After a three-month standoff, Indian fertiliser companies have agreed to buy potash at an average price of less than $500 a tonne.

On Thursday, Indian Potash Ltd reached a deal with the Russian cartel Belarusian Potash Co, the largest potash supplier to India, for 1.2 million tonne (mt) of MoP at $490 a tonne for deliveries during August and March on a cost-and-freight (CFR) basis.

Belarusian Potash's previous contract with India, which expired in March, was at $370 a tonne.

Tata Chemicals, Coromandel International, Zuari Industries and Indian Farmers Fertiliser Cooperative signed import deals with Canpotex, the North American potash cartel, for 6.7 lakh tonnes of potash at $470 per tonne for the 1 October 2011 to 31 March 2012 period.

The contracts price of $470 per tonne includes CFR for 50 per cent of the contract volume of 6.7 lakh tonnes for the fourth quarter of 2011 and $530 per tonne CFR for remaining 50 per cent for first quarter 2012.

The deals signed yesterday broke the three-month deadlock after India's potash users failed to reach a supply and pricing agreement with the cartels.

Indian potash importers had jointly negotiated a price of $370 a tonne including CFR last year with the two cartels and Israel's ICL Fertilisers and Arab Potash Company of Jordan. This year the two cartels have been demanding as much as $500 a tonne, which is the current spot price for delivery in South-East Asia.

India was also not willing to pay a cent over the $470-a-tonne rate inked in June to China for supplies till December.

Indian companies say that any price over $420 a tonne is not viable since at this price the Indian government sets the benchmark import parity price, which it uses to compute subsidy on potash

The global trade in potash is controlled by two dominant cartels - Canpotex and Belarus Potash Company. Canpotex, the world's largest exporter of potash, is the offshore marketing company owned by the three Saskatchewan potash producing companies: Calgary-based Agrium, a leading global producer of fertilizers, Mosaic Canada Crop Nutrition, a subsidiary of the US phosphate and potash giant The Mosaic Company, and Saskatoon-based Potash Corporation of Saskatchewan, the world's largest potash producer.

Potash Corporation supplies Canpotex with 53.6 per cent of its potash, Mosaic 37.1 per cent and Agrium 9.3 per cent. Canpotex's major markets include Australia, Brazil, China, India, Indonesia, Japan, Korea and Malaysia with annual shipments in the range of 8-9 mt.

The other is Belarus Potash Company, the marketing company for Russia's Uralkali and Belarus-based Belaruskali. Belaruskali, Uralkali, Silvinit are the world's third, fifth and sixth-largest potash fertiliser producers respectively.

Potash is a common name for various potassium compounds used primarily as fertiliser and also for industrial purposes.

Canada is the world's largest producer of potash with 11 mt annually, accounting for around 30 per cent of the global production and over 60 per cent of the reserves, followed by Russia, Belarus, Germany, Israel, China and others.

India is the largest importer of potash followed by China and Brazil --- all rapidly growing economies that have to support huge populations.

In 2009, India imported 5.09 mt, according to Fertecon, a Tunbridge Wells, England-based fertiliser consultant, and India's imports touched a record 6.4 mt last year.

India today accounts for about 13 per cent of the global potash imports of 48 mt. Since 2003-04, India's imports have risen nearly 2.5 times from 2.6 mt to 6.4 mt, making it the largest importer last year, ahead of the US (five mt), China (four mt) and Brazil (two mt).

While China has its own mines and have invested in overseas mines, India-the most vulnerable country as far as potash is concerned, does not have any reserves of Potash and nor has it tried to acquire overseas potash mines.

Indian potash importers could form a consortium to buy overseas mines and missed an opportunity last year by not bidding for Canada's Potash One Inc, which was acquired for by C$434 million ($427 million) by Germany's K+S AG, Europe's largest potash producer.