The war in Europe is impacting not just India’s import of key fertilizers, but also domestic production of the commodity because of difficulties securing ammonia, a key ingredient of commonly used fertilizer urea, according to industry executives.
Sanctions on Russia by western nations and the conflict in the region are casting a shadow over supplies and trade payments to Russia. As such, domestic manufacturers of urea, who depend on import of ammonia, are trying to recast their supply arrangements.
A leading fertilizer producer is exploring ammonia supplies from countries such as Oman and Jordan, said a senior executive of the company.
Ammonia is produced from natural gas. However, liquefied natural gas (LNG) contracts have seen a surge in recent weeks against the backdrop of economic sanctions on Russia and the geopolitical tension.
The availability of fertilizers is critical for the Indian economy as about a fifth of the gross value added comes from agriculture sector, a sector on which the livelihood of more than half of the country’s population depends.
The fertilizer producer mentioned above had imported 40,000 tonnes of ammonia before the sanctions took effect and existing supplies are sufficient to sustain production for about a month, according to its senior executive. Other supply options are also being explored for the next round of raw material imports.
India has 33 urea factories and 21 factories producing diammonium phosphate and complex fertilizers, spread across public, private, and cooperative sectors. The total output of these factories was more than 430 lakh tonnes in FY20, according to data from the ministry of chemicals and fertilizers.
The geopolitical situation in Eastern Europe has different impacts on different segments of the Indian fertilizer market, according to experts. India imports about 30% of its total fertilizer requirements and about 8% of this comes from Russia and Ukraine.
In the case of urea, shifting the sourcing of should not be a major issue and India can tap other producers in the Middle East and China, said Nitesh Jain, director, Crisil Ratings Ltd.