The Hindu Business Line : Fertiliser stocks rise on new subsidy plan

Mumbai, June 12 The new fertiliser subsidy plan by the Government drove up fertiliser stocks on Thursday. Among the fertiliser scrips that rose today were Tata Chemicals (up 1.57 per cent at Rs 356.65), Gujarat Narmada Valley Fertiliser Company (up 2.72 per cent at Rs 136), Nagarjuna Fertilizers and Chemicals (up 3.25 per cent at Rs 44.5), Chambal fertilisers and Chemicals (up 4.72 per at Rs.83.25), Rashtriya Chemicals and Fertilisers (up 3.3 per cent at Rs 62.1), Zuari Industries (up 3.79 per cent at Rs 246.45), Coromandel Fertilisers (up 3.15 per cent at Rs 124.50) and Gujarat State Fertilisers and Chemicals (up 1.83 per cent at Rs 164).

Freight subsidy

This must be seen against the backdrop of the BSE Sensex itself rising by only 0.43 per cent over the day. In order to encourage farmers to use nutrient-based fertilisers instead of the standard fertilisers like urea, the Union Finance Minister, Mr P. Chidambaram, announced a reduction in the prices of complex fertilisers.

More importantly, the Government also said it would grant an uniform freight subsidy for fertilisers, based on actuals, in order to bring about uniformity in the prices across different regions of the country.

“As of now, the fertiliser companies receive a fixed amount, regardless of the distance between the point of sale and the factory. And it has been a while since the industry started demanding payment based on actual freight costs. The uniform freight subsidy is based paying the companies on the actual stowage,” said an analyst at a brokerage. This would improve margins for these companies, he said.

Subdued buying

“Companies such as Tata Chemicals and Zuari Industries could reap the maximum benefits, as the subsidy will be based on nutrients such as nitrogen, phosphate etc,” said the Director of Research at a stock broking firm.

Though the subsidies were announced, there were no incentives for capacity expansion, and this is the reason why there was subdued buying on these counters, although the stocks gained somewhat, said analysts.

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