NEW DELHI: Russia has resumed trading fertilizer with the United States, consequently halting the discounts the country was previously giving to India, highly placed sources told this newspaper.
The shift in trade dynamics is expected to increase the government’s expenditure on fertilizer subsidies as Russia is a major exporter of fertilizers. India had previously reaped benefits after the Western countries imposed sanctions on Russia following its invasion of Ukraine.
“Russia was compelled to sell fertilizers to India due to a lack of demand from Europe, resulting in lower prices compared to those from Morocco and Jordan. However, with Europe and America now starting to import from Russia, there is speculation that Russia may shift its preference away from India. Market prices are influenced by various factors and can fluctuate accordingly,” a top government official said.
As per industry experts, the rise in fertilizer prices will not impact the farmers as they get subsidies on it. However, it will increase the burden on the government. In the 2022-23 fiscal, India saw a significant rise in fertilizer imports from Russia, with a surge of 246% to a record 4.35 million tonnes. This was driven by suppliers offering discounts on DAP, urea, and NPK fertilizers compared to the global market price.
Data indicates the government gave fertilizer subsidies of `2.25 lakh crore in FY23. In the first four months of the current fiscal, fertilizer subsidies have crossed `72,000 crore. As per reports, discounts from Russia reached $80 per tonne, but the Russian firms are not even offering discounts of $5. The current price for Russian DAP stands at about $570 a tonne on a cost and freight (CFR) basis for Indian buyers, which matches the price offered to other Asian buyers.
To increase govt spends on fertilizer subsidies
The shift in trade dynamics is expected to increase the government’s spending on fertilizer subsidies as Russia is a major exporter of fertilizers. India had previously reaped benefits after Western countries imposed sanctions on Russia after its invasion of Ukraine. As per experts, the rise in prices will not impact farmers as they get subsidies for it. However, it will burden the government