Page 183 - CW E-Magazine (28-1-2025)

Special Report

CareEdge Ratings View
10
Demand for fertilisers in FY25 is
8 expected to grow by 2-3% following a
de-growth of ~1% in FY24, mainly due
6
to an above normal monsoon, adequate
4 reservoir level, and enhanced MSPs for
major crops, leading to an increase in
2
area under cultivation.
0
April May June July August September October November
The reduction in prices of major raw
Import FY24 Import FY25 materials for fertilisers compared to the
Fig. 6: Monthly DAP import trend, lakh tonnes historical highs witnessed in the past
few years also augurs well for the sector.
180,000 168,677
160,000 Import dependency for urea has
130,221
140,000 steadily reduced over the years, while
119,000
120,000 for complex fertilisers, import depen-
100,000 90,549 100,988 dency is expected to be sustained due
86,122
80,000 65,200 to the limited availability of key raw
54,756 52,770 material (rock phosphate) in the domestic
60,000
37,372 45,000 market.
40,000
26,369
20,000
0 Before the onset of rabi sowing,
FY20 FY21 FY22 FY23 FY24 FY25 (BE) which is slightly delayed due to ex-
tended monsoon, there appear to be
Urea NPK some challenges in adequate availability
Fig. 7: Annual subsidy budget, Rs. crore
of DAP in some parts of the country,
However, DAP imports have improved to a higher subsidy for urea, while an mainly due to higher imported prices,
in October & November 2024. Thus, increase in key raw material prices led lower exports by China and Red Sea
DAP’s availability and/or Government to a higher subsidy for NPK as well. logistics issues leading to higher trans-
intervention to ensure DAP is available In FY23, the fertiliser subsidy reached an portation time for its imports to India.
in the required quantities will remain all-time high of Rs. 2.55 lakh crore due However, sizeable import of DAP in
key monitorable factors, especially to a sharp rise in almost all input prices. recent months is expected to ease the
considering its increased prices. With the easing of input costs, includ- shortage situation.
ing gas, the subsidy was reduced to
Reduced subsidy budget allocation Rs. 1.95 lakh-crore in FY24, and further Credit risk profi le of fertilizer com-
for FY25; albeit recent upward to Rs. 1.64 lakh-crore for FY25. Over- panies has improved over the last three
revision of NPK subsidy all, 76% of the subsidy budget (i.e., 83% years with adequate subsidy budget
Historically, the subsidy budget and 75% for nutrient based and urea and timely release of subsidy, enabling
ranged from Rs. 70,000-crore to subsidy respectively) has been utilised them to sustain any potential subsidy
Rs. 80,000-crore p.a. from FY17 to FY20. till November 2024. Given that 83% backlog. In-spite of the recent spike in
The total subsidy outlay increased by of the budgeted nutrient-based subsidy ammonia prices and those of imported
58% during FY21 to ~Rs.1.28 lakh- has already been released, and with the DAP, the subsidy budget for FY25 is
crore, mainly due to an additional allo- input prices of ammonia and imported expected to be largely suffi cient on the
cation under the Atmanirbhar pack- DAP on a rising trend, the Govern- back of recent upward revision in NPK
age of ~Rs. 62,600-crore, targeted to- ment has approved additional subsidy subsidy budget. This translates into
wards clearing previous subsidy back- of ~Rs.6,600-crore on December 12, continued strong fi nancial health and
logs which had been created due to 2024 for the P&K fertilisers. Revised no major build-up of subsidy backlog
NBS-1. The subsidy pay-out further subsidy budget of Rs.1.71 lakh-crore for fertiliser companies.
increased to ~Rs 1.54 lakh-crore in is now expected to be adequate at
FY22, with rising gas prices leading prevailing raw material prices. [Report prepared by CareEdge Ratings]

Chemical Weekly January 28, 2025 183

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