* New regime may hurt potash, phosphate demand in India
* Potash price has to remain in $350 to $360/tonne range
(All figures in U.S. dollars, unless noted)
By Euan Rocha
TORONTO, Feb 11 The Indian government will
announce a new fertilizer subsidy policy in coming weeks that
could make it harder for Indian farmers to afford potash- and
phosphate-based fertilizers, the head of fertilizer maker IFFCO
said on Thursday.
India's fertilizer subsidy more than doubled in the
2008-2009 fiscal year to more than $25 billion as high raw
material prices and tight nutrient supplies led to a sharp
run-up in fertilizer costs.
This increased the country's fiscal deficit and has forced
the Indian government to rethink its fertilizer subsidy
The current policy forces producers to sell fertilizer at
below-market prices, while the government compensates them for
the deficit through cash subsidies and bonds.
"The new policy will result in a fixed subsidy and a
floating price," said IFFCO's Managing Director U.S. Awasthi.
Hence, if the price of nutrients like potash and phosphate
rise dramatically, the government's subsidy will cover only a
portion of the costs, while the remainder of the increase will
have to be borne by farmers.
"In my mind, the potash suppliers have to very seriously
think of supplying to India within a $350 to $360 range, if
they think of selling at a higher price, then they may be in
for a surprise, as our farmers may not be able to pay," Awasthi
India relies completely on potash imports to meet its
domestic needs and the country was hurt, when the price of the
crop nutrient spiked to over $1,000 a tonne in mid-2008, from
below $150 levels, earlier in the decade.
A handful of producers control the majority of the world's
potash supplies. Two export consortiums -- BPC and Canpotex --
currently account for more than 60 percent of global potash
exports. [ID:nN20132301] [ID:nN25401844]
The price of potash retreated over the course of 2009
during the recsssion. In December, BPC signed a contract to
sell potash to Chinese buyers at $350 per tonne, but this month
it announced plans to raise prices again. [ID:nN03149519]
But Awasthi argues that BPC's price hike is meaningless
unless buyers consent to pay.
The potash price on the current BPC-China contract is
reasonable, but anything much higher than the $350 price will
crimp demand, said Awasthi, who has also previously headed the
International Fertilizer Industry Association.
IFFCO, in a bid to secure some of its own potash
requirements, has acquired a stake in a Canadian potash
explorer and plans to keep scouring the globe for other
low-cost potash projects. [ID:nN11182843]
IFFCO, one of India's top fertilizer manufacturers, owns a
34 percent stake in Indian Potash Ltd, the country's largest
potash importer. IFFCO produces more than 7 million tonnes of
fertilizer annually and has overseas joint ventures and
(Reporting by Euan Rocha; Editing by David Gregorio)