Govt May Allow RCF, NFL to Import Urea.

State owned fertilizer makers Rashtriya Chemicals and Fertilizers Ltd (RCF) and National Fertilizers Ltd (NFL) may soon be made trading agencies, three officials familiar with the development said.

At present, only three state-owned entities—Minerals and Metals Trading Corp. of India Ltd (MMTC), State Trading Corp. of India Ltd (STC) and Indian Potash Ltd (IPL)—import urea. Private firms are not permitted to import urea. They can, however, import decontrolled potassic and phosphatic fertilizers under an open general licence.

“While MMTC and IPL import a bulk of the product, STC’s contribution is negligible,” said an official at the department of fertilizers (DoF).

“There have been some preliminary discussions with officials in DoF in this regard and we hope to get clearances in the next three-four months,” said a top RCF official.

Another DoF official confirmed there was a meeting with RCF and NFL officials in this regard on 15 December. Mint could not ascertain what transpired at the meeting. All the officials declined to be named.

India’s annual domestic urea production stands at 21-22 million tonnes (mt), falling short of the country’s annual requirement of 27-28 mt.

The shortfall is made good by imports. Agents earn a commission of Rs.17 per tonne of urea imported.

Officials say the decision to allow RCF and NFL to import urea could be a way to break a deadlock over the issue of decanalising urea. “In future, we may allow all public sector manufacturers to import urea,” said the second DoF official quoted earlier. The ministry of chemicals and fertilizers had proposed decanalising urea, but minister M.K. Alagiri was against such a move.

An industry official, who didn’t want to be named, said the only “rationale behind such a move (allowing RCF and NFL to import urea) could be that the government wants to tightly control its import”.

Analysts said unlike MMTC and STC, both RCF and NFL have port handling and distribution rights and, therefore, would not have to go through the process of sub-contracting that such activities require. They would also save on costs.

“A canalising agent gets only 1% commission on the urea imported, so it is not a lucrative opportunity in itself. But they can earn on their synergies,” said Tarun Surana of Mumbai-based Sunidhi Securities and Finance.

Source : livemint.com