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Mr A. Vellayan (right), Chairman, FICCI (Southern Region), and Vice-Chairman, E.I.D. Parry (India ) Ltd, addressing a press conference in Chennai on Wednesday along with Mr R.S. Nanda (centre), President and Managing Director, Coromandel Fertilisers, and Mr V. Ravichandran, Vice-President, Farm Inputs, E.I.D. Parry.

CHENNAI, June 11

MANUFACTURERS of phosphatic fertilisers in the country are facing a crisis because of the unviable tariff fixed by the Government, industry captains said on Wednesday.

Ever since the revised norms for subsidy-fixation came into effect in January, phosphatic fertiliser units have been bleeding. This is mainly because the cost of one of the major raw materials, viz sulphur, has not been recognised as an input cost at all in fixing the norms, they say.

Also, the profit margin has been fixed "wafer thin", and hence the companies are unable to "recover" the cost out of the profits, said Mr A. Vellayan, Vice-Chairman, EID Parry, and Chairman-Southern Region, Federation of Indian Chambers of Commerce and Industry.

He said the margins had been fixed in such a way that the units would get only between Rs 100 and 120 per tonne. On the other hand, sulphuric acid costs around Rs 800 per tonne.

Clearly, the cost of the raw material cannot be recovered from the margins.

"All the units are cash negative," Mr Vellayan said, pointing out that all the units needed capital expenditure of at least Rs 10 crore per year on modernisation.

He pointed out that all the phosphatic fertiliser units across the country were making loss, "so there is no question of inefficiency here".

He observed that if the situation continued, the units would have to close down and India would have to "permanently depend upon imports".

Answering a question, Mr Vellayan said the Government was doing this in order to bring the subsidy bill down.

"There is a wrong notion that the industry is getting the subsidy. The fact is that it is the farmers who get the subsidy, we are only the mechanism of passing on the subsidy to them," he said.

Shortage emerging

The President and Managing Director of Coromandel Fertilisers, Mr R.S. Nanda, observed that come monsoon, the existing stocks of fertilisers with the manufacturers would be consumed by June-end and there would be a severe shortage of phosphatic nutrients in the country.

India then would have no option but to import. The country's total requirement of phosphatic fertilisers is of the order of 8-9 million tonnes and if India entered the international market to buy even only 2-3 million, the prices would go up tremendously.

Mr Vellayan said for the current season, the crisis could not be averted. But for the long term, the Government would have to decide whether India should manufacture the key agricultural input or depend entirely on imports, he said.

Asked why then, some companies were still interested in buying other fertiliser units (Godavari Fertilisers and Madras Fertilisers have attracted bidders), Mr Vellayan said the industry believed that some of the less-loss making units had a better chance of survival than others. (Companies like FACT and Oswal have reported loss of around Rs 200 crore.)

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