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Government plans to absorb the burden of rise in global fertiliser prices
• Under the Nutrient-Based Subsidy (NBS) policy for non-urea fertilisers, the
benchmark prices at which the government reimburses subsidy to fertiliser
companies were fixed at USD 450 per MT for DAP, USD 280 per MT for urea
and USD 350 per MT MOP for FY12 (in FY11, USD 500 per MT for DAP, USD
310 per MT for urea and USD 370 per MT of MOP).
• Government has reduced this NBS subsidy on account of its estimate that the
global prices of fertilisers and raw materials will reduce and also to put some
pressure on global prices
• Nevertheless, global prices of finished fertilisers and the raw materials
continue to be strong, with the price of DAP in the global market currently at
~USD 630 per MT and MOP at USD 400-420 per MT
• Against this background, if the subsidy is not revised upwards, fertiliser
companies need to sharply hike farm gate prices
• To avoid this (more so in the background of high food inflation), government
has decided to increase the subsidy to absorb the burden of high global prices.
• We await more clarity with regards to the quantum of the subsidy increase
which the government would be taking on these fertilisers under NBS
• This is expected to be positive for the fertiliser sector, especially for the
complex fertiliser manufacturers like Coromandel International, Zuari
Industries, GSFC
• We currently have a ‘BUY’ recommendation on Coromandel International and
Zuari Industries, and ‘HOLD’ on Chambal Fertilisers.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Government plans to absorb the burden of rise in global fertiliser prices
• Under the Nutrient-Based Subsidy (NBS) policy for non-urea fertilisers, the
benchmark prices at which the government reimburses subsidy to fertiliser
companies were fixed at USD 450 per MT for DAP, USD 280 per MT for urea
and USD 350 per MT MOP for FY12 (in FY11, USD 500 per MT for DAP, USD
310 per MT for urea and USD 370 per MT of MOP).
• Government has reduced this NBS subsidy on account of its estimate that the
global prices of fertilisers and raw materials will reduce and also to put some
pressure on global prices
• Nevertheless, global prices of finished fertilisers and the raw materials
continue to be strong, with the price of DAP in the global market currently at
~USD 630 per MT and MOP at USD 400-420 per MT
• Against this background, if the subsidy is not revised upwards, fertiliser
companies need to sharply hike farm gate prices
• To avoid this (more so in the background of high food inflation), government
has decided to increase the subsidy to absorb the burden of high global prices.
• We await more clarity with regards to the quantum of the subsidy increase
which the government would be taking on these fertilisers under NBS
• This is expected to be positive for the fertiliser sector, especially for the
complex fertiliser manufacturers like Coromandel International, Zuari
Industries, GSFC
• We currently have a ‘BUY’ recommendation on Coromandel International and
Zuari Industries, and ‘HOLD’ on Chambal Fertilisers.
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