DBT, gas price fall to reduce subsidy burden: NFL

The reduction in natural gas prices and announcement of direct benefit tax (DBT) in the Union Budget will reduce the subsidy burden on fertilizers, says Manoj Mishra, CMD of NFL.

Speaking to CNBC-TV18, he said that production capacity beyond 100 percent will also be viable due to lower gas prices.National Fertilizers is engaged in the production and marketing of urea and fall in Ammonia (major component in urea) prices will boost the company’s prospects.

The company clocked subdued revenue gains but saw strong operational improvement in the third quarter of FY16.Below is the verbatim transcript of Manoj Mishra's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18. Latha: Can you tell us the impact of lower gas prices on your operations? A: With the lower prices the production beyond 100 percent capacity will also be viable for almost all the units. Latha: What do you expect is going to be your output in Q1? A: Instead of seeing Q1, let me take the annual figures first. For 2015-2016, India also produced the ever best production. Beyond that because of gas pooling impact and the policy which is beyond 100 percent, it should be viable. Now, the threat was that because of ruling low international price of urea, whether it will be viable on the previous gas price which was ruling in 2015-2016, now they said that the gas prices have come down. So production is beyond 100 percent which is going to affect the last quarter. The first three quarters won\\'t be affecting much. Last quarter will remain viable. Sonia: Can you tell us about your own profitability for the nine months ended FY16, you did clock in profits of almost Rs 166 crore, which is a very good jump, what is the expectation for the full year and for FY17 since things have improved, how much do you think your profits could rise? A: Full year definitely we will be better than the first nine months. But the last quarter, normal revenue which we earned up to 100 percent is difficult to maintain because it depends on the international prices for the production beyond 100 percent. Average for us was almost 2 lakh tonne. Latha: Would you not have some working capital efficiency, therefore better margins? A: Definitely. Latha: Can you give us an idea what maybe the revenue growth, what maybe the margins? A: I will see from the working capital point of view because this single reduction should reduce the subsidy burden by almost Rs 3,000 crore. So that coupled with earlier international price, which is ruling low. So, the Budget provision of Rs 70,000 crore for the entire year. Earlier we used to run out of the Budget for the month of August itself. Probably, it will grow to one and a half months to two months more. So that way all companies -- the subsidy areas will come down in all companies.