Published on January 6, 2014

Agro-Pesticide industry has been constantly suffering from internal issues. The foremost remained the subsidy issue. Government allocated very low budget for fertilizer industry. To add further was the constant delays in paying subsidy to the farmers. Later in the third week of December, govt. provided a package of 10,000 crore to provide some relief to the ailing industry.

In the beginning of the year 2013, government had promised to invest a new urea policy to encourage industry to set up new plants and boost domestic production to reduce the current import dependence of about 8 million tonnes. However, the policy was not implemented throughout the year. According to the Director General of Fertilizer Association of India (FAI) Satish Chander, “There was no major development on the policy front as we were expecting. The major worry was delay in subsidy payment by the government to companies.” Government has not yet paid the dues of Rs. 36000 crore to companies which affect the fertilizer sector in 2013. This fiscal good monsoon will increase the demand of urea which is still under government control and is cheaper than other fertilizers.

Because of higher finance cost, the profit of fertilizer firm drops by 30% in 2013. Fertilizer ministry is likely to propose an increase of Rs 350/MT in cost of production of urea against the industry’s demand for a hike of Rs 700/MT. Recently, an Agro chemicals company Insecticides (India) Ltd. (IIL) made an announcement of increasing its prices for 30 chemicals by 15-20 percent. Farmers will be facing tough time and will have to pay more for the upcoming Rabi season. Finance costs for fertilizer companies are set to rise as delayed subsidy payments force them to borrow money to run operations.