India farmers may see agri input scarcity despite prediction of a good monsoon

Agricultural inputs are going to be dearer to access for Indian farmers in the kharif season despite the prediction of a good monsoon as dealers delay placing orders with the fertilizer and pesticide manufacturers waiting for clarity over the impact of goods and services tax (GST).

Dealers fear the notification of the Union government that allows only up to 60% of refund on input credit for dealers for an initial period. Sector analysts point out this could adversely affect the financials of fertilizer and pesticide makers during the next couple of quarters and could lead to a pile-up of unsold stocks.

Dealers of agricultural inputs across the country are reducing inventories and avoiding stocking ahead of GST for the last month or so, said brokerage JM Financial after a detailed survey it conducted in June covering over 50 large dealers.

“Farmers may face scarcity of agri inputs in the last couple of weeks of the current month and in July as dealers are not accepting new stock from the companies. Dealers normally start stocking after initial rainfall in peak season of July-August for agri inputs, which is not happening this time around,“ said Rajesh Aggarwal, managing director, Insecticides India.

“Less than a third of dealers across the country have so far received their GST number and a similar number is equipped with point of sale (PoS) swipe machines, which could create problems in direct benefit transfers in case of fertilizers and dealers getting input tax credit post GST implementation from July 1,“ says Gourishetty Munendar, national vice-president, All India Agro Input Dealers' Association.

Industry analysts say while some states are better equipped with digital sale solutions, majority of them are unprepared.Non-availability of GST number to a large chunk of dealers could impact the business, creating a chaos initially once the GST comes into play. With dealers not booking new stocks, inputs manufacturers are seeing inventories pile up, that could boost their working capital requirements and adversely affect financials.

“We had originally estimated 15-16% growth for the agrochemicals industry but given the likely headwinds, we see a risk of lower 10-12% growth for the upcoming Kharif season,“ says Mehul Thanawala, director, JM Financial.

“This will definitely have an impact on the second quarter business, which is the strongest quarter along with first quarter for agri input companies, as the effect has started to pan out in the last leg of first quarter and we will have to wait to fully under stand the impact,“ said V Vijay Shankar, MD, Nagarjuna Agrichem.

However, some agri input manufacturers said the impact won't be much.

Rajiv Kumar Gupta, managing director, managing director, Gujarat Narmada Valley Fertilizers and Chemicals, said, “We are not witnessing any resistance from the dealers here in Gujarat. Further, we have also supplied PoS machines to 80% of our 10,000 dealers.“ Meanwhile, farmers' bodies are seeking the intervention of the government to ensure timely and adequate supplies of agri inputs.

“We are in the process of appro aching Anant Kumar, Union mi nister for chemicals and fertilizers, to ensure timely supply of agri input,“ said BV Javare Gow da, president of Federation of All India Farmers Association.