The Hindu Business Line : SPIC hopeful of revision in urea pricing mechanism

THE Chairman of Southern Petrochemical Industries Corporation (SPIC), Mr A.C. Muthiah, on Thursday said that the "inherent anomalies" in the `group pricing scheme' for urea had "impaired the performance and growth of a number of fertiliser units."

Speaking at the annual general meeting of shareholders here, Mr Muthiah observed that SPIC too had "witnessed certain setbacks on account of these anomalies" and had been getting "only part reliefs" for the past two years.

Mr Muthiah later explained to Business Line that SPIC had spent about Rs 250 crore, which had to be compensated for under the previous pricing mechanism. (Urea prices are controlled, manufacturers are to sell at subsidised prices and the Government compensates the manufacturers for the under recoveries.) However, the new group pricing scheme (under which prices are fixed on the basis of averaged costs of similar types of fertiliser units) did not fully compensate SPIC for the capital costs, Mr Muthiah said. "We are losing Rs 400 a tonne because of that alone," he said.

SPIC also lost out because some companies were left out of the reckoning while averaging out costs, he said.

He, however, told shareholders that he was hopeful of a revision in the policy with effect from April 2006. Only then would the fertiliser sector get new investments, he said.

"After all, India's dependence on agriculture and agriculture's dependence on fertilisers cannot be gainsaid and this should prod the policy formation in the direction of revitalising the industry," Mr Muthiah said.

Later, speaking to journalists, he said that ONGC was expected to commence `due diligence' for a possible takeover of SPIC Petrochemicals Ltd, in about a fortnight's time.

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