Fertiliser producers cut imports as global raw material prices fall.

HYDERABAD | NEW DELHI: Indian fertiliser companies are cutting imports of finished products as a fall in global raw material prices has made it more economical to source the inputs from abroad and then put them together here.

As a result, India's import of fertilisers other than urea dropped more than 41 per cent from a year earlier in the first quarter of fiscal 2017. The industry now wants the 5 per cent import duty on raw materials to be scrapped, while keeping that on the finished products at the same level, to give a thrust to the make in India programme.

The fall in the prices has largely been on the back of global capacity addition in fertiliser raw materials, said industry people. "This year with a good monsoon, the fertiliser industry is making all efforts to maximise domestic production of DAP (diammonium phosphate) and NPK, to boost the Make in India programme," said Rakesh Kapur, joint managing director of the Indian Farmers Fertiliser Cooperative Ltd (Iffco).

With an increase in domestic production and adequate availability of pipeline stock, imports of DAP are likely to be lower than last year. "The industry has been pleading with the government to provide custom duty concession on import of raw material from current 5 per cent to zero, to promote domestic production," said Kapoor.

India imports phosphoric acid, sulphur and ammonia as the major fertiliser ingredients for manufacturing and DAP and Muriate of Potash (MOP) fertilisers for trading. According to data from the Department of Fertilisers and Edelweiss Securities, the volume of traded non-urea fertilisers dropped 41.3 per cent from a year earlier to 1.31 million tonnes in the first quarter of this fiscal year.

Companies like Coromandel International, Iffco, Zuari, Paradeep Phosphates and Chambal fertilizers have reduced their exposure to traded non-urea fertilisers. K Ravichandran, senior vice-president at ratings firm ICRA, said: "With the fall in international prices of raw materials since June last year, companies are focussing more on manufacturing and are witnessing a profit margin of around Rs 2,500 per tonne in non-urea fertilisers which stands at around Rs 500 in case of trading of a non-urea fertilisers which stands at around Rs 500 in case of trading of a non-urea fertiliser."

The companies that are involved in the trade of non-urea fertilisers like DAP and MOP used to import more than the quantity set under their import deals with foreign manufacturers, said industry sources.

But with the fall in raw material prices, which made local manufacturing more cost effective, that volume of surplus import has gone down, they said.

Meanwhile, the recent government decision to reduce NPK subsidies by 25-30 per cent and lower maximum retail prices has reduced the benefits that the producers were eyeing, said experts. But an expected high consumption on the back of a good monsoon will maintain good profits for the companies, they said.

Source : economictimes.indiatimes.com