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India breaks global fertiliser cartel

July 18, 2009 03:30 IST

India has managed to create ripples in the global commodities market with countries like the US and China set to follow its benchmark price for potash, a fertiliser widely used in the country. Breaking a well-entrenched global cartel, government-owned Indian Potash Ltd has managed to negotiate a potash deal with Russian company Silvinit at $460 a tonne, which is about 26 per cent lower than what was being offered by a group of five producers and about 37 per cent lower than current spot market prices.

What did the trick was hard bargaining by India, in which it set its own terms, since the country's consumption constitutes 30 per cent of the global potash market.

The potash deal, which was closed last week, set neighbouring Sri Lanka rethinking on a tender it had floated and prompted it to put purchases on hold. A weekly potash market report said the deal caused jaws to drop, especially those of other suppliers, who, according to Fertiliser Secretary Atul Chaturvedi, will now start falling in line.

The deal with Silvinit is for 850,000 tonne, but if India manages to bring down the price for its entire procurement of 3.5 million tonne, it translates to about 10 per cent saving in its subsidy bill of nearly Rs 50,000 crore for the current year (see chart). India imports its entire potash requirement. "The $460 a tonne is a global benchmark now," said Chaturvedi. The farmers pay only around $95 a tonne for Muriate of Potash.

Jyoti Mukul and Ajay Modi in New Delhi
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