Fertilisers : NIP 2012 structurally positive ::ShareKhan (PDF link)

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Fertilisers      NIP 2012 structurally positive New Investment Policy 2012; structurally positive but gas-linked subsidy cap causes uncertainty: The empowered group of ministers (EGoM) has finally given an in-principle nod to the New Investment Policy (NIP) for urea manufacturers in order to attract new investments in the segment. Currently, India produces around 22 million tonne of urea as compared to the domestic consumption of 28-29 million tonne. The remaining gap is bridged by importing urea at a high cost. Thus, any move to attract fresh investments in urea capacity expansion (greenfield and brownfield both) will be structurally positive for the sector and the major fertiliser players looking to expand, eg Rashtriya Chemicals and Fertilizers (RCF), Tata Chemicals, Zuari Industries and Chambal Fertilisers and Chemicals. However, the proposal to link the subsidy in urea with the gas price within a band of $6.5-14 per mmbtu has caused some uncertainty and the domestic players have requested the government to increase the gas price limit to $20 per mmbtu. The policy will have to be cleared by the Cabinet Committee on Economic Affairs (CCEA) before it can be implemented.

 

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