Rating agency ICRA in its latest report has said that fertiliser volume growth is expected to be strong in the current financial year (FY21) with a strong kharif production and healthy reservoir levels leading to record rabi sowing levels. It noted that 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. Therefore, it said the rabi sowing and the production is expected to be strong, which bodes well for fertiliser sales.
According to the report, fertiliser sales volume have witnessed a growth of 12 percent year-on-year in the first nine months of 2020-21. It was driven by a 9 percent increase in urea, 11 percent rise in di-ammonium phosphate (DAP), 19 percent jump in complex fertilisers (NPK), 29 percent in muriate of potash (MOP) and a 12 percent 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.
The report further said that 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. It 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.