ARTICLE AD BOX
New Delhi: The blockade of the Strait of Hormuz hasn’t just affected energy imports, it could threaten our food supplies as well. With the conflict between the US and Iran showing no signs of a truce, the goverment has been put in a bind as urea demand is expected to skyrocket for the impending Kharif sowing season.
Unreasonable price rises
Just two months ago, global urea prices hovered around the $500 per tonne mark, even as the government started procurement well ahead of the sowing season. Due to the US-Iran war, quotes have reached upwards of $950, putting the government in a bind as a bid for the commodity has to come soon in time with the sowing season.
Natural gas prices, a key raw material for urea production, has driven up import quotes, with suppliers offering quotes in the range between $935 to $1,136 per tonne and that too below the total tender requirement of 1.5 MT.
The skyrocketing subsidy bill
The government will have no choice but to bear the costs, as urea is heavily subsidized in India. The skyrocketing price of LNG will also impact domestic urea production, as this input accounts for about 90% of the production cost.
The subsidy bill is all set to far exceed last year’s Rs. 1.24 lakh crore as the Center cannot raise urea prices much from the current rate of Rs.242 per 45kg bag despite higher production costs.
Fears of a fertilizer shortage are already doing the rounds, with rumors of a shortage driving farmers in Raichur to hoard the commodity.
With most of the required LNG and ammonia imported from the Middle East, the developments there could affect us in more ways than just inflated fuel prices.
English (US) ·