Oil price drop to buoy fertiliser, aviation sectors

Energy guzzling fertiliser companies and aviation sector can heave a sigh of relief as the crude oil prices are heading south after a steep rise due to hurricane.

The fertiliser companies may have the benefit of price fall as they use over 25 per cent naphtha as feedstock. Natural gas is used as the major fuel.

Urea prices are regulated by the government and fixed compensation is given based on the use of feedstock. Government had to bear the burden of subsidy to help farmers. Hence industry sources feel that the fall in crude oil prices will help both fertiliser firms and the government.

"Two years ago the crude price was below $40 a barrel, thus the subsidy per cent was low. But when the crude price went up the government had taken extra burden for agricultural sector. Now, the price has fallen by $10 a barrel from $70. A whole host of industries will benefit from lower prices," said fertiliser company official.

"India is producing over 200 lakh tonne urea every year in addition to Diammonium Phosphate (DAP).

About 15 major companies are producing fertiliser in the country," he added. According to the The Fertiliser Association of India (FAI), the demand in the kharif season was high and some areas suffered the shortage.

Meawhile, public sector oil companies have cut aviation turbine fuel (ATF) prices by 1.85 per cent following the price fall. But, the airline operators are in no mood to lower the airfares as they had to bear the burden of high ATF price when crude prices were high.

We have not even imposed fuel surcharge when the ATF prices shot up. Therefore, no plan to lower the fare at this point," said a senior Air Deccan executive.

According to sources, the ATF price fall may help the country carriers reduce their operating cost by one per cent.