Current Scenario: Good demand is likely to emerge in domestic Fertilizers sector in coming months. India will soon sign agreements with Morocco and Egypt to secure long-term supply of rock phosphate, a critical raw material for making Diammonium Phosphate (DAP) and Nitrogen-Phosphorus-Potassium (NPK). India’s fertilizer subsidy has already surged in the current fiscal to ₹2.15 trillion. Data from the department of chemicals and fertilizers showed that India’s total fertilizer requirement is around 43.5 million tonnes. India is totally dependent on imports for muriate of potash. Imports in the last few years ranged from 2.4 million tonnes to 4.7 million tonnes. In the case of Diammonium phosphate, around 60% of the requirement is imported. In addition, 25% of urea and 15% of NPK fertilizer requirements are met through imports. On 23 December, the ministry of chemicals and fertilizers said that in FY23 the total consumption of fertilizer has been 401.46 metric tons while the production is 320.76 metric tons. The global Organic fertilizers market is expected to grow from US$ 9.05598 billion in 2022 to US$ 16.63671 billion by 2028, according to a latest update from the the Insight Partners. The market is estimated to grow at a CAGR of 10.7% from 2022 to 2028. The growing health awareness among consumers is driving the demand for organic products. Advancements in agricultural practices and technologies, high investments in research and development, and increasing health consciousness are a few of the important factors that are anticipated to boost the organic fertilizers market.

Asia Pacific held the largest share of the organic fertilizers market in 2021. The overall fertilizer market in Asia Pacific countries has experienced a huge shift over the years. Asia Pacific is the largest continent in the world and is known for its agricultural base. The market growth in the region is associated with a surging middle-class population and urbanization. Key countries in Asia Pacific that play an important role in agriculture are India, China, and Australia. The major crops grown in these countries include fruits & vegetables, oilseeds, cereals, and grains. Advancements in communication technology in these countries of Asia Pacific have contributed to the awareness of the health and wellness dynamics.

The main role of organic fertilizers in farming is to proffer nutrients in organic forms from plant or animal origin. These fertilizers aid sustainability in the operations of farmers and growers, and lead consumers to a sustainable lifestyle. They are free from harmful chemicals that can cause waterway pollution, air pollution, acidification of soil, and chemical burns to crops. They nurture the soil with organic matter, thus reducing the dependency on chemical inputs. Organic fertilizers restore and maintain soil fertility to nurture plant growth. They enhance the biological activities and biodiversity in the soil. The enhanced water efficiency by the application of organic fertilizers renders the crops more resilient and drought resistant. The plant-based organic fertilizers such as alfalfa meal, compost, corn gluten meal, cottonseed meal, soybean meal, kelp or seaweed, and humus provide nitrogen, potassium, and phosphorous required for plant growth. These nutrients are provided in forms that can be easily absorbed by growing plants. Supplementing the soil nutrients with animal-based organic fertilizers such as manure, bat or seabird guano, blood meal, bone meal, and fish products makes the soil appropriate for the growth of fruits, vegetables, and other crops.

Budget Expectations:

There is likelihood that the government might cut the fertilizer subsidy amid a broad revamp of the country’s subsidized food allocations and expected stable supply of fertilizers due to multi-year contracts with several countries to secure supply of raw materials. The country’s overall spending on food and fertilizers are pushing up to record levels this financial year and the focus next year will likely be on ensuring a strong supply response from the growers by ensuring a plentiful return for their harvest. The central government has already announced a move to end an expensive free food scheme – the Pradhan Mantri Garib Kalyan Anna Yojana -- introduced during the pandemic, making the country’s regular subsidized food grains programme free till December 2023. This is likely to keep the overall demand for grains elevated. The total cost of PMGKAY since its launch till December 2022 is set to be ₹3.91 lakh crore, according to a Cabinet note. Under PMGKAY, each beneficiary got 5kg of foodgrains free of cost every month.

Stocks in focus:

RCF, Deepak Fertilizers, Chambal, Coromandel International, Deepak Fertilizers, F A C T

Outlook:

At the recent G20 Summit in Bali, PM Narendra Modi cautioned about today’s fertilizer shortage becoming tomorrow’s food crisis. India now wants to establish trade and investment links with mineral-rich countries through multi-year import and investment deals that will diversify supply sources and protect farmers from supply shocks. This in turn means that the fertilizer segment needs to see plenty of fresh investments and will need continued support from the government as India surpasses China as the most populous country in coming months. The current government has been focusing vehemently on the welfare of farmers in the country in recent years and support for food security has gained a very high prominence in the pandemic. This can ensure that some concrete steps could be announced to offer a sizable boost to the domestic fertilizer output.