Fertiliser stocks rally on urea policy, FACT up 17%

Fertiliser shares rallied on Friday after the government approved a new policy to encourage investment in urea manufacturing, in a move seen expediting USD 6.5 billion in projects that have been held back.

The Cabinet Committee on Economic Affairs (CCEA) yesterday approved a urea investment policy that is likely to incentivise fertiliser firms setting up new plants and expanding existing capacity. India imports over 30 per cent of urea requirement and the policy aims at reducing that. But, it is unlikely to have any impact on existing prices. Under the new policy, the government will give 12-20 per cent post-tax return on fresh capital infused by manufacturers for setting up of new plants as well as for expansion and the revamp of the existing ones. To ensure this return, the government would cover the entire cost of the natural gas, which is main feedstock of urea and accounts 80 per cent of the cost. The country produces 22 million tonnes of urea, against the requirement of 32 million tonnes. Meanwhile, National Fertilizers, Rashtriya Chemicals & Fertilizers, Chambal Fertilisers and GNFC gained 2-4 percent. Deepak Fertiliser, Mangalore Chemical and Zuari Agro were up over 1.5 percent. FACT shot up more than 15 percent as Cabinet gave the company time till June 2013 to shift from liquid fuel to gas based plants. (With inputs from Reuters)