The fertiliser sector is expected to get some relief soon as the government is considering increasing the fixed cost of urea, sources told CNBC Awaaz. According to the sources, the MRP for P&K Fertiliser may be reinstated. The Fertiliser Association of India said the government is expected to take a decision on this soon.
The government is preparing to give big relief to the fertiliser sector on three fronts. This includes increasing urea's fixed cost and reinstating the MRP for P&K Fertiliser.
According to sources, the Ministry of Chemicals and Fertilizers is considering a proposal to increase the minimum fixed cost of urea. Discussions have happened between the fertiliser industry and the Ministry of Chemicals and Fertilizers on this issue.
However, the government has not changed the fixed cost since 2002-03. In this case, the price of a 50 kg bag of urea is fixed at Rs 268.
However, it marginally increased during NPS-III in 2014. The Fertiliser Association of India says urea production is becoming difficult due to a lack of increases in fixed costs. Fertiliser Association of India chairman KS Raju recommends increasing fixed costs by 12 percent of profit after tax (PAT) every year.
In addition, Fertiliser Association of India has pushed for the return of P&K Fertiliser's market-based MRP system. In addition, there has been a need to eliminate indirect taxes while setting the MRP of P&K Fertiliser units.
"The government is considering these proposals. And a decision on this front is likely to be taken soon,” according to the Fertiliser Association of India.
Also read: Deepak Fertilisers, Aarti Industries join hands in Rs 8,000 crore Nitric Acid supply arrangement
The fertiliser industry is also receiving assistance from the international front in addition to government relief. International prices for natural gas and fertiliser raw materials, which had previously climbed significantly, are now showing a drop.
According to Dr PS Gehlot of Indian Potash Limited, this could result in a decrease in the need for fertiliser subsidies of around 25 percent in the following fiscal year.
For the long term, however, the fertiliser industry has developed a roadmap till 2030. This plan calls for 50 percent of the energy needed by the industry to come from renewable sources. During the 8th and 9th of December, a seminar will also be held on this topic.
Shares of major fertiliser companies are trading red. Chambal Fertilisers and Chemicals is down 0.6 percent, Deepak Fertilisers and Petrochemicals Corporation is down 0.1 percent, Gujarat State Fertilizers & Chemicals is down 1.5 percent and Coromandel International is down 1.8 percent from previous close on the BSE.
First Published: Dec 6, 2022 1:25 PM IST
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