Tata Chemicals Limited [TCL] made headlines on August 10, 2016 by announcing sale of its urea business [it has a plant in Babrala, Uttar Pradesh with 700,000 tons ammonia and 1.2 million ton urea capacity] to Yara Fertilizers India Private Limited [YFIL] – Indian arm of Norway’s Yara lnternational ASA – for a sum of Rs 2670 crores [after obtaining all regulatory approvals and court sanction, the transaction will be consummated within 9-12 months]. TCL had decided to exit fertilizers long back. However, a number of earlier attempts had failed as it did not find any taker; even this one is a distress sale and will fetch the company only 2/3rd of the money so far invested. Tata has also...
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Category: Production vs imports
REVIVING INDIA’S FERTILISER PLANTS
Efforts by successive Government’s to achieve self-sufficiency in the production of fertilisers have failed. The Modi Government should broaden its options and look for expansion of existing units or set up joint ventures abroad The Coal India Limited (CIL) and the National Thermal Power Corporation limited (NTPC) signed a joint venture agreement to revive the Sindri (Jharkhand) and Gorakhpur (Uttar Pradesh) plants of the Fertiliser Corporation of India (FCIL), at an estimated cost of about Rs 18,000 crore, over the next four years. CIL and NTPC operate in coal and power sectors respectively and both have their plates full to meet their commitments in those areas to help India achieve the growth target. But, given fertiliser is a different cup...
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Fertilizer woes – quick fix won’t work
On July 4, 2016, the minister for chemicals and fertilizers, Ananth Kumar announced government’s decision to reduce maximum retail price [MRP] of non-urea fertilizers viz., DAP [di-ammonium phosphate: 18% nitrogen [N] & 46% phosphate [P]]; MOP [muriate of potash] [60% potash [K]] and complex fertilizers [contain N, P and K in different proportions] with immediate effect. The retail price of DAP has been reduced by Rs 2,500 per ton to Rs 22,000/tonne, MOP by Rs 5,000 per ton to Rs 11,000/tonne and those of complex fertilizers by Rs 1,000/tonne on an average. The minister went on to say that the rate cut would entail a benefit of Rs 4,500 crore to farmers and help promote balanced use of fertilizers. On...
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‘Make in India’ skips fertilizers
Even as Modi – government has unleashed a wave of reforms to accelerate the pace of foreign direct investment [FDI] and give a boost to prime minister’s flagship “Make in India”, fertilizers happens to be one sector that has been completely bypassed. While, indigenous production in all segments of this crucial industry continues to languish, the most neglected is DAP [di-ammonium phosphate; it contains 18% nitrogen [N] and 46% phosphate [P]] where traders have hey-day at the expense of domestic industry. Of the total DAP consumption in India, nearly 60% is met from imports. India is the single biggest buyer of DAP in global market with a share of more than 50 per cent of globally-traded DAP. Even for domestically-manufactured...
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Revival of sick fertilizer PSUs – a mirage
The revival of sick plants of two central public sector undertakings [PSUs] viz., Fertilizer Corporation of India Limited [FCIL] and Hindustan Fertilizer Corporation Limited [HFCL] is once again in the news. Last year, the Union Cabinet had approved a plan to revive the Barauni [Bihar] of [HFCL], Gorakhpur [UP] and Sindri [Jharkhand] of FCIL through auctions. Having failed to get a good response through this route, the central government had asked cash-rich PSUs viz., Oil and Natural Gas Corporation Limited [ONGC], National Thermal Power Corporation limited [NTPC] and Coal India Limited [CIL] to adopt one closed urea plant each for revival. Accordingly, CIL and NTPC have signed an agreement to form a joint venture [JV] to revive Sindri and Gorakhpur...
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Tackling urea shortage – neem coating won’t help
Addressing an election rally in Tamil Nadu, prime minister listed the major achievements of his government which, he exhorted, is exclusively for the poor and the oppressed and is sorting out issues faced by them one by one. One of these achievements is “helping the poor farmers surmount the urea shortage which has been haunting them for years”. Modi said immediately after swearing in as PM, he received letters from Chief Ministers of States and farmers about the severe shortage of urea. “Urea was being sold in the black market and farmers had to bribe officials to get their quota of urea. My government put an end to the practice of corruption in the sale of urea. We have started...
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Direct transfer of fertilizer subsidy – 12 commandments
Direct benefit transfer [DBT] of fertilizer subsidy offers huge benefits viz., rational allocation of resources, reduction of imbalance in NPK use, prevention of pilferage/black-marketing and saving in subsidy. Even as Modi – government is committed to introduce DBT, it would do well to seriously consider following 12 commandments:- (i) It must be made abundantly clear to all stakeholders that the day DBT is introduced, the present system of routing subsidy through fertilizer manufacturers will go. The new pricing scheme [NPS] for urea under which they are paid subsidy will be dismantled. Likewise, the nutrient based scheme [NBS] under which manufacturers of P&K fertilizers are paid subsidy will have to go. (ii) All manufacturers of urea and P&K fertilizers will sell...
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Fertilizer Industry in India – on the brink
Emboldened by the success of direct benefit transfer [DBT] in LPG and having announced DBT for kerosene subsidy in 26 districts to begin with from April 1, 2016, the government is currently examining various possibilities for taking similar initiatives in fertilizers [besides food]. Subsidy syndrome While, these efforts are welcome, it needs to take stock of the present state of fertilizer industry in India as its health is a pre-requisite for ensuring un-interrupted supply of fertilizers to farmers at affordable price. In a pre-budget meeting with finance minister, Arun Jaitely, the Fertiliser Association of India [FAI] told him that at present, manufacturers have outstanding subsidy dues of Rs 45,000 crores. It urged the government to clear these in three installments....
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It’s wrong to deny gas to the fertiliser sector
And worse still, to favour urea producers over decontrolled fertiliser units in gas allocation, exacerbating the nutrient imbalance The manner in which gas is allocated within the fertiliser sector smacks of arbitrariness. The Centre gives a uniform subsidy to all manufacturers, including those of decontrolled complex fertilisers, under the Nutrient Based Scheme (NBS) . Why, then, does it use a different yardstick for allocation of gas to manufacturers of urea on the one hand and decontrolled fertiliser on the other? A two-judge bench of the Delhi High Court has ordered the government to resume supply of natural gas to Deepak Fertiliser and Petrochemicals Corporation (DFPCL), a manufacturer of decontrolled phosphatic fertilisers, which was arbitrarily suspended last year. The bench has...
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Gas price loss is urea’s gain
It’s time to leverage the conditions. Freeing distribution and movement will also make a difference Under new pricing guidelines notified in October, 2014, the price of domestic gas was fixed at $5.61 per mBtu on net calorific value (NCV) basis with effect from November 1, 2014 — an increase of 33 per cent over the $4.2 per mBtu prior to that date. The price was applicable till March 31, 2015. The price was arrived at by taking a weighted average of gas prices in Henry Hub (the US), NBP (National Balancing Point, the UK), AGR (Alberta Gas Reference, Canada) and Russia. It was to be revised once in six months based on movement in these indices for a full year,...
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