The Centre plans to revive strategic sale of state-owned fertiliser firms from the next fiscal year, two people familiar with the matter said, even as it works to boost domestic production and reduce imports.
Besides putting eight major fertiliser public sector units (PSUs) up for sale in a phased manner, some closed units could be revived and prepared for sale, the people cited above said on condition of anonymity.
The eight public sector fertiliser companies are Brahmaputra Valley Fertilizer Corp. Ltd, Fertilizers and Chemicals Travancore, FCI Aravali Gypsum and Mineral Ltd, Madras Fertilizers Ltd, National Fertilizers Ltd, Rashtriya Chemicals & Fertilizers, Fertilizer Corp. India Ltd and Hindustan Fertilizer Corp. Ltd, said one of the two people cited above.
“Several units of Fertilizer Corp. located in Gorakhpur in Uttar Pradesh, Sindri in Jharkhand, Talcher in Odisha and Ramagundam in Telangana are also on the list for disinvestment,” the source added. “The plan is at the discussion stage and a final decision will be taken soon in this regard,” the source said.
Eight identified
In 2022, Niti Aayog had identified eight fertiliser producing companies for strategic sale; however, the Centre postponed the plan to the following year as it prioritised increasing domestic production.
“The Centre is working to reduce import dependency and achieve self-reliance before opting for disinvestment in state-owned fertiliser companies,” said the second person cited above. The Centre plans to reduce urea imports by 30% by the end of 2024.
Federal fertilizer subsidies have been significantly cut, since ₹1,88,894 crores (revised estimates) in FY24 ₹1,64,000 crore (budget estimates) in FY25. However, the stake sale will not affect subsidy payments, the first person said.
Experts said the drive to revive old plants and set up new ones has helped, with domestic production rising 20% to 31.4 million tonnes and imports falling at least 10% year-on-year in FY24.
“The recent policy measures have brought the industry and the units into focus and helped the country reduce its import bill, starting with volumes and invariably the total value. These initiatives and outcomes will boost these public sector companies, improving their efficiency and potential profitability prospects,” said Chirag Jain, Partner, Grant Thornton Bharat LLP.
“The catch-22 situation with these public sector companies after decades of waiting is over, which will help them scale new heights, generate profitability, address the country’s food security challenges and reduce the import bill,” he added.
In FY24, the Centre imported 7.04 million tonnes of urea worth $2.61 billion, down from 7.57 million tonnes in FY23, Anupriya Patel, minister of state in the ministry of fertilizers, told the Rajya Sabha earlier this month.
End of imports
India, which imports urea mainly from Oman, Qatar, Saudi Arabia and the United Arab Emirates, plans to completely eliminate urea imports by fiscal year 2026.
“In order to achieve self-sufficiency in urea in the country, the Government of India has directed revival of Ramagundam (Telangana), Gorakhpur (Uttar Pradesh), Sindri (Jharkhand) and Talcher (Odisha) units of Fertilizer Corp. of India Ltd and Barauni (Bihar) unit of Hindustan Fertilizer Corp. Ltd through a designated joint venture of state-owned companies for setting up new ammonia and urea plants of 12.7 LMTPA (lakh metric tonnes per annum) capacity each,” Patel said.
“The Ramagundam and Gorakhpur units were commissioned on March 22, 2021, and December 7, 2021, respectively. Further, the Barauni and Sindri units commenced urea production on October 18, 2022, and November 5, 2022, respectively. These plants have added 50.8 LMT per annum of indigenous urea production in the country,” he added.
Spokespeople for the Ministry of Finance and the Department of Fertilizers did not respond to emailed queries.
Stable prices
Fertilizer prices have remained stable in recent months due to improved domestic production and lower input costs, according to the World Bank.
The World Bank Fertilizer Price Index remained relatively stable in the June quarter, following a 20% year-on-year decline in the March quarter. The index is 24% lower year-on-year in the June quarter, mainly due to a significant decline in phosphate rock prices (-56%) and potash prices (-17%).
“This broad-based weakness is driven by higher output and lower input costs,” the World Bank said in a blog post last month. “Compared to 2023, prices are expected to average lower in 2024 and 2025, but will remain well above 2015-2019 levels due to robust demand and some export restrictions (particularly from China) and sanctions (mainly on Belarus),” it said.
“Upside risks to the outlook include potential increases in input costs, especially natural gas. However, a resumption of exports from China and lower-than-expected crop prices could contribute to further declines in fertilizer prices,” it added.
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