The implementation of the nutrient-based subsidy policy (NBS), announced last week by the Centre, will increase the volatility in the profitability of fertisiler firms. Under the new regime, more efficient players will be better placed to mitigate the impact of higher volatility, as they will be better able to control their production costs, said Crisil Ratings.
In the complex fertilisers segment, the linkage of subsidy with import parity prices since April 2008 had already exposed the producers to volatility in international prices of fertilisers and raw materials.
According to Pawan Agrawal, director, Crisil Ratings, ?The NBS policy will mean that as the subsidy component becomes fixed in nature, changes in raw material prices will impact the profitability of players in the complex fertilisers segment more than before.? The retail prices of complex fertilisers will be decided by the players.