Complex Fertilisers get a let-up from nutrient based subsidy

The Hindu Business Line - December 19, 2010
Harish Damodaran

New Delhi, Dec. 19
The institution of a nutrient-based subsidy (NBS) regime from April 1 has given a huge boost to consumption of complex fertilisers.
During April-November, fertiliser firms have sold 7.07 million tonnes (mt) of complexes, containing varying proportions of nitrogen (N), phosphorous (P), potash (K) and sulphur (S). This represents a one-third jump over the 5.32 mt for the corresponding eight months of 2009-10.
Conventional fertilisers
On the other hand, sales of conventional fertilisers such as urea and di-ammonium phosphate (DAP) have registered a mere 5-6 per cent increase, while being negative in muriate of potash (MOP).
“Complex sales will easily top 10 mt this fiscal,” said Dr G. Ravi Prasad, President (Fertiliser Marketing) at Coromandel International Ltd (CIL). In 2009-10, CIL manufactured around two mt of complex fertilisers, which was next to the 2.75 mt by the Indian Farmers Fertiliser Cooperative (Iffco).
Besides these two, the K.K. Birla Group-controlled Pradeep Phosphates and Zuari Industries (0.8 mt), Fertilisers & Chemicals Travancore (0.75 mt), Rashtriya Chemicals & Fertilisers (0.5 mt), Tata Chemicals (0.4 mt), GSFC (0.3 mt), GNFC (0.2 mt) and Deepak Fertilisers & Petrochemicals Corporation (0.1 mt) are the major producers of complexes.
According to the industry, the introduction of NBS – linking subsidy payable to the nutrient composition of individual fertilisers – has made complexes attractive to both companies as well as farmers. This is unlike the earlier regime, where subsidy was limited to specific products (urea, DAP, MOP) with little linkage to nutrient content.
Under the NBS, the Centre is now providing a per-kg concession of Rs 23.227 on nitrogen , Rs 26.276 on phosphorous , Rs 24.487 on potash and Rs 1.784 on sulphur . These translate into a respective subsidy of Rs 15,521 and Rs 15,114 a tonne on the two most popular complexes, 10:26:26:0 and 12:32:16:0, enabling them to be retailed at Rs 8,200 and Rs 8,650 a tonne. Lower prices (against Rs 9,950 for DAP) and the presence of K (DAP only contains ‘N' and ‘P', albeit at 18 and 46 per cent) makes them a value proposition.
Companies, in turn, have responded by augmenting production of complexes. Iffco's Kandla plant manufactured 0.7 mt of DAP in 2009-10, whereas this year, “we are hardly making any DAP and bulk of its 2.4-2.5 mt output will consist of 10:26:26:0 and 12:32:16:0”, informed Mr Arabinda Roy, Marketing Director, Iffco.
Apart from DAP, even potash is being increasingly sold in the form of complexes rather than as MOP. “That probably explains declining sales of MOP. Although MOP imports are higher this time (six mt against 5.3 mt in 2009-10), a significant part of it is going for manufacture of complexes,” he added.
Higher complex sales
The other reason for higher complex sales is imports, adding to the overall availability. The extension of NBS benefits to imported material has led to over 1.1 mt of complexes – mainly 10:26:26:0, 16:16:16:0, 16:20:0:13 and 20:20:0:0 – being brought in from Russia, China and Indonesia during April-November, compared with just 0.2 mt in the whole of 2009-10.
Interestingly, the import of complexes have been undertaken not just by Iffco, Zuari and Deepak Fertilisers, but even by companies such as Nagarjuna Fertilisers & Chemicals and Indian Potash Ltd that do not manufacture them domestically.
The other major fertiliser to have benefited from the NBS is single super phosphate (SSP), which, on account of its lower 16 per cent phosphorous content, has faced steady marginalisation from DAP. But with the NBS recognising the 11 per cent sulphur content in SSP, this fertiliser, too, has become a marketing proposition.
“I foresee SSP consumption to touch 3-3.5 t this year and also more production capacity being added,” said Dr Prasad.

Brand Line - Harish Bijoor column

Brand Line - The Hindu Business Line, December 16, 2010

The urban-rural debate has been on forever. Do you see this changing as we work towards inclusive marketing as the basic ethos of all marketing?

"Even I thought it was another Fevicol Ad! But they're all marketing men out to capture the rural sector, it seems."

Inclusive marketing is a faraway dream as of now. Today, exclusive marketing has hijacked all semblance of inclusiveness.
Post-Independence, India witnessed a creeping and crawling morphing of mindsets and consumption from the rural to mindsets that are more aggressively urban. The marketer has been largely responsible for this. The movement, that was a crawl, literally became a gallop in the early and mid-Eighties when television knitted the nation as one, pumping urban imagery of the modern marketing man to rural audiences. Television and all the advertising it carried fed rural markets the urban way of life. In more ways than one, India became an instant urban society.
This, I believe, is an undoing that needs to be corrected. In many ways, marketing is a hegemony in India. The urban-educated and privileged marketer markets to the rural person. Never mind that rural is three times bigger than urban. The imagery that consumers emote with in India today is the urban imagery.
Overturn this and emote with the real India. Emote with the imagery that is rural. Put a programme that is rural in your marketing mix. Go one step further and show the archetypical brand hero in your TV commercials to be the rural person. See what it does. I do believe India is ready to turn marketing imagery on its head. The bottom-of-the-pyramid market will admire this and will certainly reward this effort — with market share, and money, and more than that, consumer affection.

Agricultural fields in mechanisation mode

The Hindu, December 13, 2010

SANGAREDDY: M. Hanumantu of Nawabpet village in Hatnoora mandal in Medak district recently destroyed his paddy crop. He was one among the thousands of farmers in the district who were unable to hire labour for harvesting crop.
Mr. Hanumantu has 4.18 acres of land, out of which paddy was cultivated in three acres. He grew cotton in the remaining 1.18 acres. When the crop was ready for harvesting, he tried to hire a harvesting machine.
Though the operator brought the machine to the field, he refused to start it saying the field was wet and it would damage his machine. His efforts to hire labour did not yield result as they preferred to work for Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) instead of the hard labour. Vexed with that, he lit his crop.
Time saved
Contrary to the experience of Mr. Hanumantu, many farmers in the district are preferring to hire machines to harvest the crop. According to sources in the Agriculture Department, more than 100 machines are functioning in the district.
Each machine is replacing about 1,000 mandays if it is to assume that machines are working between six to eight hours a day. While it would take five days for eight persons from harvesting to packing paddy in one acre of land, it is consuming only one-and-half hour for the machine to complete the job.
Farmers prefer these machines as it is becoming hard to find manual labour, in addition to consuming more time. The labourers are also demanding wages between Rs. 100 to Rs. 150 to work in the fields.
Cost factor
“This is benefiting farmers as the operator is charging Rs. 2,500 per acre whereas it will cost about Rs. 4,000 if labour is hired. In addition, the trader will be ready to procure the produce once it is ready in bags,” said Chandrasekhar, Joint Director of Agriculture.
According to department estimates, out of the 45,000 hectares of paddy that was cultivated in the district during the current rabi season, at least 30,000 hectares will be harvested by the machines.
Doubts are being expressed in the official circles whether the labourers would lose work in the farms in the long run as the farmer, once habituated to harvesting with machines, would only prefer machines.

Ministry drags feet on paying fertiliser firms

The Economic Times, December 10, 2010

 

NEW DELHI: The country's cash-strapped fertiliser makers are blaming the ministry of chemicals and fertilisers for the delay in compensating them for the losses they suffered on selling government bonds.

The long-tenure bonds were issued to public sector fertiliser companies in lieu of the cash subsidy they receive from the government for selling their produce below cost.

People close to the matter said the finance ministry is ready to repay the fertiliser firms but it can't do so until it receives a proposal from the ministry concerned. "We can only act if we receive a proposal," a finance ministry official told ET.

The delay is adding to the grief of fertiliser makers as they have to sign contracts for the kharif season by the end of January or early February. "Normally , it is the administrative ministry that should aggressively push for the resolution of this problem," said an industry representative. "But in this case, it is the finance ministry that is taking the initiative." The government had issued Rs 27,500-crore worth of bonds to fertiliser companies in lieu of subsidies for 2007-08 and 2008-09.

Some of these companies had sold Rs 13,611 crore worth of these bonds at a discount after they failed to find ready takers for them. This led to a loss for these firms, which was pegged at Rs 543.3 crore at the end of March 2009. They are ready to sell the remaining bonds at a loss of about Rs 1,400 crore if there is a commitment from the government that the losses will be made good. The finance ministry had in October agreed to compensate the fertiliser firms but the department of fertilisers has not yet moved a detailed note on the issue. "There is simply no market whatsoever for these 20-year bonds," said a Fertiliser Association of India official. "Should we manage to sell them, the industry will end up suffering a big loss against a backdrop of higher interest rate and a consequent drop in the value of the bonds."

The market is currently valuing these special securities at a discount of over 10% of their face value. This means that a bond holder will receive only Rs 90 for a bond worth Rs 100. The discount is highest in the bonds issued in the last two tranches because the coupon on them was 6% against the current benchmark rate of over 8%. Bond prices and interest rates move in opposite directions.

The lack of urgency is despite estimates that the annual fertiliser consumption will shoot up 20% under the new nutrient-based subsidy scheme, which means resolution of liquidity problems of fertiliser companies is critical. The worries of fertiliser companies over unpaid dues by the government do not end with the bonds.

Rallis buys majority stake in biotech firm Metahelix

The Hindu Business Line - December 10, 2010

With a view to stepping up its revenues in the seeds space, Rallis India, a subsidiary of Tata Chemicals Ltd, announced on Thursday that it has acquired a majority stake in Metahelix Life Sciences Ltd.

“Over the last few years we contracted our seeds part of the business. But with this acquisition we expect an addition cumulative revenue of Rs 1,000 crore by 2015,” said Mr V. Shankar, Managing Director and Chief Executive Officer, Rallis India.

The company has picked up a stake of 53.5 per cent in Metahelix for Rs 99.5 crore and in the next five years Rallis plans to pick up 100 per cent stake progressively.

“Farmer adoption of good hybrid seeds is rapidly growing and with this newly acquired strength, Rallis will be in a firm position to provide a portfolio of seeds for the farmers,” he added.

Rallis will continue to invest in the company and subscribe to an additional equity of Rs 25 crore to increase its stake in Metahelix to 59.02 per cent soon.

“We will be investing further. In the first quarter of the next fiscal we will make a further investment. The investment will focus on R&D and if there is need we would invest in processing facilities,” said Mr Shankar.

The Indian seeds market is currently the sixth largest in the world at Rs 6,500 crore. “It is large market and growing at 12-13 per cent per annum. We expect this to grow faster in the future,” added Mr Shankar.

Metahelix has a product portfolio in rice, maize, millets and vegetable seeds along with good germplasm with many exciting products in the pipeline. It has nationwide sales presence through Dhaanya Seeds, sold through around 1,000 distributors. Metahelix is the first Indian company to have a proprietary Bt trait, cry1C approved in cotton.

He added that Rallis has no plans to change the employees or promoters of Metahelix. Sales would continue under the Dhaanya Seeds brand of Metahelix.

United Phosphorus to launch 12 hybrid vegetable seeds

The Hindu Business Line - December 8, 2010

United Phosphorus Ltd, the country's largest agro-chemical company, is betting big on the domestic hybrid seeds market, having firmed up plans to launch a clutch of new branded hybrid vegetable seeds, ranging from tomatoes to green peas, next year.

Although hybrid seeds today account for an insignificant portion of the estimated $1.1 billion Indian seeds and seedlings market, this segment is beginning to gain currency in the farming community.

“We will be launching hybrid seeds for 12 different vegetables next year, starting with a tomato variety in April 2011 which we have decided to brand as Gazanan — the USP of this variety, apart from higher yield, is that it can be sown in 10 months in a year, unlike the traditional tomato crop,” Mr Bhupen Dubey, Head-Integrated Business, UPL, told Business Line.

Un-seasonal rains

The company had initially planned to release the hybrid for sowing in 40,000 acres, but the un-seasonal rains that destroyed the pollen had impacted seed production. “We may limit our initial release (of the seed variety) for about 20,000 acres,” he said.

This will be followed by release of hybrid seeds of chillies (two varieties), green peas, French beans, okhra and a few other vegetables. “China uses 60 per cent of its total seed requirement under hybrid varieties. We see this segment growing at a faster rate in India. We are targeting to increase our turnover from seeds business from the present $160 million to $500 million in the next three to four years,” Mr Dubey said.

He was in Hyderabad in connection with a farmers meet for interaction on its Aneeta Hybrid seeds, a high yielding Ridge Gourd, produced by its group company Advanta India.

Acquisitions

UPL, which undertook a string of acquisitions in the last few years ending with buying DuPont's Mancozeb fungicide business earlier this year, is looking out for fresh acquisitions in the agro-chemical segment globally. “The global chemical industry is witnessing a consolidation and we are looking out for opportunities,” Mr Dubey said.

The company, which is having about Rs 2,100 crore cash reserves, could use almost half this amount as its war chest for the acquisitions, which are likely to be in the niche segments with registrations in developed markets, rather than big-ticket buyouts.

NABARD allocates Rs 750 cr more for crop loan refinance in AP

Business Standard, December 7,2010

NABARD has made an additional allocation of Rs 750 crore for providing refinance to Cooperative Banks and Regional Rural Banks (RRBs) in Andhra Pradesh keeping in view the seasonal agricultural operations (crop loans) of thee banks.

Of this fresh allocation, Rs 600 crore has been earmarked for Cooperative Banks while the remaining amount was allocated to RRBs. This is in addition to the existing limits of Rs 2550 crore including 1580 croe to Cooperative Banks and 970 crore to RRBs.

With the additional allocation , the total allocation of refinace under production credit in the state has gone upto Rs 3300 crore for the current financial year, an increase of 38 per cent over the total allocation of Rs 2397 crores druing the last year.

NABARD has increased the allocation to take care of the increased credit demand of farmers generated in the state on account of favourable monsoon this year. The credit needs of farmers affected by recent floods also would be taken care of by this additional allocation, the release said.

There is a buoyancy in the ground - level credit and banks are expecting that the credit demand will increase during the ongoing Rabi season as most of the irrigation projects are full to the brim.

As against Rs 1580 crore allocation for the current year, the Cooperative Banks have already drawn refinance Rs 1383 crore from NABARD while RRBs have availed refinance of Rs 926 crore as against allocation of Rs 970 crore .