India’s fertilizer black market is booming as prices skyrocket

Indian farmers pressed by a massive shortage of fertilizers are turning to the black market and paying exorbitant prices for their supplies. The shortfall has led to a thriving market where nutrients from subsidized crops are sold illegally at prices well above government-set levels. Shady agents have been busy responding to requests from farmers who call them in desperate need.

With a key planting season underway for the millions of Indian households who depend on agriculture for a living, farmers say they have little choice.

We must either reduce the use of fertilizers and risk lower production, or pay sky-high prices on the black market, said Dilip Patidar, a wheat and onion farmer in Madhya Pradesh state.

Either option is not great. A drop in crop yields could push up food prices, worsening inflation in a country where 15% of the population faces hunger. Paying high prices on the black market will hurt the incomes of marginal small farmers, who make up over 80% of India’s agricultural sector.

India is one of the countries most affected by the global fertilizer crisis. Crop nutrient prices have skyrocketed as coal and natural gas shortages have forced some fertilizer factories in Europe to close. China and Russia have also restricted exports to preserve domestic supplies. These hurdles will keep fertilizer prices high until the first half of 2022, according to Gro Intelligence.

India will be the first to feel the effects, as its demand for fertilizer tends to peak between the fourth and first quarters, according to Alexis Maxwell, analyst for Bloomberg Intelligence. Export restrictions imposed by China, one of India’s main suppliers, have left the South Asian nation with very few options for sourcing fertilizer, she said.

India imports up to a third of its fertilizers and is the world’s largest buyer of urea and diammonium phosphate, known as DAP. The tight supply is likely to hurt the production of staple crops such as wheat, rapeseed and pulses sown during the winter.

“The fertilizer shortage comes at a time when the prices of other inputs like diesel are also high and some farmers have suffered damage due to erratic rainfall,” said Garima Kapoor, economist at Elara Securities (India) Pvt . Ltd. in Mumbai. These could limit the recovery in rural demand, she added.

India is increasing its own production of fertilizers and is working on long-term deals with suppliers to curb price increases, people familiar with the matter say. Current subsidies to fertilizer companies are sufficient, but if more is needed the government will provide them, said the people, who asked not to be named because they are not allowed to discuss publicly.

The federal government has started allocating fertilizer weekly to districts based on demand to avoid hoarding by retailers and farmers amid low stocks, one of the people said. Talks are underway with countries like Oman, Jordan, Morocco and Russia for long-term supplies, the person said.

Economic Affairs Secretary Ajay Seth declined to say whether the government would further increase fertilizer subsidies. A spokeswoman for the fertilizer ministry was unavailable for comment.

On the black market, a 45-kilogram bag of diammonium phosphate sells for 1,500 rupees ($ 20), above the maximum retail price of 1,200 rupees, farmer Patidar said. A bag of urea costs up to 400 rupees compared to the usual price of 266 rupees.

Patidar is awaiting the arrival of its fertilizer stocks. “If I don’t get enough supplies on time, my production will drop,” he said.

Another farmer in Haryana state in northern India is also struggling with fertilizer. Sukram Pal said he managed to sow wheat using half the usual amount of DAP, but now needs urea which is scarce. “Production will definitely drop this year,” he said.

This story was posted from an agency feed with no text editing.

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