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In an attempt to ward off further inflationary impact on
already high food prices and to cushion the farmers from
the impact of high global raw material prices, the group
of ministers (GoM), in a meeting held on February 15,
2011 headed by the finance minister, has decided to hike
the quantum of subsidy under the Nutrient Based Subsidy
(NBS) scheme payable to fertiliser manufacturing
companies.
Effective April 2011, the subsidy prices of Nitrogen (N),
Phosphorus (P) & Potassium (K)—NPK nutrients—Diammonium
Phosphate (DAP), Muriate of Potash (MOP),
Sulphur and Urea have been revised (see table below).
However, the farm gate prices, (ie the prices at which
fertilisers are made available to the farmers), would
remain at the existing levels since the government would
absorb the burden of the rise in global prices by way of
subsidising.
Revised subsidy rates
NPK Nutrients Revised (FY2011-12) Old (FY2010-11)
DAP $ 580 / ton $ 500 / ton
MOP $ 390 / ton $ 370 / ton
Urea $ 350 / ton $ 310 / ton
Sulphur $ 180 / ton $ 120 / ton
The GoM meeting was held to review the fertiliser prices
in the wake of the worldwide spike in raw material costs
for fertiliser manufacturing companies and to maintain
fertiliser prices at affordable levels for the farmers. The
price of DAP in the global market is around $630 per tonne
and MOP at $400-420 per tonne, but the benchmark prices
at which the government reimburses the subsidy to the
fertiliser companies are $500 and $370 a tonne,
respectively.
The fertiliser subsidy for 2009-10 stood at Rs64,000 crore
as against the budgeted allocation of Rs49,981 crore. For
the current financial year, the budgeted fertiliser subsidy
was slated at Rs53,000 crore. It remains to be seen what
quantum of subsidy burden the government would have
to bear in the light of this latest development.
Besides, the government has also constituted a task force
under UIDAI chairman – Mr Nandan Nilekani in order to
evolve a suitable mechanism for direct payment of subsidy
on kerosene, LPG and fertilisers to individuals who are
entitled to them.
Background
In November 2010, the government of India (GoI) had
announced an ~20% reduction in subsidies of complex
fertilisers under the NBS with effect from April 2011, in
anticipation of lowering raw material prices from global
suppliers and with a view towards complete decontrol of
the fertiliser sector in India and bringing down its subsidy
burden.
This would have meant that the fertiliser companies would
be required to negotiate raw material prices with their
global suppliers or increase farm gate prices to the farmers
(which would have inflated food prices further), failing
which their profitability would be adversely impacted.
Impact
Against this background, the GoM’s move to review the
subsidy prices for NPK nutrients in light of the higher
prevailing raw material prices in the global markets,
complex fertiliser manufacturing companies like
Coromandel International, GSFC, Tata Chemicals and Zuari
Industries would be able to maintain their profitability
for the coming financial year.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
In an attempt to ward off further inflationary impact on
already high food prices and to cushion the farmers from
the impact of high global raw material prices, the group
of ministers (GoM), in a meeting held on February 15,
2011 headed by the finance minister, has decided to hike
the quantum of subsidy under the Nutrient Based Subsidy
(NBS) scheme payable to fertiliser manufacturing
companies.
Effective April 2011, the subsidy prices of Nitrogen (N),
Phosphorus (P) & Potassium (K)—NPK nutrients—Diammonium
Phosphate (DAP), Muriate of Potash (MOP),
Sulphur and Urea have been revised (see table below).
However, the farm gate prices, (ie the prices at which
fertilisers are made available to the farmers), would
remain at the existing levels since the government would
absorb the burden of the rise in global prices by way of
subsidising.
Revised subsidy rates
NPK Nutrients Revised (FY2011-12) Old (FY2010-11)
DAP $ 580 / ton $ 500 / ton
MOP $ 390 / ton $ 370 / ton
Urea $ 350 / ton $ 310 / ton
Sulphur $ 180 / ton $ 120 / ton
The GoM meeting was held to review the fertiliser prices
in the wake of the worldwide spike in raw material costs
for fertiliser manufacturing companies and to maintain
fertiliser prices at affordable levels for the farmers. The
price of DAP in the global market is around $630 per tonne
and MOP at $400-420 per tonne, but the benchmark prices
at which the government reimburses the subsidy to the
fertiliser companies are $500 and $370 a tonne,
respectively.
The fertiliser subsidy for 2009-10 stood at Rs64,000 crore
as against the budgeted allocation of Rs49,981 crore. For
the current financial year, the budgeted fertiliser subsidy
was slated at Rs53,000 crore. It remains to be seen what
quantum of subsidy burden the government would have
to bear in the light of this latest development.
Besides, the government has also constituted a task force
under UIDAI chairman – Mr Nandan Nilekani in order to
evolve a suitable mechanism for direct payment of subsidy
on kerosene, LPG and fertilisers to individuals who are
entitled to them.
Background
In November 2010, the government of India (GoI) had
announced an ~20% reduction in subsidies of complex
fertilisers under the NBS with effect from April 2011, in
anticipation of lowering raw material prices from global
suppliers and with a view towards complete decontrol of
the fertiliser sector in India and bringing down its subsidy
burden.
This would have meant that the fertiliser companies would
be required to negotiate raw material prices with their
global suppliers or increase farm gate prices to the farmers
(which would have inflated food prices further), failing
which their profitability would be adversely impacted.
Impact
Against this background, the GoM’s move to review the
subsidy prices for NPK nutrients in light of the higher
prevailing raw material prices in the global markets,
complex fertiliser manufacturing companies like
Coromandel International, GSFC, Tata Chemicals and Zuari
Industries would be able to maintain their profitability
for the coming financial year.
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