Strong fertiliser volume growth in FY21 likely as rabi sowing reaches record level: Report

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Mumbai, Jan 27 (PTI) With a strong kharif production and healthy reservoir levels leading to record rabi sowing levels, fertiliser volume growth is expected to be strong this financial year, according to a report.

The government support during the summer season led to strong kharif production and healthy reservoir levels resulted in rabi sowing levels reaching 67.5 million hectare as on January 22, 2021, rating agency Icra said in the report.

Therefore, the rabi sowing and the production is expected to be strong, which bodes well for fertiliser sales, the report stated.

The area under wheat increased by 3.1 per cent to 34.5 million hectares, while that under coarse cereals decreased by 7.5 per cent to 5.1 million hectares.

Madhya Pradesh planted an additional area of 0.83 million hectares, and Maharashtra 0.11 million hectares more in wheat sowing, the report noted.

Gram and mustard are the two other crops that, in terms of coverage, have done well, it said.

The report added that grams were cultivated over nearly 11.1 million hectare, while mustard fields occupied nearly 7.4 million hectare.

The gram and mustard area at the end of the previous rabi season was about 10.7 million hectare and 7.0 million hectare, respectively.

The rabi sowing has increased to 67.5 million hectare, higher than the previous high of 66.3 million hectare in 2014, the report said.

Icra Ratings Senior Analyst Ravish Mehta said, 'With record sowing levels witnessed in the rabi sowing and healthy offtake in the kharif season, fertiliser sales have reached record levels in 2020-21.' He added that fertiliser sales volume have witnessed a growth of 12 per cent year-on-year in the first nine months of 2020-21. It was driven by a 9 per cent increase in urea, 11 per cent rise in di-ammonium phosphate (DAP), 19 per cent jump in complex fertilisers (NPK), 29 per cent in muriate of potash (MOP) and a 12 per cent in single super phosphate (SSP).

With the fourth quarter being the placement season for the upcoming kharif season, Icra expects the full-year fertiliser sales to witness a growth of 10 per cent year-on-year as the primary sales tend to be slower in the fourth quarter, he said.

Mehta said, 'The retail sales also witnessed strong growth in FY21, resulting in low systemic inventory levels for the industry during major parts of the year leading to lower working capital requirement for the sector.' He added that additionally, with faster retail sales, the receivables from the market had a shorter cycle and the industry was able to claim subsidy at a faster pace from the government, leading to faster subsidy realisation of previous years.

The fertiliser sector had its major share of positives in 2020-21, that is record growth in volume sales and additional subsidy allocation towards fertiliser subsidy, which will wipe out the subsidy backlog and improve the credit profile of the sector, the report stated.

With the budgetary allocation for the fertiliser sector for 2021-22 expected to be in line with the total requirement of around Rs 90,000-1,00,000 crore, the sector is expected to post healthy performance in the upcoming year as well.

The report said, 'We also expect the government to provide more thrust on various other reforms the sector has been waiting for a long time in the upcoming fiscal.' The expected reforms include the implementation of the true form of direct benefits transfer (DBT) for the sector, and clarity on the implementation of the nutrient-based subsidy scheme for the urea sector, the report added. PTI SM HRS hrs