Aim to maintain urea volume at 40 lk tn for FY16: GSFC

A: The last quarter revenue may be looking a little thinner but the overall prospective compared to last financial year is that perhaps the total profit before tax (PBT) has gone up by Rs 58 crore and the reason why we had this less a revenue in the last quarter was basically because of the multiple factors like the higher prices of production due to gas prices going up, which lead to the methanol plant shutting down which further reduced our spread in the Capro-benzene sectors because of the falling prices.

So, basically the unit cost of the total sales went down to record a financial downturn in terms of revenue but in terms of the total quantity handled and total volume we have done reasonably well.

The way forward looks very positive, the reason is that we are having a uniform gas price for our operations. So, the cost for products which are interrelated would be reduced and now we are also seeing rising in the methanol price and whatever has stopped so far, we are contemplating the starting of the methanol plant from this month end, for the supply purposes.

There is also a new development which was initiated by us and which the government of India has accepted in that is we have shifted and switched over to 100 percent neem coated urea. So this will automatically help in stopping the diversion of the urea for the chemical and the industrial use which should also bring our higher margin because the MRP of the NCU is higher by 12 percent. The more we produce the urea – neem we will be getting more margins.

Mangalam: Two questions both related to volumes, the first one is that you said that ex-urea you are looking at a volume growth of about 30 percent how will the company go ahead and do this. Is there a risk of unseasonal rains? Secondly how will the volumes for complex fertilisers look in the next year?

A: Both the scenarios will be positive the reason is this, when we are talking in terms of urea we are not talking in terms of urea alone but a combo urea, Di-Ammoniam Phosphate (DAP)/ NPK. In spite of the fact that we are having the unseasonal rains there are unmet pockets in India which will be met by us because the railway restrictions have been removed of 1,400 km and a lump sum rate will be charged to us and this will help us in reaching out to the areas. We would be able to supply because our brand is accepted and highly popular one.

Second, with the other companies fertiliser we are adding to the storage capacity of our Sikka plant by getting more of ammonium and more phosphoric acid. It is because of this gulf racket which reduced our operations, as the prices were kept quite high and therefore we had to shut down our DAP production.

Mangalam: So what was your volume growth for complex fertilizer in FY15 ex-urea?

A: More or less same.

Mangalam: That would be?

A: That would be around 40 lakh tonne.

Reema: You indicated that the spreads had come down in this quarter. What would the spreads stand at and how do you see them moving in the coming quarter?

A: The coming quarter would be definitely better because I told you the gas price has almost been stabilised because earlier there was an uncertain gas price.Mangalam: Ammonia sulphate subsidy is accumulated on your books at about Rs 650 crore and the government has stopped recognising this subsidy as a product or on this product but you still continue to manufacture that, any rationale for that?

A: The point is this Ammonia sulphate issue has not been dealt with properly. This issue does not exist. What has happened is that the ammonia sulphate we had produced , was given to farmers at an MRP. Because this plant is an integrated plant which uses for ammonia sulphate, urea and other products there were some problems regarding as to how the gas could be used and what should be charged.

So, the old things which we have already done, whatever subsidies we are liable for, that should be paid off. We have taken up this matter to the court also. It is pending revenue which some day or the other will be cleared. It is nothing to do with operations from now onwards, ammonia sulphate is out of the bag.

Reema: Yes, for the company. The spreads that you are enjoying?

A: The gas price earlier was quite high but now would be at the rate of 5.1 for MMBTU.

Reema: That is the gas price, but I was asking about the spreads, GSFC enjoyed in January to March quarter? You said they were under pressure?

A: Yes, that is because of the industrial chemical revenue which went down because of the fact that we reduced from 2285 to 2036, so it was nearly a 200. That is the fact because of which we could not get sales with good margin, which otherwise we could have earned. Also, there was jacking as the prices were jacked up.