Fertiliser sales may increase by November during rabi sowing season
The outlook for fertilizer sales in India is expected to improve in the upcoming rabi season following a period of insufficient monsoon rain in various parts of the country. The uneven distribution of the southwest monsoon resulted in some regions experiencing deficits in rainfall, while others received normal to excess rainfall. Consequently, farmers curtailed their fertilizer purchases during the kharif crop season, which encompasses the sowing months of June and July.
The fertilizer industry is now anticipating a rebound in sales as the deficit rainfall is expected to be compensated for during the next few months. The rabi season, which takes place from October to March, presents an opportunity for increased fertilizer demand as farmers gear up for cultivating crops that are typically grown in the winter months.
Jitendra Saklani, the Head of Marketing Strategy & Innovation at Chambal Fertilisers, noted that while farmers may not be actively purchasing fertilizers at the moment, the industry anticipates stronger sales towards the end of October or November when the rabi season gains momentum. This seasonal shift reflects the cyclical nature of agricultural practices, where different crops are cultivated during specific periods of the year.
In summary, the fluctuations in monsoon rainfall have had an impact on fertilizer sales in India, particularly during the kharif crop season. However, industry experts are optimistic about the potential for increased demand during the rabi season, as farmers prepare for the cultivation of winter crops. This cyclical pattern underscores the interplay between agricultural practices, weather patterns, and the demand for agricultural inputs such as fertilizers.
A senior officer from the Fertilizer Association of India (FAI), which represents various stakeholders in the industry, has expressed optimism about the upcoming fertilizer sales outlook. The officer mentioned that the sowing of major crops has already concluded, and the industry foresees a potential increase of 2-3 percent in sales volumes for this year. This positive projection is based on the anticipation that fertilizer consumption might see a rise during the rabi season.
The uneven distribution of the southwest monsoon has affected several regions, including Gangetic West Bengal, east Uttar Pradesh, parts of the northeast, Madhya Pradesh, Kerala, Karnataka, Telangana, and Andhra Pradesh. Many of these areas experienced deficient rainfall during the monsoon season, which could have impacted agricultural activities and the demand for fertilizers.
Despite the challenges posed by erratic monsoon patterns and below-normal rainfall in various states, the industry remains hopeful that the rabi season will provide a boost to fertilizer sales. The rabi season presents an opportunity for farmers to cultivate crops that are well-suited to the winter months. This shift in cropping patterns could lead to increased demand for fertilizers, as farmers prepare their fields for the upcoming season.
Overall, the FAI officer’s statement reflects a cautiously positive outlook for the fertilizer industry in India. While challenges such as deficient monsoon rainfall have impacted sales during certain periods, the anticipation of stronger demand during the rabi season suggests a potential recovery and growth in fertilizer consumption.
The fertiliser industry in India is anticipating increased rainfall in September, which marks the final month of the southwest monsoon season, as well as during the subsequent northeast monsoon. These expected showers are important for agricultural activities and the overall demand for fertilisers.
Despite concerns about subsidy cuts, fertiliser companies are expressing confidence that their earnings will not be significantly impacted this year. According to industry experts, the reduction in subsidies is unlikely to affect the profitability of fertiliser companies. Jitendra Saklani, Head of Marketing Strategy & Innovation at Chambal Fertilisers, stated that although sales have remained relatively flat, the overall profit figures may not be severely impacted.
The Indian government had reduced fertiliser subsidies for the fiscal year 2023-24 by 22 percent to Rs 1.75 lakh crore. This reduction was attributed to the softening of raw material and energy prices. Even the subsidy for urea, which typically receives a higher subsidy compared to other nutrient fertilisers, was lowered by about 15 percent to Rs 1.31 lakh crore.
The optimism regarding earnings and profitability despite subsidy reductions highlights the industry’s adaptability to changing circumstances. The anticipation of increased rainfall and the strategic management of operations contribute to the industry’s ability to navigate challenges effectively. This resilience reflects the interconnected nature of factors influencing the fertiliser sector, including subsidies, weather patterns, and market dynamics.
The Indian government had responded to challenges posed by the Covid-19 pandemic and the Russia-Ukraine conflict by increasing subsidies in recent years. This measure was aimed at mitigating the impact of rising raw material and energy costs. However, the subsequent decrease in energy prices provided relief to companies that relied on natural gas for their production processes, leading to cost reductions.
The combination of higher subsidies, increased imports of fertilisers, and a consistent supply of raw materials had a positive impact on the performance of many companies in the sector. For instance, Fertilisers and Chemicals Travancore Ltd. (FACT), a state-owned company, not only turned around its financial performance but also became the top public sector fertiliser company in terms of market capitalisation. This success was attributed to factors such as improved raw material production, effective marketing strategies, government subsidy schemes, and employee cooperation.
FACT’s transformation from incurring losses just four years ago to achieving record profits demonstrates the potential for positive change within the sector. The company’s plans for expansion, both in terms of production and turnover, indicate a commitment to sustained growth.
Currently, India produces more urea compared to other fertilisers such as DAP (diammonium phosphate) and NPK (nitrogen, phosphorus, and potassium). The country imports potash and certain phosphate fertilisers. Urea, which is controlled by the government, is the most widely consumed fertiliser due to its affordability.
However, concerns have arisen about the excessive use of urea leading to reduced soil productivity. To encourage the use of other fertilisers, the industry has advocated for a market-based retail pricing system. The industry suggests that reducing the price gap between urea and NPK fertilisers could promote the use of the latter and thereby improve soil productivity.
In conclusion, the fertiliser industry in India has witnessed a dynamic interplay of factors, including subsidies, energy prices, and market dynamics, which have influenced the performance and transformation of companies within the sector. Efforts to promote a balanced use of fertilisers and enhance soil productivity underscore the industry’s commitment to sustainable agricultural practices.
