The government of India will be signing a protocol agreement with Russia with the objective of proceeding towards picking up stake in Russian potash manufacturing company – Acron.
Acron is a Russian group of interrelated companies and one of the leading global mineral fertilizer producers in the world, primarily potash. This is over and above the agreement which Indian Potash Limited has with Uralkali, another potash manufacturing Russian company for import of potash.
According to officials close to the development, Russia has offered to government of India to pick up 30% stake in the Acron along with buyback agreement for exclusively supplying the produce back to India.
Officials said that existing import deals with Uralkali will not be hampered with this new development.
To this effect, the Indian government has formed a consortium of five public sector undertakings led by National Mineral Development Corporation – NMDC with other associates like Rashtriya Chemical Fertiliser (RCF), Krishak Bharti Cooperative (KRIBHCO), Fertiliser and Chemicals Travancore (FACT) and National Fertiliser Ltd (NFL).
The primary responsibility of the consortium will be to engage in due diligence of the proposal so as to see how feasible it will be to produce and ensure uninterrupted supply of potash to India through an exclusive buyback arrangement. According to officials, only after the due diligence report, the proposal to pick up the stake will be finalized. The potash manufactured through this agreement will be exclusive use in India. It will be mandate of the government of India to export potash out of this facility only after fulfilling the domestic demand, said sources. However these details will be worked out after due diligence is done and manufacturing starts, they added.
While the fertilizer subsidy is a big drag for the Indian economy, it has to rely on imports for non urea fertilizers as most of the domestic units engage in urea manufacturing due to the incentive of assured subsidy in line with the marketing prices. The Indian government has been trying to decrease the overuse of urea in India agriculture and diversify to other nitrogenous fertilizers.
Retail potash prices in India have doubled since 2011 to 17,000 rupees a tonne as India cut subsidies in the last two years - including a 21.5% reduction in 2013/14 - and due to a weak currency. Global potash prices have fallen more than 20% to around $310 per tonne since Russia's Uralkali, broke away from trading venture Belarusian Potash Company (BPC) in July.
Reportedly, Russia’s Uralkali, one of the world’s largest potash producers has t concluded a contract with Indian Potash Limited (IPL) for potash deliveries between April 2014 and March 2015. The rate of $322 per tonne on a cost and freight basis (CFR) would be around 25% less than what it supplied to the Indian company last year. Last year Uralkali charged India $427 per tonne.
India and China are the world's largest consumers of potash and India’s potash imports stood at 3 million tonnes in 2013-14. India has cut potash subsidy by nearly a fifth to 9,400 rupees ($160) per tonne for the year starting April in an effort to contain a ballooning fiscal deficit, a government source and an industry official told Reuters on Friday.
