It has been more than 11 days since the war broke out between Iran and Israel. Ammunition and missiles are being fired continuously from both the countries. Iran has completely closed its biggest weapon, the Strait of Hormuz, which has set oil and gas prices on fire and now there is a fear that its impact may be seen on fertilizers as well, due to which Indian farmers may also be affected. Why would this happen? Let us understand it in detail.
Iran closed the Hormuz waterway as soon as the war with Israel started. According to the report, about 70 percent of urea in India comes through this route. In such a situation, the blockade of Hormuz can cause a dent to India’s agriculture sector. However, in the meantime, India has also changed its strategy a bit. According to the report, the country is now working on a new import option. The new plan is to diversify fertilizer imports by increasing purchases from Indonesia, Belarus, Morocco, Jordan, Russia and China, ahead of the crucial Kharif sowing season starting in June.
This move reflects India’s heavy dependence on global supplies. The country is the world’s largest importer of diammonium phosphate (DAP) and urea and the second largest consumer of fertilizers. Till now, most of this supply came from West Asia, in which Oman was at the forefront in sending consignments of urea and Saudi Arabia was at the forefront in exporting DAP to India. Experts say diversifying is both strategic and necessary. But this fact also needs to be taken with a pinch of salt. Because there is financial risk in exploring other options.
What is the advantage of other options?
Looking directly at the question, could increasing imports from Russia, China or Morocco help hedge against geopolitical risks? So the answer is probably yes, but there may be a cost to it. Alternative shipping routes and suppliers can make fertilizers more expensive. But a happy thing for India is that the stock of fertilizers has increased by 36.6% year-on-year to 18.01 million tonnes, which has given an opportunity to take a sigh of relief before the Kharif demand reaches its peak. However, if this crisis continues for a long time then the supply crisis will deepen and if the supply is disrupted then there are chances of the cost of imports increasing. In such a situation, there is a possibility of increase in the price of fertilizer in the country in the coming time.
India’s gas related weakness revealed
The Iran-Israel conflict has halted traffic in the Strait of Hormuz, disrupting LNG shipments from Qatar and leading to ‘force majeure’ notices issued between Petronet LNG and Qatar Energy. Due to this the supply of gas has reduced and uncertainty has increased. India already imports about half of its natural gas needs, of which 40-50% comes from Qatar, and demand continues to grow, powering fertilizer plants, CNG vehicles and piped gas supplies to millions of homes.
Also read- After oil, now there is a crisis on fertilizer! India imports fertilizer worth thousands of crores