From magnets to fertilisers: China’s new trade weapon hits Indian farms

After blocking rare earths’ supplies to India, China has now blocked the supply of specialty fertilisers to India, according to a report.

Earlier this month, it emerged that even though China had resumed the exports of rare earths to rest of the world on licence-basis, no licences were being issued to India . The halt in supplies posed a substantial threat to India’s automobile industry that depends on Chinese rare earth supplies, particularly magnets.

The Economic Times has reported that China has halted specialty fertilisers’ shipments to India for two months. These fertilisers are used in the cultivation of fruits, vegetables, and other remunerative crops. China has not blocked such shipments to any other country.

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Notably, the blocking of rare earths and fertilisers has come at a time when India and China are working to improve their relationship after reaching an understanding for partial disengagement in the standoff in Ladakh last year. The two countries have just resumed the Kailash Mansarovar Yatra and are under talks to resume direct flights.

Indian imports from China down 80%

Indian imports of specialty fertilisers from China are down up to 80 per cent, according to Rajib Chakraborty, the President of Soluble Fertilizer Industry Association (SFIA).

“China has been restricting suppliers of specialty fertilisers to India for the last four to five years. However, this time it is a complete halt,” Chakraborty told ET.

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A separate report in the newspaper said that farmers are reporting shortages and increase in prices for fertilisers like Diammonium Phosphate (DAP), which is used widely in rabi crops like wheat, pulses, and mustard.

“India’s import of DAP from China fell drastically by nearly 75 per cent in the first half of FY25 from corresponding period last year,” Richa Bagaria, Associate Director, CareEdge Ratings, told ET.

As a result, farmers in states like Punjab, Haryana, and Uttar Pradesh, have reported shortages of the fertiliser and have said they are forced to pay Rs 250-350 more for a bag of fertiliser, according to the newspaper.

Is it about ‘PN3’?

In its report, the ET mentioned that the blocking of supplies industrial essentials like rare earths and fertilisers has come amid India’s block on direct investment from China under ‘press note 3’.

India issued press note 3, commonly called PN 3, in 2020 that essentially blocked all investments from China unless approved by the Union government.

The PN 3 was issued during the India-China conflict in Ladakh in 2020 when China mounted incursions in India. Over the past year, the government has said that there was no plan to relax the provisions.

“I cannot blindly receive foreign direct investment (FDI) because I want money for investment, forgetful or unmindful of where it is coming from…“We want business, we want investment, but we also need some safeguards, because India is located in a neighbourhood that is very, very sensitive,” said Union Finance Minister Nirmala Sitharaman in October 2024.