Policy inaction has been the image of the fertiliser sector in the country, primarily due to highly sensitive nature of the consumers -- the farmers. Recent years have seen a drastic rise in prices of deregulated fertilisers, which has made the government much cautious on deregulating the most consumed fertiliser - Urea.
Speaking to Business Standard, minister of state for chemicals and fertilisers Srikant Jena raised questions over the industry's demands and intentions on hiking urea prices and maintained that urea deregulation is an option but only after all urea units in the country become gas-based.
The fertiliser industry in recent weeks demanded its share of the reforms pie, in the form of increased prices of Urea by up to 40%.
Chairman of the Fertiliser Association of India and Chairman, Coromandel International Ltd A Vellayan recently called for an increase in Urea prices by at least 40%.
Jena simply reacted to this demand asking how the industry will gain if the price of Urea is raised? He further added that no industry is safe like Urea industry anywhere in the country.
"The Urea industry in India is the most insulated industry as it straightway gets a 12% profit on the cost of production," he said.
Industry officials, however, said the actual profit given by the government is calculated on weighted average. Which means if the efficiency of a plant is low, its profit also comes down. But at the same time, if the efficiency of a plant is good, its profit cannot exceed 12%. Also, the fixed costs are calculated on the basis of 2002 prices, industry officials said.
Jena appreciated if the question is being raised out of concerns for soil health and balanced fertilization. At the same time he added that the better way to establish balance is by bringing Di ammonium phosphate (DAP) and Muriate of Potash (MOP) prices down.
Still, on the suggestion that subsidy can be decreased on urea to increase it on DAP and MOP, Jena said that the "industry is worried as their product (DAP and MOP) is not getting sold".
Iffco chairman US Awasthy recently suggested that subsidy on urea be reduced as its prices are "abnormally low" and increase it on non-urea fertilisers to "maintain a balance".
The prices of non-urea fertilisers under the Nutrient Based Subsidy (NBS) scheme have seen a manifold rise in two years of the NBS. NBS was implemented for Phosphate and Potassic (P and K) fertilisers in April 2010. Since then the prices of DAP and MOP, respectively, have gone up from around Rs 9,000 per tonne and Rs 4500 per tonne to the tune of Rs 24,000 per tonne in recent time.
On the high prices, industry has cited helplessness on several occasions as the India is significantly dependent on imports for DAP and completely for MOP. To this, Jena said that the international "cartels" should bring the prices down.
Indian companies have not signed contracts for the supply of MOP in the current fiscal primarily due to lower consumption in domestic markets which has led to high inventories and also due to high prices in the international markets.
Last fiscal too, the signing of contracts was significantly delayed as India declared a 'potash holiday' protesting against the high prices in the international market.
