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Amritsar, NFA Post: Surplus reservoir levels, record high kharif crop sowing, and plentiful rainfall during the monsoon season has uplifted demand for procurement of fertilizers till date this year, research firm CARE Ratings said.

Overall sales of fertilizers have increased sharply by 19.3% during Apr-Sep, and “going forward with the increase in liquidity of farmers and good moisture level in the soil we expect a very good Rabi season. Keeping this in mind, the demand for fertilizers for the rest of FY21 seems sanguine,” the agency said in its latest note.

CARE Ratings noted that the rural economy continues to be a bright spot with two consecutive years of above normal rainfall, and additionally the government has announced an increase of MSP upfront on the Rabi crops with its objective to provide minimum 50% returns on the cost of production to farmers.

The agency also expects the overall fertilizer production to grow by 4-6% during financial year 2020-21 (Apr-Mar). 

“We expect production to increase in the coming months on the back of restocking activities undertaken by fertilizer manufacturers. Low raw material prices too will aid in spurring production.”

The overall fertilizer production has increased by 4.1% during Apr-Oct, as against a growth of 2.7% registered during the corresponding period a year ago, the agency said.

“On a monthly basis, production increased by 6.3% during October ’20. The country witnessed an on-time arrival of Southwest monsoon, followed by a quick spread across the region which has resulted in higher sowing thus augmenting the sales of fertilizers which has led to an increase in production.”

Increase in production can also be ascribed to restocking activities undertaken by the manufacturers in order to keep up with the sharp increase fertilizer sales witnessed during the year, CARE Ratings said.

It added that imports have also increased sharply by 18.2% due to the sharp increase in urea imports. 

The rating agency has noted that import dependence (imports as a proportion of production plus imports) has fallen from being 36% to 39% during Apr-Oct.

“Production of urea increased by 5% during 7M-FY21 due to favourable weather and market conditions. Imports have risen sharply by 36.4% to supplement the increase in demand. Import dependence of urea (imports as a proportion of production plus imports) has increased to 31% during 7M-FY21 compared with being 25% during 7M-FY20,” CARE Ratings said.

The agency noted that DAP production fell by 10.1% during Apr-Oct. “Decline in production can be attributed to the shortage in raw material availability and labour constraints. Imports on the other hand have risen by 13.9% in the same period.”

CARE Ratings said that sales of decontrolled fertilizer is set to increase on the back of low prices of DAP and SSP and the government’s thrust on improving balanced nutrition.

Demand for DAP and DAP blends, usually, increases during rabi sowing.

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