As the India gears up to meet fertiliser demand for the ensuing monsoon season crops, companies are considering incorporating “floor and ceiling” price in annual fertilizer contract with suppliers of di-ammonium phosphate (DAP), muriate of potash (MOP) and complex fertilizers. This will ensure that volatility like current one is avoided to a large extent.
“Volatility in fertilizer prices have become too frequent and there has to be some mechanism to at least partially insulate any shock like the current one. There is no futures trading of fertilizers anywhere as suppliers are limited and buyers cannot hedge the risk in this supplier-dominated market,” said a CEO of a leading Indian company dealing with urea, DAP, potash as well as complex fertilizers.
Though the outcome will depend on how the negotiation proceeds, still price factor can be brought into the contract, he said, adding that most companies are not in a hurry to renew their annual import contract with suppliers even as the current financial year is about to end. “At current global prices, no negotiation can take place on what should be either the ‘floor’ price or ‘ceiling’ price, he pointed out.
No new urea tender
Floor price is the minimum guaranteed rate which supplier will get when prices dip and ceiling price is the maximum Indian buyer will pay for that product in case of spurt in prices, he said.
Meanwhile, even as the government is betting on supplies from Russia, which may take about 45 days to reach Indian ports, there is no fresh tender for urea ever since last one issued by RCF on February 18, before the war began on February 28. The government has constituted a panel of experts representing top officials of public sector firms NFL, IPL, RCF and HURL to advise it on the time and volume of urea that can be imported.
“The government agreed to buy about 1 million tonnes of urea from last RCF tender at $508 (west coast delivery) and $512 (east coast delivery) for supply to be completed by March 31, though there will be delay now. But it would be difficult to source urea even at $750/tonne now, as global prices have zoomed,” said a senior executive of a company who participated in the bid.
Similarly, global DAP rate have exceeded $800/tonne and MOP $370-400/tonne, much higher than their pre-war rates of $650 and $290, respectively.
Urea output doubts
On the other hand, the government is committed to try to meet kharif demand of fertilizers saying the country has higher stock compared to previous year. However, doubts remain about domestic production of urea due to tight supply of natural gas.
“Through a combination of domestic production hikes and a sophisticated global procurement strategy, the government has moved to insulate Indian farmers from global supply chain volatilities,” the Department of Fertilizers said last week.
As of March 19, urea stock was 61.14 lakh tonnes (lt) against 55.22 lt, DAP 24.24 lt against 11.85 lt, complex 57.21 lt against 34.44 lt and SSP 24.80 lt against 23.15 lt. Stock of only MOP is lower at 12.65 lt from 14.13 lt, it had said.
In the last Kharif season, the requirement of urea was estimated at 185.4 lt whereas the sales rose by 4 per cent to 193.2 lt. The fertilizer demand for Kharif 2026 is yet to be estimated.
Since there are no signs of the war ending and when the Strait of Hormuz will open, fertilizer companies doubt if domestic production of urea this kharif would match last year’s level of 144.8 lt (April-September) even if 70 per cent of committed gas supply is achieved.
“If there is 30-40 per cent lower production that amounts to an availability of 150-160 lt (excluding fresh import in the season) of urea after factoring 60 lt of opening stock,” said an expert cautioning a demand gap of 30-40 lt.
Published on March 25, 2026
