Domestic DAP manufacturers benefit from stable raw material prices despite soaring import prices.

Domestic DAP makers are less affected by the price surge compared to importers, as the cost of raw materials has not risen proportionally. India imports over half of its annual DAP consumption, and import prices for July and August deliveries have reached over $800 per tonne, close to historic highs. This has reignited calls for promoting domestic value-addition and boosting capacity utilization.

In recent months, India has been grappling with a significant shortage of di-ammonium phosphate (DAP), a critical fertilizer, due to high global prices and supply constraints. The current price surge for DAP imports has reached near-record levels, with prices exceeding $800 per tonne for July and August deliveries [2]. This has sparked renewed calls for promoting domestic value-addition and boosting capacity utilization in the sector.

Domestic DAP makers have been relatively unaffected by the price surge, as the cost of raw materials has not risen proportionally. India imports over half of its annual DAP consumption, with more than 50% of the country's annual requirement being imported in finished form [2]. The government has responded to this situation by proposing a new pricing formula for domestically mined rock phosphate, a key ingredient in DAP, which is currently almost entirely imported [2].

The Union Mines Ministry has proposed linking the average sale price of rock phosphate with international rates to boost domestic production and reduce dependence on imports. This move aims to encourage domestic miners to explore and develop suitable deposits within the country. The draft notification, which amends the Minerals (Other than Atomic and Hydrocarbon Energy Minerals) Concession Rules, 2016, categorizes rock phosphate into four grades based on the percentage of phosphorus pentoxide (P₂O₅) content and applies a grade-based conversion factor to determine the average sale price [2].

Additionally, the government has been working on increasing gross value added, reducing import content, and enhancing employment in the electronics sector through the Production Linked Incentive (PLI) scheme. The PLI scheme aims to make domestic manufacturing globally competitive and reduce imports by increasing domestic value addition. The electronics sector, particularly mobile handsets, has shown significant growth in exports and foreign direct investment (FDI) inflows [1].

Economic Advisory Council to the Prime Minister (EAC-PM) Chairman S Mahendra Dev has emphasized the importance of negotiating trade agreements on India's terms, prioritizing national interests. He has expressed hope that India will have an advantage over other countries on tariffs once Free Trade Agreements (FTAs) are signed, boosting exports. The PLI scheme, coupled with FTAs, is expected to attract FDI, enhance exports, and promote domestic manufacturing competitiveness [1].

In conclusion, the current price surge for DAP imports has highlighted the need for promoting domestic value-addition and boosting capacity utilization. The government's proposal to link rock phosphate prices with international rates and the implementation of the PLI scheme are steps towards achieving these goals. These measures aim to reduce India's dependence on imports and enhance its manufacturing capabilities.

References:
[1] https://economictimes.indiatimes.com/news/economy/foreign-trade/india-should-negotiate-trade-agreement-with-us-on-its-own-term-eac-pm-chief-s-mahendra-dev/articleshow/122627728.cms
[2] https://www.business-standard.com/industry/agriculture/centre-links-rock-phosphate-prices-to-global-rates-to-boost-output-125071401220_1.html