Though demonetisation is expected to have marginal impact on the sales volume of fertilize sector, the favourable agro-climatic conditions and fall in raw material prices indicate stable outlook for the same in second half of this financial year, says a report from ICRA.
The rabi season sowing sets in November and the demand for agri-inputs like fertilisers, seeds andagrochemicals is high during this period.
Most of the sales to the farmers are usually done on a cash basis and hence the temporary liquidity pressure is likely to affect the demand for the fertilisers during the peak rabi season.
Also some impact on the sales was expected on account of the disruptions in the transportation and the supply chain, added the report.
However, a slew of measures announced by the GoI to help farmers get through the cash crunch, would mitigate the impact, added the report.
Farmers are allowed to use old high denomination notes for purchasing seeds. They can now withdraw up to Rs 25,000 but only from the KYC-complaint bank accounts while traders registeredwith APMC markets and mandis can draw up to Rs 50,000 per week.
Also, the fertiliser companies have been directed to extend thecredit period by one month in addition to the prevailing credit period to wholesalers and dealers; though the same may lead toelongated receivables for the industry. Such measures could mitigate the impact on the temporary liquidity crunch on the farmers.