* Subsidy to be cut to 9,300 rupees/T for 2014/15 from
* Cuts may be approved in a week
* Rising Indian potash prices to curb demand
By Rajendra Jadhav
MUMBAI, Feb 27 India will cut potash subsidies
by nearly a fifth for the year starting in April as the
government tries to contain a ballooning fiscal deficit, two
government sources and an industry official told Reuters.
A smaller subsidy would push up costs in India, dashing any
hopes for a recovery in demand in one of the world's top
importers of the fertiliser that global potash miners are
banking on to counter a slump in prices.
Russia's Uralkali broke away from trading venture
Belarusian Potash Company (BPC) in July, sending potash prices
down more than 20 percent since then to around $310 a tonne.
India relies on imports to meet its entire potash demand,
which in the current year is 4 million tonnes. Over the past
five years it has accounted for about a tenth of global
shipments, although its share has been slipping as local prices
rise on previous subsidy cuts and on a weaker rupee.
Major suppliers to India include Potash Corp of Saskatchewan
, Mosaic Co, Agrium Inc, Uralkali, Arab
Potash Co, Israel Chemicals and Germany's K+S
India's fertiliser ministry has set the subsidy at 9,300
rupees ($150) per tonne for next year, said a fertiliser
ministry official, who declined to be named. For the year ending
March 31 the subsidy was fixed at 11,300 rupees per tonne.
"The proposal is with the cabinet and will be cleared in the
next meeting," said another government official, who takes part
in negotiations with overseas suppliers. The officials said the
proposal could be cleared in a week.
Retail potash prices in India have doubled since 2011 to
17,000 rupees a tonne as India cut subsidies in the last two
years, including a 21.5 percent reduction in 2013/14, and due to
a weak currency.
Higher retail prices have already reduced India's annual
potash imports from 6.3 million tonnes in 2010/11 to 4 million
tonnes in the current financial year to end-March, according to
the Fertiliser Association of India (FAI).
Leading producers Uralkali and Potash Corp declined to
comment on the impact of a subsidy reduction on their exports.
A senior potash industry source said Indian farmers have
always responded negatively in their application of potash, when
subsidy adjustments led to higher prices.
"I would assume that this will also happen this time. This
especially since the devaluation of the rupee will have already
partially offset the reduced (US dollar) world market prices,"
the official said.
Bill Doyle, chief executive officer at Potash Corp said on
Wednesday that he expected an increase in total Indian potash
imports in 2014 due to its lower stockpile.
Shares of North American producers Potash Corp, Mosaic and
Agrium, were all slightly lower on Thursday morning.
Since the breakup of BPC, the world's top potash producer
Uralkali has been ramping up production to compensate for a drop
in prices and is on the hunt for buyers such as India to absorb
But India, which has been struggling to contain food, fuel
and fertiliser subsidies amid a slowdown in the economy, may not
be able to soak up the supplies as it can ill afford current
Finance Minister P. Chidambaram allocated 679.71 billion
rupees for the fertiliser subsidy in 2014/15 in the interim
budget presented last week, as he tried to bring down the fiscal
The subsidy is not enough as the government has already
deferred a payout of around 360 billion rupees from the current
year to next year, said Satish Chander, director-general of the
"There is no room to reduce retail potash prices considering
the lower subsidy and weak rupee. There will be destruction in
demand," said an official at state-run Rashtriya Chemicals and
Fertilizers Ltd (RCF).