fertilisers affordable for impoverished farmers.
“Payments worth nearly Rs 7,000 crore are due,” a prominent fertiliser company spokesperson said. This caused a delay in contracting imports, he added, resulting in the current shortage.
Prices of DAP—an essential fertiliser—have gone up to Rs 677 from Rs 500 a tonne. “This is a problem for especially minor farmers. Complaints are pouring in,” JPS Dabbas of the Delhi-based Indian Agricultural Research Institute said.
While the rupee’s plunging value has made imports costly, several countries India relies on for imports have jacked up prices due to enhanced domestic demand this year.
China has raised its fertiliser export duty to 110%, while Brazil has increased prices to discourage exports. Costlier borrowing, because of successive interest rate hikes by the RBI, has also fanned retail fertiliser prices. India is about to begin its rabi or winter-sown crop season, which accounts for almost half of the country’s annual food output. Wheat is the major staple grown in winter. Assured availability of key fertilisers is critical to food security.