Fert cos readying to meet demand for cheaper phosphate
MUMBAI | Wed Nov 30, 2011 3:20pm IST
MUMBAI (Reuters) - Rising prices of diammonium phosphate coupled with scarcity of the import-dependent soil nutrient has forced Indian fertiliser makers switch to single super phosphate - a cheaper alternative - to meet fertiliser demand from farmers.
The phosphatic DAP is the second most consumed soil nutrient in India after nitrogenous urea and is also the most costly form of basic fertilisers while SSP is cheaper and can be easily manufactured using readily available raw material.
“DAP costs more than three times that of single super phosphate. DAP’s import costs are rising and that is forcing fertiliser companies raise retail prices,” Gautam Sen, director finance, Rashtriya Chemicals and Fertilizers (RSTC.NS), told Reuters.
State-run RCF is one among firms such as Tata Chemicals (TTCH.NS), Coromandel International (CORF.NS), Jubilant Industries (JUBL.NS) and Chambal Fertilisers (CHMB.NS), that are either expanding their SSP capacity or are planning new units seeing rising demand for this variant of phosphate.
SSP is obtained through a chemical reaction between rock phosphate and sulphuric acid and contains phosphorus, sulphur, calcium and other essential micro nutrients in small proportions.
The chemical helps treat sulphur deficiency in the soil and enhances yield of crops such as oil seeds, pulses, sugarcane, fruits and vegetables.
“SSP is a poor farmer’s fertiliser and an option to cut the usage of DAP,” said a fertiliser analyst with a Mumbai-based brokerage.
The import prices of DAP, which were about $500 per tonne in FY11, had shot up as much as $700 per tonne in August globally and are hovering around $680 since then.
At retail level, post-subsidy, farmers have to pay between 18,200-19,000 rupees a tonne to buy DAP in India, while they spend just 5,000 rupees for the same quantity of SSP.
Indian farms consumed about 7 million tonnes of DAP in FY11 but the consumption is expected to fall in the current fiscal on delayed imports and higher prices.
In comparison, India’s SSP consumption was 3.1 million tonnes last year, according to data from the Fertiliser Association of India.
“This year, there are chances that SSP usage will nearly double as farmers are not willing to spend on DAP,” D.D. Khose, western region executive at FAI, said.
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RCF is exploring possibility to set up an SSP unit at a cost of 3 billion rupees at its Thal plant in Maharashtra, Gautam Sen, director-finance, had said in May.
“We are studying the possibility and the capacity would not be less than 300,000 tonnes,” Sen said.
Tata Chemicals is also looking to expand its existing SSP capacity, while Chambal Fertilisers is building a unit each in Gujarat and Rajasthan at a total cost of 1.55 billion rupees.
Coromandel International last month said, it would set up a new SSP manufacturing plant in Rajasthan with a capacity of 800-tonne-per-day.
“SSP is easy to make and the capex required is very low. Therefore, all companies want to make this complex fertiliser when DAP is becoming unaffordable,” Tarun Surana, analyst at Sunidhi Securities & Finance, said.
India’s SSP consumption would grow fast in the current year and would cross 4 million tonnes, he said.
“Sulphuric acid is easily available and rock-phosphate can be imported. Also, Rajasthan has some rock phosphate reserves. So, we can see companies opting for this state,” he said.
