IFFCO to take Rs 300 crore hit on costlier imports

The Indian Farmers Fertiliser Co-operative Ltd (IFFCO) will take a Rs 300 crore hit for the current financial year on account of its import of raw materials turning costlier due to a weaker rupee in recent months.

“We have decided to take a hit on our balance sheet as we don't intend to pass on the cost hike to farmers by raising the maximum retail prices (MRP) of our products,” said IFFCO Managing Director, Dr U.S. Awasthi. For this, IFFCO has taken approval from its board.

Hit by a weak rupee, IFFCO is renegotiating contracts with its global suppliers and has managed to secure some discount from Russian supplier PhosAgro. “But for the 5 per cent discount from PhosAgro, the extent of the impact on our balance sheet would have been higher by Rs 100 crore at Rs 400 crore,” Mr Awasthi said.

SECURING DISCOUNTS

Mr Awasthi's comments assume significance as IFFCO is the country's largest player in the fertiliser market with a share of around 25 per cent. To what extent not raising MRP would hit the private players such as Zuari Industries and Coromandel International, is not clear.

IFFCO has secured a discount of $35/tonne for di-ammonium phosphate (DAP) and $25/tonne for NPK fertilisers from PhosAgro, Mr Awasthi said. The co-operative has contracted for total import of 1.5 million tonnes of DAP at $677 a tonne and NPK at $617 a tonne, when the rupee was at 49.5 to a dollar, from about 10 global suppliers.

Over the next four months till March 2012, IFFCO plans to produce 16 lakh tonnes of complex fertilisers and import about 9 lakh tonnes, Dr Awasthi said this would be sold during the kharif season starting June next year. From May onwards, the company typically starts producing complexes for the Rabi season.

Global prices

The global fertiliser prices have largely stayed firm in the past six months, when most of the commodities such as wheat, corn, soyabean and cotton have seen a decline. In the last six months, wheat at CBOT (the most actively traded contract) has fallen from $ 269.61 to $ 220.65 a tonne, while corn and soyabean have correspondingly declined from $ 289.95 and $ 512.21 a tonne to $ 233.36 and $ 415.57 a tonne, respectively. Cotton has fared the worst. In March, the average Cotlook A Index (Far East) price ruled at a high of 229.67 cents/pound. It eased to 167.16 cents by June and is now ruling at 99-100 cents!

Though there is some softening seen recently, it would not be of any help to mitigate the impact, fertiliser-makers said. In India, the DAP prices, which ruled at Rs 11,000 a tonne at the beginning of kharif season in May-June this year have shot up 65 per cent to Rs 18,500 a tonne at present. Since April 2010 when the Government de-controlled the non-urea fertilisers, the prices of DAP have almost doubled from a level of Rs 9,350.

IFFCO registered a net profit of Rs 791.49 crore on a sales turnover of Rs 21,195.16 crores for the year-ended March, 2011. The high prices this year has led to a reduction in sales of DAP, which may fall by 25 per cent, Dr Awasthi said.

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