Agri Business

Fertiliser industry to seek sovereign fund for acquiring assets abroad

Our Bureau Chennai | Updated on November 12, 2017

(From right) Mr T. Nagendra Rao, Head-Plant Nutrition Services of Nagarjuna Fertilizers and Chemicals, Mr A. Vellayan, Chairman of Fertilizer Association of India and Mr M. Remold, Regional Executive of FAI-Southern Region Chennai, at a programme on `Fertilizer Policies – Financial and Marketing Management’ held in Chennai on August 09, 2011 - Photo: S.S. Kumar

The fertiliser industry is lobbying for a sovereign fund to support acquisition of assets overseas to bring down dependence on imports, according to Mr A. Vellayan, Chairman, The Fertiliser Association of India.

Continued dependence on imported raw material for domestic fertiliser production makes the industry susceptible to international price fluctuations. Without raw material security, India will ‘import inflation,' he said.

China, which has as much arable land as India, is set to achieve fertiliser self-sufficiency within a couple of years as it has continuously acquired assets in Africa and Latin America and is now about 90 per cent self-sufficient, he said.

India needs an additional 7-8 million tonnes a year of production capacity and about 4-5 million tonnes of phosphatic fertiliser capacity. A million tonnes of urea production could involve investments of about Rs 4,000-5,000 crore and about Rs 600 crore for a million tonnes of DAP.

Rising Subsidy bill

It would not be viable for India to continuously depend on imports as costs are spiralling upwards. For instance, urea prices range around $550 a tonne against $350 last year; DAP around $640 ($500) and potash $470 ($370).

This also means India's subsidy bill continues to rise. A portion of the subsidy could be earmarked for funding overseas assets which would go towards bringing down subsidy in the coming years.

Mr Vellayan, the Executive Chairman, Murugappa group, who was addressing a seminar organised by the fertiliser association said that the industry has been freed from controls in stages leading up to implementation of Nutrient Based Subsidy last year and partial decontrol of urea. The coming years, when it would be completely freed, will pose a challenge.

The industry has faced strict controls and made little investments due to the policy regime. However, for the same reasons the industry has managed to get the capacity in terms of efficiency to control costs and world class product quality.

Published on August 10, 2011

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