“A number of Indian players will come forward ready to make investment to set up new urea plants and no FDI will be required by the Indian industry” – R.G. Rajan, CMD, Rashtriya Chemical Fertilisers
Rashtriya Chemical Fertilisers, a public sector unit, is one of the leading fertiliser manufacturers in the country. Recently, it won the national award for excellence in cost management.
The company’s Chairman-cum-Managing Director R.G. Rajan in an interview to Business Line, outlines the public sector unit’s plans.
The company will introduce a slew of new products next fiscal, while looking to participate in a potash mining project in Canada. It is also setting up an ammonia-based urea plant in Ghana.
Tardy progress of the monsoon this year has left large tracts of land in different parts of the country moisture-stressed. What is the impact of the current situation on the country’s fertiliser market in general and specifically, what is the effect on sales volumes, prices and so on?
The kharif markets for fertilisers normally get rain from the South-West monsoon – predominantly western and central India. Not only was the monsoon delayed, there has been a very long dry spell through most of June and July leaving the farmers literally high and dry.
Sowing of crops has been delayed, in fact, there is likely to be a situation where farmers may shift to late varieties and/or short duration crops.
During April-July 2012, there has been a decline in sales of all fertiliser products including urea in comparison to last year corresponding period. The drop in sales was about 3.5 per cent for Urea while 28.6 per cent, 22.9 per cent and 1.2 per cent decrease in sales was seen in case of DAP, NPK and MOP respectively.
The availability of fertilisers in February-March this year was very good due to the heavy arrivals of imports particularly phosphatic and potassic fertilisers . But the reduction in subsidy levels this fiscal and the weak rupee have resulted in a drastic increase of the farm gate prices of the decontrolled phosphatic and potassic fertilisers thereby deterring sales.
On the other hand, urea prices have remained stagnant at a low controlled level and farmers are tempted to use urea in place of costlier other fertilisers.
Do you have a market outlook for the Rabi season (October 2012-March 2013)? What would be your strategy to enhance fertiliser sales for Rabi crops?
Rabi sowing is dependent on the moisture content of the soil post South-West monsoon. The deficit in rainfall would certainly cause the water table to deplete further in most parts of the country. The other factor which would have a bearing on the Rabi season would be the arrival of North-East monsoon which might facilitate the Rabi season.
We hope that Rabi season takes off as scheduled. Timely placement of material at the points of consumption would be the key to success of the marketing strategy.
Is RCF working on new, tailor-made or customised products for India’s varied agro-climatic conditions? Could you please provide some details?
RCF’s projects for more grades of liquid micronutrients, solid micronutrients and customised fertilisers are in the advanced stages and we aim to have the new products introduced in the markets from the next financial year.
With fertiliser prices (except urea) decontrolled, what has been RCF’s experience in the decontrolled environment? How have you protected your market share? What strategies have been adopted for expansion of market share?
RCF has been importing small quantities of DAP and higher volumes of MOP since the past few years. This has enabled the company to protect its market share. While the prices have been free, the band of price operated for each product is in the same range. We have been able to maintain our price levels at very competitive rates with respect to the other players in the industry.
Is the Indian fertiliser industry ready for foreign investment – both inbound and outbound? Why do you say so?
The Indian fertiliser industry is not looking for inbound FDI but is ready to make outbound foreign investment in countries where business opportunities are there.
At present, India’s total fertiliser consumption is pegged at 58 million tonnes (mt) a year in which the share of major fertilisers Urea, DAP and MOP are around 28 mt, 10 mt and 4 mt, respectively.
As the country is unable to meet its fertiliser requirements from own production, it has to depend on imports to partially meet the requirements of urea and phosphatic fertilisers whereas MOP requirement is fully met through imports.
In the case of urea, non-availability of feedstock and lack of attractive returns, have deterred the industry from making fresh investments for quite sometime thereby increasing the demand-supply gap over the years. It is not because of lack of funds with the Indian fertiliser industry.
The moment environment becomes conducive with appropriate policy in place, a number of Indian players will come forward ready to make investment to set up new urea plants and no FDI will be required by the Indian industry for this purpose.
For phosphatic and potassic fertilisers, as raw material is not available in the country, setting up of new plants is not found to be remunerative and hence not pursued with seriousness by anybody.
At the same time, many Indian companies are exploring the possibilities of setting up new fertiliser plants abroad where raw materials and feedstock are abundantly available at reasonable prices including acquisition of assets such as potash mines.
Does RCF have plans to invest abroad? Would you like to share some details?
RCF plans to invest in fertiliser projects abroad where feedstock and raw material are available at remunerative prices. The company is planning to set up gas-based Ammonia-Urea plants to produce about 1.27 million tonnes per annum at Ghana under the MoOU signed between the Indian and Ghanaian Governments.
For the project, site has been identified and land acquisition by the Ghana Government is underway.
The pre-feasibility study has been completed. We have now engaged agencies for geo-technical study and topography surveys of the site. Various other project-related documents and agreements are under preparation.
Further, RCF is also pursuing to participate in Potash mining project in Canada.