The industry blames the poor sales on lower demand for fertilisers, constraints in feedstock supply, paucity of funds and government's dithering policy on fertiliser subsidy.
Fertiliser production during 1996-97 fell by 1.6 per cent to 111.6 lakh tonnes from 113.4 lakh tonnes in 1995-96.
Nitrogenous fertiliser, that accounts for nearly 80 per cent of the total production, declined by 2.1 per cent to 86 lakh tonnes even as production of phosphatic fertilisers remained steady at 25.6 lakh tonnes.
Import of fertilisers in April-February 1996-97 witnessed a sharp drop of over 42 per cent over the previous year.
Yet, through trading of fertilisers by GNFC, the industry managed a two per cent increase in sales turnover in 1996-97. GNFC, which traded urea worth Rs 408.06 crore, showed a 51.9 per cent rise in sales turnover to Rs 1,223 crore.
Through diversified activity, GSFC's sales rose by 3.9 per cent to Rs 1,890.4 crore. Among other fertiliser companies, SPIC maintained sales at Rs 1,810.7 crore, Nagarjuna Fertilisers and Chemicals reported a growth of 4.5 per cent to Rs 922.49 crore but FACT reported a drop of 11.9 per cent in sales turnover at Rs 1,037.3 crore.
Indo Gulf Fertiliser had to shut down its plant for three months after the kharif season due to equipment problems.
The resultant fall in sales was 22 per cent to Rs 438.8 crore. RCF's nearly stagnant turnover was attributed to the gas shortage. National Fertilisers suffered a decline of 10.4 per cent in sales as a result of funds crunch.
The poor show by the fertiliser industry does not end with lower sales turnover. Shortage of ammonia, a vital raw material used in nitrogenous fertilisers, was also a canker. High cost of funds has dented the profits of the fertiliser industry. With cost of funds having increased by over 10 per cent, gross profits declined by 12.9 per cent.
Barring SPIC and EID Parry, all other companies failed to show a positive growth in gross profit.
Though the incident of tax was lower by 19.8 per cent, its share in pre-tax profits increased to 18.5 per cent from 17.7 per cent in the previous year. As a result, net profit declined sharply by 21.1 per cent exceeding the average 12.7 per cent decline by 600 corporates. During 1996-97, the government in order to discourage indiscriminate and excessive use of urea increased its prices by 10 per cent.
The current year may end on a happy note.
The first sign of this is seen from the production of fertiliser for April 1997.
The fertiliser output in April 1997 was 9.4 lakh tonnes - up 43 per cent over 6.6 lakh tonnes in April 1996.
In the same period, nitrogenous fertiliser output was 7.1 lakh tonnes (4.9 lakh tonnes) - up 45 per cent and that of phosphatic fertilisers was 2.2 lakh tonnes (1.7 lakh tonnes ) - up 37 per cent.
The task force on fertilisers has now suggested a 30 per cent increase in urea prices in 1997-98, the first year of the Ninth Plan followed by a 10 per cent increase per annum from the second year of the plan period.
The 30 per cent hike in urea prices may save Rs 1,000 crore on subsidy alone. Besides, lower consumption of urea will improve soil fertility if used in proper doses with phosphate and potash.
The government has also announced a reduction in the prices of complex fertilisers (NPK).
The price of the cheapest variety of NPK has been slashed to Rs 6,200 per tonne from Rs 6,829 and that of the most expensive mix to Rs 8,000 from Rs 9,390.The action is expected to boost the consumption of NPK and may benefit SPIC, Coromondel Fertilisers, Zuari Agro, GSFC and other complex fertiliser manufacturers.
B G Shirsat BS Research Bureau
