The Hindu Business Line : Market buoyancy helps phosphatic fertiliser makers to have a good H1

Chennai, Nov. 8 Buoyed by market demand and prompt subsidy disbursements by the Government, manufacturers of phosphatic fertilisers have had a good first half in the current year.

According to Mr K.S. Raju, Chairman, Fertilisers Association of India, manufacturers of phosphatic fertilisers would have turned in a buoyant performance, while nitrogenous fertiliser manufacturers totally dependant on subsidised pricing mechanism have not benefited from the buoyant market.

With the prices of phosphatic fertilisers linked more closely to market demand and supply, and to the international market prices of raw materials, manufacturers would have had the benefit of improved margins as prices have been high.

Nitrogenous fertiliser manufacturers have done well in the international market, but domestic players subject to subsidy regime have not had the benefit of the buoyancy in the market, he said.

According to Mr P. Nagarajan, Chief Financial Officer, Coromandel Fertilisers, a Murugappa Group company, the prompt disbursement of subsidy during the current year and added compensation for the cost of sulphur in the complex fertilisers, which was earlier not available, have contributed to the bottomline for the manufacturers of complex and phosphatic fertilisers. The seasonal demand for fertilisers has also been good and the tight supply position has contributed to better prices, with sales on cash and carry basis with no discounts or rebates, he said.

Raw material prices

While the retail price has been the same as that of last year, the raw material prices have jumped significantly leading to a steep growth in subsidy for the raw material cost.

For instance, the price of DAP which has been around Rs 9,350 a tonne, gets five time more subsidy this year compared with last year. This was because the price of the raw material phosphoric acid which was $560 a tonne (Rs 25,000) last year had increased to over $2,200 (Rs 100,000) and sulphur prices had jumped ten times to touch $800 (Rs 36,000). The prices of these raw materials were now coming down.

This financial year, the Government has distributed subsidy in cash up to September, an unprecedented move. This helped the domestic fertiliser companies’ revenue by over Rs 55,000 crore.

Demand driven

According to a representative from another leading manufacturer of fertilisers and other agro inputs, demand in the South and West driven by sugarcane, foodgrains and cotton have buoyed the market.

Companies with a diversified presence in fertilisers and agro inputs have benefited from the buoyant demand in the market.

However, industry representatives declined to comment on whether the good times would hold during the second half. It is likely that the Government would continue with cash subsidy disbursement up to October, but subsequently, it is likely to revert to issuing bonds because of fiscal pressure.

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