DoF goes for strategic buying to hedge prices

In an effort to bring down the country?s ballooning fertiliser subsidy bill, the department of fertilisers (DoF) has decided to do strategic buying instead of panic buying in the international market.

?We have smashed a fertiliser cartel by using our powers as the largest buyers to our advantage following this urea subsidy level will be substantially curtailed,? Atul Chaturvedi, fertilisers secretary told FE

The move is expected to bring the prices of urea and di-ammonia phosphate by almost 50% and the government will save almost Rs 20,000 crore this fiscal.

?The plan has started showing results. The prices of urea and DAP, which ruled at $860 and $1,297, respectively, sulphar ($860) and MoP ($1,920) a tonne earlier, have come down to $630, $1,020, $375 and $1,205, respectively, within a month,? Chaturvedi said. Prices are further expected to come down next year.

In another development, the revival of Barauni plant is with the techno-feasibility study almost over. Report by Project Development Ltd (PDIL), the consultant for the project, is expected to be submitted next month. Urea subsidy could be easily brought down from the present level of Rs 32,000 core to Rs 20,000 crore.

In another reform measure for the sector, the government has set up a joint venture company, Urvarak Videsh with equity from Rashtriya Chemicals & Fertilisers (RCF), National Fertilisers Ltd (NFL) and Kribhco. The special purpose vehicle will work as a channelising agency for import of phosphatic fertilisers.

The JV will explore possibilities to sew up joint venture with resource rich countries such as Tunisia, Lebanon, Mozambique and Egypt. The basis of agreement will be on long term offtake arrangement, say 15 years.

The exercise expected to save another Rs 800 crore annually and reduce reliance on costly imports. The country imports 92% of its DAP requirement and depends entirely on imports of potash that constitutes a major portion of subsidy bill, which is pegged at Rs 1,25,000 crore for the current fiscal.

Of this, about 99,000 crore goes to DAP and MoP imports and manufactures. Urea subsidy stands at Rs 32,000 crore. This years, the country needs to import about 7 million tonne urea at $4.2 billion.