India steals a deal on potash on breakup of Belarus cartel
Apr 01 2014 , New Delhi
Top potash importers like the Tatas, Birlas, the Murugappa group and the state-run Indian Potash (IPL) will pay $105 per tonne less in 2014-15 than $427 they forked out in 2013-14. The Indian companies contracted 800,000 tonnes of muriate of potash (MOP) with Russian potash company Uralkali on Tuesday.
China, the world’s largest potash consumer, has concluded a deal for about 8 million tonnes at an even cheaper rate of $310 a tonne in an all-cash deal. Russia, Belarus and Canada had raised the price to $545 in 2011-12.
The breakup of Uralkali’s partnership with Belarusian Potash Company (BPC) in September last year and lower consumption in India has led to a drop in international prices of potash. Indian importers will now separately negotiate a deal with BPC at a competitive price.
“The conclusion of the Indian contract will boost the global potash market,” Uralkali, one of largest potash producers globally, said in a statement. It holds 20 per cent of the global potash market share. India is one of the largest consumers of this farm nutrient and imports most of its requirement from Russia, Belarus and Canada.
Oleg Petrov, Uralkali’s director for sales and marketing, said India was a strategic market and potash would help the country meet food demand for a growing population. As per the terms of engagement between Uralkali and the Indian importers, the latter will be eligible for 180 days’ credit — unlike in the past, when New Delhi had to shell out cash. The Indian firms will also get discounts on lifting all the contracted potash within the timeframe i.e. before March 31, 2015.
IPL chairman PS Gehlot led the Indian importers at the negotiations. “Low demand from India and the breakup of the potash cartel globally helped us negotiate a better price,” the chief executive of the top fertiliser company told Financial Chronicle on the condition of anonymity.
The official said the government should allow the importers flexibility to trade in potash across the border and enable them to take advantage of the quick movement in potash prices in the international market. Indian fertiliser industry officials are currently in Russia for the negotiations.
India’s potash consumption along that of complex fertilisers has fallen by 50 per cent over the last six years to about 3 million tonnes in 2013-14. Last week, the government slashed subsidy on potash by Rs 3 a kg following the fall in global MOP prices. This will lead to a saving of Rs 900 crore in subsidy outgo during 2014-15.
“The subsidy on potash will come down to Rs 15.50 a kg from Rs 18.83 earlier, but it will not put any additional burden on farmers,” fertiliser secretary Shaktikanta Das said. Currently, potash is sold in the Indian market at Rs 16,000 per tonne while phosphate is available at Rs 22,500 per tonne.
The government decontrolled retail prices of phosphates and potash in April 2010, but offers a fixed nutrient-based subsidy (NBS) on P&K nutrients to keep domestic rates lower. In case of urea, the maximum retail price is fixed at Rs 5,360 per tonne and the subsidy keeps changing depending upon production cost of domestic urea and landed cost of imported urea.