Pvt cos may get nod to import urea

 The government is likely to lift the ban on private sector companies importing urea for agricultural use to secure cheaper imports and lower the country’s fertiliser import bill. The move would benefit companies like Tata Chemicals that have acquired stake in cost-efficient production facilities abroad near ports as they become eligible for fertiliser subsidy for Indian retail sales.

Setting up production facilities where natural gas is abundantly available such as the North American continent or Africa would lower India’s urea import cost as shipping the fertilizer is more cost effective than producing it locally using imported liquefied natural gas (LNG). India has allocated more than R32,000 crore as subsidy for this price controlled commodity.

“We will certainly look at proposals, if private sector companies offer attractive prices for import of urea,” fertiliser secretary Ajay Bhattacharya told FE. The fertiliser ministry is open to remove the import restrictions as the finance ministry has pledged to lower the total subsidy on food, fertiliser and oil to 1.75% of GDP over the next three years.

“De-canalising urea import will be a step in the direction of offtake facilitation for any urea manufacturing projects brought up in resource-rich countries,” said Deepak Mahurkar, associate director, PricewaterhouseCoopers.

At present, three state-run agencies MMTC, Indian Potash Limited (IPL) and State Trading Corporation (STC) are designated by the government to import urea on behalf of various distributors and get subsidy based on their audited retail sales figures.

Tata Chemicals and Fertilisers recently acquired 25% stake in ammonia-urea fertiliser complex at Gabon in Africa. The plant located near Gabon’s main seaport is cost effective in terms of production and transportation to large markets such as North America, Latin America and India, the company said while announcing the deal April. But so far, the government had maintained that urea could be imported by private players only for industrial use.

“Once the contours of the policy are clear, the joint venture (Gabon Fertiliser Company) will take a decision on how the output is to be supplied in different geographies,” Tata Chemicals’ Senior VP Marketing and Commercial D K Sundar told FE.

Other element to be addressed for such projects is offtake or import price since uncertainty may spoil possibility of such investments, Mahurkar added. India produces about 22 million tonne of urea and consumes more than 30 million tonnes. In 2010, the government had increased the retail price of urea by 10% to R5,310 per tonne, which is still the current retail price. Now India import urea at nearly five times the administered retail price.