MUMBAI: The demand for fertilisers is expected to grow by five per cent in the next financial year due to rise in farm income, India Ratings (Ind-Ra) today said.
“The demand for fertilisers is likely to increase by about 5 per cent year-on-year in FY18,” Ind-Ra said in a report.
“The demand for fertilisers is likely to remain strong in FY18 on account of an increase in purchasing power of farmers due to a rise in farm income and a rise in minimum support price of key rabi crops in FY17,” it said.
Maintaining a stable outlook for the sector in FY18, Ind-ra said the fertiliser industry for the next financial year will remain similar to the previous year because of lower dependence on government subsidies following lower international prices of raw materials and finished products.
A combination of lower dependence on government subsidies, which will lead to lower working capital debt, and higher term debt for capex is likely to result in stable debt levels across the sector, it said.
The rating agency also said that the annual growth of fertiliser companies is likely to be at the FY17 levels, mainly driven by consumption growth.
However, the sector outlook could be revised to negative, if the government’s subsidy support reduces or there is a large debt-funded capex by fertiliser companies.
Low domestic gas production, gas supply limitations and low international prices of key fertilisers would continue to affect domestic production, it further said.
It expects urea and decontrolled fertiliser manufacturers’ annual growth levels in FY18 to sustain at the levels recorded for FY17.
The rating agency expects the prices of imported fertilisers to continue to remain low in view of low energy and raw material costs and subdued international demand due to a change in China’s crop policy.