The Hindu Business Line : Coromandel bullish on fertiliser sales, thanks to monsoons

COROMANDEL Fertilisers expects a 15-20 per cent growth in offtake of phosphatic fertilisers this year due to bountiful rains in both the southwest and northeast monsoon seasons. What is more, with surplus rains bolstering storage in the major reservoirs, the company expects the beneficial effect of this monsoon to last for the next 2-3 years.

"Both the kharif and rabi seasons have been very good for us, especially in key markets in the South - Andhra Pradesh, Tamil Nadu and Karnataka. We expect a 15-20 per cent growth in the sales of fertilisers this year," said Mr Ravichandran, President and whole-time Director of the company.

Tie-ups help: The strategic tie-ups that the company entered into last year, with large material suppliers such as South Africa-based Foskor, have helped iron out problems in input availability. This has allowed the company to operate its plants at "better than full capacity" this year.

Coromandel is looking to further strengthen these backward linkages. It already holds a small equity stake in Foskor. It has signed a contract to render technical and managerial assistance to the latter and earns an annual management fee of about $500,000. This apart, the contract allows Coromandel to acquire an additional 14 per cent equity stake in Foskor without any additional investment if its performance satisfies contractual parameters over the next three years.

New subsidy mechanism: Monsoons apart, the company is also positive about a rejig in the subsidy mechanism for phosphatic fertilisers mooted recently by the Abhijit Sen committee. The new policy, yet to be cleared, suggests directly linking the subsidy to the landed cost of imported fertiliser, instead of deriving it from the prices of inputs.

"This will introduce greater transparency into the subsidy calculation and expedite the disbursal of subsidy. Producers who have clout with their suppliers will benefit if the new policy comes into effect," observes Mr. Ravichandran.

Currently, the subsidy paid to manufacturers of phosphatic fertilisers is computed each year based on the contracted prices of the key inputs - phosphoric acid and ammonia. This has led to protracted three-way negotiations between the industry, its suppliers and the Government.

Pesticides sales down

While excess rains have boosted fertiliser sales, they have had the opposite effect on pesticide sales, which are expected to shrink sharply by 20-25 per cent this year. The deluge, the company says, has simply washed off the pests, reducing the need for pesticide sprays this season. Industry watchers say that rising acreage of Bt cotton and specialised branded products have also eaten into the consumption of conventional pesticides.

However, Coromandel is hopeful of countering these threats by diversifying into products for new pests and crops. Paddy, chilli and vegetables are to be the new focus crops.

Coromandel is using its extensive marketing network in the South to market agrochemicals on behalf of MNCs such as BASF and FMC. It also sees opportunities to export generic products such as Endosulfan and Acephate, where it has low cost manufacturing capabilities.