Financial Daily from THE HINDU group of publications
Friday, Jul 08, 2005
Industry & Economy
MFL seeks regulated phosphoric acid supply
Chennai , July 7
MADRAS Fertilizers Ltd (MFL) has urged the Union Fertiliser Ministry to regulate distribution of phosphoric acid among fertiliser manufacturers.
According to reliable sources, production of complex fertilisers has been hit at MFL due to low supply of phosphoric acid, the raw material for complexes and phosphatic fertilisers.
While international prices and supply situation have affected supplies in general, MFL is being deprived of available supplies because it has to depend on suppliers that are also its competitors in fertiliser production.
In 2004-05 it produced only about 40 per cent of its capacity of eight lakh tonnes of complexes.
In the current year there has been a negligible production while the demand is expected to peak for the current kharif season.
Sources said that in 2004-05, MFL was supplied 37,802 tonnes of phosphoric acid against an allocation of 1,50,000 tonnes, while its requirement was 1,80,000 tonnes.
This year the situation could only be worse as the supply has been further hit and phosphoric acid suppliers and consumers are yet to arrive at a common ground.
The Fertiliser Ministry has fixed an interim price of $431 a tonne of phosphoric acid, which is much less than the asking price of the manufacturers, sources said.
The Union Government should make arrangements to ensure independent supply of phosphoric acid to MFL, the sources said.
The opportunity presents itself in the form of a Government stake in Senchim, a Senegal-based producer of phosphoric acid. The company currently supplies raw material to Iffco, which has a 24 per cent stake in Senchim.
Both the management and the MFL staff union have represented to the Fertiliser Ministry to ensure that it uses its stake in the Senegalese company to divert a part of the supplies to meet MFL's requirement.
Senchim supplies about 5,00,000 tonnes of phosphoric acid, which is entirely cornered by Iffco, they said.
According to Mr R. Kuchelan, who heads the MFL staff union, the union has sought the Government's assistance in procuring supplies of phosphoric acid.
It has represented that the MFL Chairman and Managing Director be made the Government nominee on the board of the Senegalese company.
The sources attribute the problem to domestic suppliers that are also fertiliser manufacturers, which makes them MFL's competitors. These suppliers have an equity stake or tie-up with overseas producers and have a say in the prices of the raw material.
According to the sources, MFL has therefore represented that wherever there is such a conflict of interest the commercial agreements between overseas manufacturers and local suppliers, it should be made transparent.
This would ensure that the Government, which pays the subsidy on fertilisers, gets the accurate price of phosphoric acid.
"Unless the Centre takes immediate action, MFL, which reported a loss of about Rs 58.39 crore in 2004-05 and has accumulated losses of Rs 175 crore, can only go further downhill. If that happens it would not be MFL's fault, as it matches with the best on production and efficiency norms."
It may be recalled that MFL was hit by a feedstock and fuel problem earlier this year when there was a cash crunch and it was on the verge of closing down production.
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