Fertiliser sales up 12% year-on-year in April-December period

New Delhi: Fertiliser sales volume have witnessed a growth of 12% year-on-year in 2020-21, according to rating agency Icra. It expects a strong fertiliser volume growth with rabi sowing reaching 67.5 million hectare after a healthy Kharif season driven by favourable monsoons, healthy reservoir levels and government measures for the sector.

The FY 2021 is to be a pivotal year for the fertiliser industry characterised by record sales volume growth, healthy profitability and allocation of additional subsidy which will lead to removal of subsidy backlog and improvement in the credit profile, it said.

Ravish Mehta, Senior Analyst, ICRA Ratings said, “with record sowing levels witnessed in the rabi sowing and healthy off-take in the Kharif season, fertilisers sales have reached record levels in FY 2021. Fertiliser sales volume have been driven by a growth of 9%, 11% , 19% , 29% and 12% year on year for urea, di-ammonium phosphate (DAP), complex fertilisers (NPK), muriate of potash (MOP) and single super phosphate (SSP) respectively.”

With the fourth quarter being the placement season for the upcoming kharif season, we expect the full year fertiliser sales to witness a growth of over 10% year on year as the primary sales tend to be slower in the fourth quarter, said Mehta.

The retail sales also witnessed strong growth in FY 2021 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 said.

Additionally with faster retail sales, the receivables from 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 compared to the previous years, Mehta said.

With government support during the kharif season, strong kharif production and healthy reservoir levels, rabi sowing levels reached 67.5 million hectare as on January 22, 2021. ICRA expects the rabi sowing and thereby the production to be strong, at all-time high levels which bodes well for fertiliser sales.

With the budgetary allocation for the fertiliser sector for FY2022 expected to be in line with the total requirement of around Rs 90,000-100,000 crore, the sector is expected to post healthy performance in the upcoming year as well, said Icra.

“We also expect government to provide more thrust on various other reforms the sector has been waiting for a long time in the upcoming fiscal e.g. implementation of the true form of direct benefit transfer (DBT) for the sector, clarity on the implementation of the nutrient based subsidy (NBS) Scheme for the urea sector and more policy certainty to support domestic production in the budget,” Mehta said.

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