Fertiliser firms rally on hope of GST rate cut on raw materials

Madras Fe­rtilizers, Nati­o­nal Fertilizer, ot­her fertiliser makers on Wednesday gained 1 to 5 per cent on hopes over the government’s plan to cut duties on some fertiliser inputs. India fertilizers ministry is likely to seek a cut in goods and services tax (GST) on ammonia and phosphoric acid from the current 18 per cent.

The fertiliser industry has demanded reduction of tax on ammonia and phosphoric acid after GST on one of the fertiliser raw materials Sulphur was reduced to 5 per cent from 18 per cent.

Ananth Kumar, Union fertiliser minister, said ferti­liser subsidy arrear reduced to Rs 230 billion and more funds may be sought from the finance ministry to clear the backlog completely.

The backlog of subsidy, which was Rs 440 billion in 2014, has been reduced to Rs 230 billion.

The direct benefit transfer (DBT) for fertiliser subsidy, which is being implemented in some states, will be rolled out across the co­untry from April 1, Kumar added. In the pre-GST reg­ime, fertilisers attracted 4-8 per cent indirect tax depe­nding on the raw materials used and the states in which the products were sold.

The concerns mainly revolve around the urea fertiliser industry, where both prices and production cap­acities are regulated by the government. With losses be­ing incurred by urea plants, the government is co­nsidering revision of fixed cost of urea and giving amnesty to meet the energy norm.

The fixed cost of urea has not been revised for last 15 years, due to which the companies have been incurring losses. The last revision was done way back in 2002.

Also, urea plants have to meet the energy norms fr­om April on­wards and as a result so­me plants are shut to undertake energy efficiency exercise. This has been affecting the urea production. India produces 24 million tons of urea and imports 6-7 million tons to meet the gap.

Urea is highly subsidised at Rs 5,360 per tonne, while its production cost is Rs 16,000 per tonne. The difference is paid to manufacturers as subsidy. Non-urea fertilisers like potash are largely imported. “The industry needs to be decontrolled so as to unleash its full potential. In the immediate term, urea policy needs to assure that urea units are able to recover their full cost of production, not incurring losses,” the Fertiliser Association of India (FAI) said in a statement earlier.

The Indian fertiliser industry, despite its woes, is one of the most efficient in the world. Thus resolving such input cost issues would be seen benefitting the companies in near term. At close Madras Fertilizers jumped 4.25 per cent to Rs 42.90, National Fertilizer rose 0.66 per cent to Rs 61.30 while Fertilizers & Chemicals Travancore jumped 4.90 per cent to Rs 42.80 on the National Stock Exchange.

— TickerNews Service