The fertiliser industry in India operates in the public, private and co-operative sectors, with the private sector occupying a prominent share of the manufacturing capacity. Fertiliser is a high energy and capital intensive sector, as the cost of fertiliser is quite high. At present urea prices are subsidised and administered under the “new urea policy”, with the price fixed by Government of India. Currently, it is fixed at Rs 5,360 per MT, which is around one third of the current cost of production/imported price. Apart from domestic production, the government is also importing urea through three canalising agencies—MMTC, STC and IPL. Under the “Make in India” initiative of the government, a record urea production of 245 LMT was achieved. All out efforts are being made to revive the closed urea plants in the country, which shall not only reduce the dependence on imports, but also make the country self-reliant. The government has taken some of the major reforms through the recent notification of various policies, such as 100% mandatory production of neem coated urea, introduction of a “new urea policy” for existing gas-based urea manufacturing units and application of gas pooling. The “new urea policy” incentivises the additional production capacity of the plants and helps achieving record domestic urea production in the country. The introduction of pooling of gas mechanism has facilitated the delivery of gas at uniform and lower prices to fertiliser companies, thus reducing the requirement of a working capital to a large extent. Consequent to the favourable policies notified by the government, the availability position of urea in the country is quite comfortable and probably no shortage of urea should be felt by the farmers during the current year. The government plans to directly transfer the fertiliser subsidy to farmers and an experimental project for the same is being considered. The Department of Fertiliser is working on a roadmap to capture the details of farmers, so that sales data can be captured and subsidy can be transferred to farmers’ accounts directly. This shall improve the efficiency of disbursement of subsidy and address the problem of delayed release of subsidy to the industry by the government.
National Fertilisers Limited (NFL) is a Mini Ratna of Government of India, which owns 89.71% shares of the company. It is engaged in producing and marketing urea, neem coated urea, bio-fertiliser and other allied industrial products. It is involved in the trading and selling of fertiliser and other agro-inputs, including certified seeds and agro-chemicals, such as compost, insecticides and herbicides. The company is the second largest producer of urea in the country, with a total market share of 15.5%. It saw a strong rebound in its latest operating performance on the back of record urea production, increased turnover of other industrial products, lower power consumption on lower gas prices, favourable government policies on neem coated urea and improved domestic production. With new product lines, expansion of production capacities, and favourable urea prices, we feel that the NFL stock can appreciate by 30% in the next one year
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.