(Bloomberg) -- India won't increase subsidies on phosphorus-based fertilizers and has directed producers to refrain from raising prices, according to people with knowledge of the matter, threatening the firms' margins as global costs of the raw material surge.
Chemicals and Fertilizers Minister Mansukh Mandaviya instructed the companies, the people said, asking not to be identified as the details aren't public. A spokesperson of the fertilizer ministry declined to comment.
Prices of phosphoric acid and ammonia, used to make the soil nutrient, have soared in the world market due to tight supplies, putting pressure on Indian producers as they import a majority of their requirements. Some global ammonia makers have cut output or are seriously considering that option due to high natural gas prices.
The government raised the subsidy on the nutrient in June to 45.3 rupees ($0.60) per kilogram for monsoon-sown crops -- from 14.89 rupees a year earlier -- to shield farmers in the country where about 60% people depend on agriculture for their livelihood. Fertilizers in India are sold at a price that's generally below the cost of production, with the government compensating the producers for the shortfall.
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