Indian interim budget raises urea subsidy

The Indian government has made provisions for an increase in the urea subsidy from 450bn rupees ($6.35bn) to 502bn rupees ($7.09bn) for the 2019-20 fiscal year.

Most of the increase is for locally-produced urea, up from INR 350bn to INR 400bn. This is mainly due to the capacity expansions in the country, as the government implements projects in a bid to become self-sufficient.

Two new plants will raise Indian output in 2019-20.

Chambal Fertilisers started production at its 1.3mn t/yr Gadepan 3 unit at Kota in Rajasthan state in December. It produced about 110,000t in January and will reach full capacity shortly. The plant is the first new urea project to start up in India for many years.

The first project under the government's Surp programme, FCI's 1.27mn t/yr gas-based plant at Ramagundam in east India, is expected to start production in the first quarter of 2020.

Assuming full production is achieved in a timely manner, Gadepan 3 and Ramagundam should raise India's urea output by 1.5-1.9mn t in 2019-20.

The new production should reduce India's import bill for urea.

Purchases through tenders total about 4.9mn t in 2018-19 to date and an additional 1.8mn t are imported annually via the Omifco joint venture. But the additional $706mn allocated for subsidy in 2019-20 shows replacing imports is not a cost-free exercise.

India is one of the biggest buyers of urea globally, and farmers typically consume 30-31mn t/yr of urea, of which roughly 24mn t is produced domestically and the rest imported.

Domestic production totalled 17.66mn t during April- December, official statistics show, an annualised rate of around 23.5mn t.