According to sources, the Ministry of Fertilizer is considering a proposal to increase the minimum fixed cost of urea. Discussions have taken place between the Ministry of Industry and the Department of Fertilizers on this subject.
The fertilizer industry should get some relief as soon as the government considers raising the fixed cost of urea, sources told CNBC Awaaz. According to the sources, the MRP for P&K Fertilizer could be restored. The Fertilizer 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 fertilizer sector on three fronts. This includes increasing the fixed cost of urea and restoring the MRP for P&K fertilizer.
According to sources, the Ministry of Chemicals and Fertilizers is studying a proposal to increase the minimum fixed cost of urea. Ddiscussions have taken place between the fertilizer industry and the Ministry of Chemicals and Fertilizers on this subject.
Besides the raw material in the production of urea, fixed costs such as plant machinery and salary are assessed periodically by the government. Determine the exact difference between the cost of production and the selling price of urea and grant subsidies to enterprises accordingly.
However, the government has not changed the fixed cost since 2002-2003. In this case, the price of a 50 kg bag of urea is set at Rs 268.
However, it increased slightly during NPS-III in 2014. The Fertilizer Association of India claims that urea production is becoming difficult due to a lack of fixed cost increases. Fertilizer Association of India President KS Raju recommends increasing fixed costs by 12% of profit after tax (PAT) every year.
In addition, the Fertilizer Association of India has lobbied for the return of P&K Fertilizer’s market-based MRP system. In addition, it was necessary to eliminate indirect taxes when fixing the MRP of the P&K Fertilizer units.
“The government is considering these proposals. And a decision on this front is expected to be taken soon,” according to the Fertilizer Association of India.
The fertilizer industry also receives aid from the international front in addition to government aid. International prices for natural gas and fertilizer feedstocks, which had risen sharply before, are now showing a decline.
According to Dr. PS Gehlot of Indian Potash Limited, this could lead to a decrease in the need for fertilizer subsidies by around 25 percent in the next fiscal year.
For the long term, however, the fertilizer industry has drawn up a roadmap until 2030. This plan calls for 50% of the energy needed by the industry to come from renewable sources. On 8 and 9 December, a seminar will also be organized on this theme.
Shares of major fertilizer companies are trading in the red. Chambal Fertilizers and Chemicals is down 0.6%, Deepak Fertilizers and Petrochemicals Corporation is down 0.1%, Gujarat State Fertilizers & Chemicals is down 1.5% and Coromandel International is down 1.8 % from previous close on BSE.