Analysts say that amid the Russo-Ukraine war, the government may decide to increase the Minimum Support Price (MSP) to give relief to farmers and companies from increased costs.
Due to the ongoing war between Russia and Ukraine, the prices of fertilizers may see a rise in the coming days. According to a report by Kotak Institutional Equities, the cost of fertilizers and pesticides will increase from 11 percent to 15 percent in the year 2022. India is self-sufficient for its food requirements but is dependent on countries like Russia for import of nutrients like urea and phosphate. Analysts say that amid the Russo-Ukraine war, the government may decide to increase the Minimum Support Price (MSP) to provide relief to farmers and companies from increased costs.
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India depends on Russia for import of fertilizers
Russia is one of the largest exporters of fertilizers in the world. The ongoing war with Ukraine is affecting supply chains, pushing up prices of natural gas, a key component for fertilizer manufacturing. India, like other countries, has been affected by this supply crunch as it is dependent on imports of raw materials and fertilizers from Russia and its ally Belarus. ICRA Ltd said in a report that India’s plan to get potash from Belarus and phosphatic fertilizers from Russia hangs in balance amid the Russo-Ukraine war.
ICRA said in a report earlier this month, “The shortage of fertilizers is a matter of concern for the agriculture sector. The main reason for this is limited availability in the international market and low imports amidst high prices. In the fourth quarter of the current financial year, the prices of fertilizer raw materials have increased significantly as compared to the previous year. According to a report by Elara Capital, ammonia prices have increased by 200 per cent in the fourth quarter of the current financial year, while sulfur and potash prices have risen more than 100 per cent year-on-year.
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Government may increase subsidy
The report further states, “We expect the subsidy to be suitably increased in the upcoming NBS policy, so as to maintain the fertilizer MRP at the current level, thereby ensuring fair margins for the companies. If this is not done, the complex fertilizer companies can increase the prices rapidly.” Kotak Institutional Equities said the government may have to increase the Minimum Support Price (MSP) of individual crops to offset the sharp rise in input costs and support the weak rural economy.
(Article: Aakriti Bhalla)
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