India's Black Market For Fertilizers Is Booming As Prices Goes Up

Due to a severe scarcity of fertilizers, farmers in India are turning towards black market and paying high amounts for supplies. Due to the shortage, a thriving market has developed where subsidized crop nutrients are sold illegally at significantly higher rates than those established by the government. 

Farmers in severe need have been calling shady agents, who have been busy accepting requests. 

Farmers say they don't have much of a choice as the crucial planting season begins for India's millions of households that rely on agriculture for a living. 

We either have to reduce fertilizer use and risk decreased yield, or pay insanely high black market rates, according to Dilip Patidar, a wheat and onion grower in Madhya Pradesh. 

Either alternative isn't great. In a country where 15% of the population is malnourished, a decline in agricultural production might drive up food prices, aggravating inflation. Paying high black market prices will harm the incomes of India's small and marginal farmers, which accounts for more than 80% of the India's agricultural industry. 

India is one of the nations worst hit by worldwide fertilizer scarcity. Crop nutrient prices have risen as a result of limited coal and natural gas supply forcing some fertilizer companies in Europe to shut. China and Russia have also restricted exports in order to protect domestic supplies. According to Gro Intelligence, these obstacles will keep fertilizer costs high through the first half of 2022. 

According to Alexis Maxwell, a Bloomberg Intelligence analyst, India would be the first to feel the pinch because its fertilizer demand peaks in the fourth to first quarter. 

China, one of India's major suppliers has imposed export restrictions leaving the South Asian country with limited alternatives for fertilizer supplies, she said. 

India imports over a third of its fertilizers and is the world's largest buyer of urea and DAP (di-ammonium phosphate). The supply shortage would most certainly impair the output of winter-planted staple crops including wheat, rapeseed, and pulses. 

"The fertilizer shortage comes at a time when other input prices, such as fuel are also rising, and some farmers have been harmed by erratic rainfall," said Garima Kapoor, an economist with Mumbai-based Elara Securities (India) Pvt. Ltd. She added that that this might limit the recovery in rural demand. 

According to sources acquainted with the situation, India is increasing its own fertilizer output and negotiating long-term deals with suppliers to curb price increases. Current fertilizer company subsidies are adequate, but if more is needed, the government would provide it, according to the people, who asked not to be named since they're not authorized to speak publicly about the matter. 

According to one of the sources, the federal government has begun allocating fertilizers to districts on a weekly basis based on demand to avoid retailers and farmers from hoarding due to low stockpiles.

Long-term supplies are being discussed with countries such as Oman, Jordan, Morocco, and Russia, according to the source. 

Economic Affairs Secretary Ajay Seth, declined to comment on whether the government will increase fertilizer subsidies. The fertilizer ministry's representative was unavailable for comments. 

A 45-kg bag of di-ammonium phosphate is selling for 1,500 rupees ($20) on the black market, which is higher than the maximum retail price of 1,200 rupees, according to farmer Patidar. The regular price is Rs.266, thus the difference is Rs.400 

Patidar is anticipating the arrival of his fertilizer supplies. "If I don't obtain enough supplies on time, my output will suffer," he said. 

Another farmer in Haryana, India's northern state is experiencing fertilizer shortages.

Sukram Pal said he was able to seed wheat with half the quantity of DAP normally used, but now needs urea, which is in limited supply. "This year's production will undoubtedly decline," he said.