WEB EXCLUSIVE: Budget impact on fertiliser sector

Proposals benefit the entire sector, especially urea, phosphatic fertilisers as well as complex fertilizer manufacturers.
 
A year ago, a shift from product-based subsidy regime to nutrient-based subsidy (NBS) scheme to promote balanced use of all fertilisers was implemented from April 1, 2010. Most fertilisers, except urea, came out of the maximum retail price (MRP) regime. However, urea-based fertiliser continued to be under the control though the MRP for urea were increased from Rs 4830 a tonne to Rs 5310 a tonne w.ef. April 1, 2010.
 
The Finance Minister, while presenting the Union Budget on Monday 28th February 2011, has indicated towards considering a new fertiliser policy where the government will be mulling nutrient-based fertilizer policy for urea. This is a positive step and will be a step forward towards de-control of urea, analysts say. However, they add that though it is good that government is considering such a proposal, there is no timeline indicated for implementation of the same. Also there is no clarity on the mechanism of the new policy and finer details are unknown for now.
 
Another proposal made by the finance minister during his speech referred towards a cash subsidy for urea and kerosene. Analysts reckon that this though is conceptually a good idea; however, they remain apprehensive as to how the cash will reach the farmers looking at the deficiencies in the channels and rampant corruption. “I am not too enthused by the scheme / proposal,” said Segraj Bariya, analyst, Angel Broking.
 
A major positive though is seen with government proposing to treat capital investments into fertiliser sector as investment in infrastructure. This would be beneficial as will drive new players and capacities into the fertiliser space. Besides the taxation benefits as enjoyed by the infrastructure sector, bank funding for the fertiliser sector is expected to ease out as sector will be treated as a priority sector. Benefits on lower interest rates too may be seen, add analysts.
 
The announcements thus will beneficial for the entire sector and all players manufacturing urea, phosphatic fertilizers or complex fertilisers.