Need urea price hike; industry awaits policy: Coromandel

Kapil Mehan, MD of Coromandel International said complex fertiliser sales have been reasonable this season due to the decent rains in August-September. He further added that sales have been stable this quarter.

There is also a lot of discussion about a possible urea price hike and urea investment policy. Mehan informed that the government is actively considering policy action for the sector. He is also in favour of urea price hike because he feels there is a huge disparity in prices of other nutrients compared to nitrogen. Eventually, this will lead to a huge imbalance in use of fertilisers and the efficiency of urea fertiliser will also go down, explained Mehan. Also read: RCF sees 10% hike in urea prices; subsidies to reduce Here is the edited transcript of the interview on CNBC-TV18. Q: Before we get to Coromandel how is Hyderabad today?
A: I travelled in the morning, it was okay. I didn’t face any problem during the day but I understand there is some crowd in the central part of the city. Q: Now to an equally somber mood in the fertiliser space, how were sales in Q1 now that you will know how it was till September 30 considering the quality of the monsoon, its distribution. What was the impact on the complex fertilisers?
A: We are yet to get our final numbers but, I think our complex fertiliser sales have been reasonable because the monsoon had picked up in the months of August and September and sowing of oil seeds etc had also taken place due to good moisture availability. I think it got somewhat preponed and both these months have been good. Q: So any numbers, both realisations since you had a price hike and volume?
A: For numbers I think we will wait for our board meeting to happen and then only we will be able to share that. But, there have been no major hiccups on that account. Q: I am just going to shift focus with regards to the fertiliser industry. A lot is being spoken about a possible urea price hike by 10% and in terms of progress on the new urea investment policy as well. As an industry representative or a part of a very influential company, can you give us an update with regards to what is happening on the urea investment front or policy front rather?
A: I think we also hear that government is actively considering approving the policy for investment in urea sector because that is something which has been pending since 2008. I think it's required and that's the only nutrient which the country can manufacture with its own raw material base.
But, unfortunately I think the linkage of gas for these projects is an issue. An investment policy linking gas price with floor and ceiling has been proposed as a price. However, that also is not yet notified so I think industry is looking forward to such notification at the earliest.
_PAGEBREAK_ Q: What about the likelihood of passing through a 10% hike in urea prices. Do you think that's possible and something that the government would undertake and any sort of estimates in terms of how much the FY13 subsidy bill could be?
A: I think urea price adjustment is definitely a necessity; it's an imperative today given that there is a huge disparity in prices of other nutrients vis-à-vis nitrogen. At the end of the day, it will cause a huge imbalance in use of fertilisers and even the efficiency of urea fertiliser use will go down.
I think it's high time that the government takes this decision of either increasing the price of urea substantially or putting it under nutrient based subsidy so that the market forces can takeover and the government also gets a better handle on its subsidy outgo.
I think it's the right thing to do because there is so much of price imbalance between nutrients P&K (phosphorous and potassium) and nitrogen (N) that there will be tendency to use less of P&K and more of N, which I think is not good for the crops and productivity. Q: Did you hear from the ministry?
A: Our discussions with the ministry are always on the positive side and at end of the day, it’s a decision which the government has to take. I don’t think it’s with the department of fertilisers alone. Q: Can you update us on your own expansions both at Kakinada as well as that Tunisian project?
A: Kakinada project is now nearing completion. We are preparing for starting the commissioning trial in the next 4-6 weeks and I think both the plants will start simultaneously around end of October, early November. Q: Any more price hikes that you'd require in the complex fertiliser segment?
A: Not at the moment.