Pvt fertiliser cos that don't pass on input price fall face subsidy cuts

The Centre has asked private firms to slash retail prices of non-urea fertilisers by up to Rs 5,000 per tonne, in line with public sector firms, or else it will cut down the subsidy provided to them. Retail prices of non-urea fertilisers such as Di-ammonium Phosphate (DAP), Muriate of Potash (MoP) and NPK are decontrolled and are determined by the manufacturers, while the Centre gives them fixed subsidy each year.

Earlier this month, the Fertiliser Ministry asked both public and private fertiliser companies to pass on falling global prices of raw materials by reducing the retail price of non-urea soil nutrients. Accordingly, state-run Rashtriya Chemicals and Fertilizers (RCF) and National Fertilizers Ltd (NFL) reduced the retail price of DAP by Rs 2,500 to Rs 22,000/tonne, MoP by Rs 5,000 to Rs 11,000/tonne, while complex fertilisers rates were brought down by Rs 1,000/tonne.

Private players, however, did not cut the rates. "Even private companies will be reducing the prices. International prices have come down, they have to reduce the retail price. If they do not reduce the price, we will cut down the subsidy. This has been told to them very clearly," said a senior Fertiliser Ministry official.

Global prices of raw material used in making of complex fertilisers have come down by $50-70 a tonne. "They have been told very clearly this has to be passed on to farmers. If private companies do not fall in line, then the subsidy will be cut further," the official added.

In March, the government had reduced the fixed subsidy on phosphatic and potassic (P&K) fertilisers factoring falling global prices. asked that private firms are concerned about their margin, the official said: "The issue is that some of them have old stock of about 50 lakh tonnes lying in the field. They have sold that to dealers at higher price. They cannot ask the dealers now to sell at lower price."

The private companies want old stock to be cleared as their entire working capital is blocked, the official said, adding that the government is monitoring the situation and will ensure farmers get non-urea fertilisers at lower rates.

Total subsidy outgo is estimated to be Rs 21,274 crore for complex fertilisers for this fiscal. The share of complex fertilisers by PSUs is less than 10 per cent. The cooperative major IFFCO and private companies Coromandel International, Deepak Fertilisers, Gujarat State Fertilisers and Chemicals Ltd, and Tata Chemicals have major share in these soil nutrients. 

Meanwhile, Indian Potash Ltd (IPL) is in talks with Israel Chemicals Ltd (ICL) to contract import of over 5 lakh tonnes of muriate of potash (MoP). Last month, Indian Potash Ltd had signed an agreement with Belarusian Potash Company, owned by the Belarus government, for import of 7 lakh tonnes of muriate of potash at USD 227 per tonne.

"We import about 20-21 lakh tonnes of MoP every fiscal. We are negotiating with Israel Chemicals Ltd for imports of 5.25 lakh tonnes at a price of USD 227 per tonne," Indian Potash Ltd Managing Director P S Gehlaut said. The pact will be signed soon. Indian Potash Ltd had recently cut muriate of potash prices by Rs 200 to Rs 550 per bag of 50 kg with an immediate effect. Potash is one of the essential nutrients for soil.