The nutrient-based fertiliser subsidy (NBS) policy, that kicks in from April 1 for non-urea fertilisers, is going to be the first step to liberalising the sector, which hasn’t seen any new investment for more than a decade. The NBS is also going to help address food security concerns, says Ajay Shriram, chairman, DCM Shriram Consolidated Ltd (DSCL) and current president of the International Fertilizer Industry Association, in an interaction with Nayanima Basu. Edited excerpts:
How are you preparing yourself for implementation of the new nutrient-based subsidy policy announced by the government recently? How do you see the policy pan out in future?
The subsidy scheme was implemented in the mid-70s, when the government’s objective was to provide it to farmers at a reasonable rate, linked to the value of his output. At the same time, it was envisaged that the fertiliser manufacturing industry would be kept viable. But, over the past 25 years, as input costs in manufacturing went up, there has not been a corresponding increase in the selling prices of fertilisers. In the past three-four years, the procurement prices of rice and wheat have jumped up from Rs 500-600 to Rs 1,100 currently. But, the corresponding prices of fertiliser has not gone up. There should be some link between procurement price and fertiliser price.
This year the demand for fertilisers is expected to go up to 27-28 million tonnes and production is estimated to be 21 mt. The gap would be met by imports. We are importing almost 40 per cent of our production capacity, which is abnormally high. And cost of imports varies with international prices, which has a bearing on the subsidy bill. At a macro level the game is basically played by three players, the farmer who wants fertilisers at a reduced rate, the government who wants to give it below the cost of production but wants a viable industry and the third is the industry. The fertiliser industry has also not attracted any investment in the past 12-13 years because it is not a viable one.
The new policy would bring in a change by providing direction to all stakeholders. As an industry, we have agreed that prices would not go up beyond more than five per cent in the kharif season. The scheme has to be practical, taking into account the international costs of fertilisers.
The government has made it clear that the fertiliser subsidy payout will be in the form of cash, instead of bonds. Is this likely to benefit the industry?
This is going to be a very positive move for all companies. The rest depends on how the policy curves out. Bonds or no bonds, industry should be reimbursed properly, without any outstanding (amount).
Now that government has finally notified the subsidy amount on each nutrient, how is this going to impact you and the industry at large? Is it going to be revised again during the rabi season?
We will be able to leverage the new policy and would look at entering the DAP and MOP segments. It is a welcome step of deregulation and this will bring transparency, where the international contracts will be better negotiated, keeping in view the nutrient prices fixed by the government on the basis of the subsidy rates. It will also help in stabilising the import prices.
It is also good for farmers, as they will know the cost of each nutrient, based on the soil and the crop. As the NBS Policy will be valid for one year, it will remove the uncertainty for the rabi season.
The government is also looking at creating a new urea policy. How will that help, in the background of the NBS policy?
Discussion is on between industry and government on the price parity of each nutrient. This might not decrease our dependence on large-scale urea imports because that depends on production capacity in the country. So, the new urea policy should help in production capacity expansion and with India now having natural gas availability, more and more urea plants are expected to come up. The NBS scheme, if implemented in a rational way, would also enhance urea capacity.
Will the government be a watchdog through the inter-ministerial committee?
The government is concerned about prices, so they will keep track and intervene if they feel it is going out of line. But, that has to be rational and systematic.
What are your expansion plans for the future?
We are waiting for the new policy to come in and we are not looking at any expansion currently. Our total turnover is Rs 3,500 crore and we plan to strengthen our commodity business, as well as value-added and knowledge-based products & services. Hariyali Kisaan Bazaar, Bioseed and Fenesta are some of our knowledge-based businesses. These leverage the existing base within the business models, enabling them to reach end-consumers. The company is now in the process of scaling up these operations and believes these businesses could be its growth drivers in future.
What steps are you taking to educate the farmers on the new policy?
Farmers have to be educated on the fact that fertiliser should be applied based on the need of the soil rather than on the prices of fertilisers. Agricultural land is coming down, so we have to get more and more productivity from whatever is available. To educate farmers on technology and productivity, by providing proper inputs at the right price and quality is going to be quite a challenge. We are extensively involved in this process, by tying up with international agronomists who will come and teach farmers on how processes have to be followed and several other technicalities. This policy would help in providing a direction for balanced nutrition. We all have to see that it works.
