FAI expects big investments in fertiliser sector

The Fertiliser Association of India (FAI) envisages investments to the tune of Rs 35,000 crore by the industry within three years after the complete decontrol of the fertiliser sector in the country. FAI is hopeful that the Union government will decontrol the sector in a year’s span.

“We are seeking decontrol of the fertiliser industry and the government is also looking towards decontrol of the sector. Hopefully, it will happen by this time next year,” FAI chairman KS Raju said here on Wednesday.

Addressing a press conference on the eve of FAI’s annual seminar to be held here from Thursday, Raju said reforms completely bypassed the fertiliser sector while most industries benefited from liberalisation of the economy. Consequently, no additional capacity was created by the fertiliser industry in the past decade. The industry had been appealing to the government for the last few years to de-link the disbursement of subsidy from the industry and provide it directly to farmers. “Fortunately, now the government is also thinking on these lines,” he said.

In this context, Raju referred to the finance minister's July 2009 Budget speech, which stated about unshackling the Indian fertiliser sector by moving towards the nutrient-based subsidy regime and shifting to a system of direct transfer of subsidy to farmers.

He said this year's FAI conference, being held for the first time outside Delhi, would focus on policy issues. Over 1,000 delegates, including 200 from abroad, are expected to take part in the three-day conference.

FAI co-chairman A Vellayan said currently there was a shortage of 12 million tonnes of fertilisers in India and, if the sector was decontrolled, it was quite possible for the industry to create additional capacity. “It is possible for India to be self-sufficient in fertiliser production within 2-3 years,” he said.

FAI director general Satish Chander said subsidy payments to the industry were being delayed by the government. Of the subsidy amount of Rs 1.2 lakh crore last year, the government had so far paid only Rs 95,000 crore. Of this 75 per cent was paid in cash and 25 per cent in bonds that carry a coupon rate of 6 per cent. Apart from prompt payment of the subsidy amount, the industry also wants the government to make these bonds “saleable and encashable.”

Due to failure of monsoon, the offtake of urea, complex fertilisers (other than DAP) and potash was 12.3 million tonnes (mt), 3.6 mt and 1.9 mt respectively during kharif 2009 registering a decline of 4 per cent, 4.1 per cent and 14.3 per cent over kharif 2008. However, on account of revival of monsoon towards the end of the season, the offtake of fertilisers in the ensuing rabi is estimated to be higher leading to an increase in the total consumption of fertilisers in 2009-10 by 4-5 per cent over the previous year.