Farmers squeezed by a massive shortage of fertilisers are turning to the black market and paying exorbitant prices for supplies.
The shortfall has led to a thriving market where subsidised crop nutrients are sold illegally at prices much higher than levels set by the government. Shady agents have been busy fielding requests from farmers who call them in desperate need.
With a key planting season underway for India’s millions households that depend on agriculture for a living, farmers say they don’t have much of a choice.
We either have to cut the use of fertilisers and risk lower production, or pay sky-high prices on the black market, said Dilip Patidar, a wheat and onion grower in the state of Madhya Pradesh.
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Either option isn’t great. A drop in crop yields could drive food prices higher, worsening inflation in a country where 15 per cent of the population faces hunger. Paying high prices on the black market will hurt the incomes of small and marginal farmers, which make up more than 80 per cent of India’s agricultural sector.
India is one of the worst affected by a worldwide fertiliser crisis. Prices of crop nutrients have soared as tight coal and natural gas supplies forced some fertiliser plants in Europe to close. China and Russia have also curbed exports to safeguard domestic supply. These hurdles will keep fertiliser prices elevated through the first half of 2022, according to Gro Intelligence.
India will be first to feel the pinch as its fertiliser demand tends to peak in the fourth to first quarter, according to Alexis Maxwell, an analyst for Bloomberg Intelligence. The export curbs by China, one of India’s top suppliers, have left the South Asian nation with very few options for fertiliser supplies, she said.
India imports up to a third of its fertilisers and is the world’s biggest buyer of urea and di-ammonium phosphate, known as DAP. The supply crunch will likely hurt production of staple crops such as wheat, rapeseed and pulses planted during the winter.
“The shortage of fertilisers comes at a time when the prices of other inputs like diesel are also elevated and some farmers have suffered damage due to erratic rainfall,” said Garima Kapoor, an economist at Elara Securities (India) Pvt. Ltd. in Mumbai. These may limit the recovery in rural demand, she added.
India is boosting its own fertiliser production and working on long-term deals with suppliers to curb price increases, according to people familiar with the matter. Current subsidies to fertiliser companies are sufficient but if more is required, the government will grant it, said the people, who asked not to be named as they’re not authorised to discuss publicly.
The federal government has started making weekly allocation of fertilisers to districts based on demand to prevent hoarding by retailers and farmers amid low stockpiles, one of the people said. Talks are ongoing with countries such as Oman, Jordan, Morocco and Russia for long-term supplies, the person said.
Economic Affairs Secretary Ajay Seth declined to comment on whether the government will further boost fertiliser subsidies. A spokeswoman for the fertiliser ministry wasn’t available for comments.
On the black market, a 45-kilogram bag of di-ammonium phosphate is selling for 1,500 rupees ($20), above the maximum retail price of 1,200 rupees, farmer Patidar said. A bag of urea costs as much as 400 rupees compared with the usual price of 266 rupees.
Patidar is waiting for his fertiliser stocks to arrive. “If I don’t get adequate supplies on time my output will fall,” he said.
Another farmer in India’s northern state of Haryana is also facing fertiliser woes. Sukram Pal said he managed to sow wheat by using half the usual amount of DAP, but now needs urea which is in short supply. “Production is definitely going to fall this year,” he said.