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Public sector FACT is gearing to overcome supply constraints and technical issues pertaining to a production snag, even as the fertiliser demand looks bullish this kharif season.
The increase in the input cost of raw materials and uneconomical gas prices are some of the impediments in fertiliser production, despite good demand visibility across South India, thanks to widespread monsoon. To add to FACT’s woes, the rupee depreciating against the dollar is also playing spoilsport.
Monthly production
The production during June-July was in the range of 65,000-75,000 tonnes of Factamfos and ammonium sulphate and the company has managed to meet the demand from inventories, D Nandakumar, Director (Marketing), said.
However, the rising LNG prices forced FACT to depend on imported ammonia to meet the production requirements as it forked out around $360 a tonne. “We cannot run the plants for long with imported ammonia,” he told BusinessLine . To contain the volatility in natural gas prices, FACT is looking at long-term agreements with LNG suppliers as the rates touched $13 mmBtu from $8 mmBtu this time last year. The availability of gas at competitive rates would ensure a total monthly production of 90,000 tonnes as achieved last year during the same period.
He also cited some restrictions in the import of phosphoric acid from Morocco due to logistical problems. This has facilitated the company to explore pooling of resources with other public sector fertiliser entities for procuring raw materials, which would bring down the unit cost due to economies of scale and better bargaining power.
Plans are also afoot to buy Muriate of Potash (MoP) in association with National Fertilizer Company. Likewise, the feasibility of an agreement between India and Morocco is under consideration to supply phosphoric acid and rock phosphate.
Demand in South
According to him, the Factamfos demand in the South for the kharif is estimated at 12 lakh tonnes and 10 lakh tonnes for rabi. Of the 22 lakh tonnes, FACT has 30 per cent market share. Tamil Nadu is the major market followed by Karnataka, Kerala, Andhra Pradesh and Telengana.
To leverage the potential of its brand image in the receptive markets of northern Karnataka, AP and Telangana, FACT is enhancing its production capacity to one million from seven lakh tonnes, he said.
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