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Tuesday, Oct 03, 2006

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Fertiliser Dept seeks panel nod to float SPV

Ambarish Mukherjee

To undertake global trading, joint ventures abroad

Joint efforts
The joint venture company will handle import of fertilisers and raw materials.
There would be total transparency on information.

New Delhi , Oct. 2

The Department of Fertilisers has decided to set up a new special purpose vehicle to extend its direct control over urea imports by undertaking international trading and setting up manufacturing joint ventures.

As of now urea imports are canalised through MMTC under the Department of Commerce.

According to the plan that has been sent by the department to the Committee of Secretaries (CoS) for approval, three fertiliser manufacturers controlled by the Government, namely, Krishak Bharati Cooperative Ltd (Kribhco), National Fertilisers Ltd (NFL) and Rashtriya Chemicals and Fertilisers Ltd (RCFL) will form a joint venture company.

Special purpose vehicle

Sources told Business Line that when the proposal to float a special purpose vehicle was mooted by the Ministry of Fertilisers and Chemicals in March this year, several industry groups and sections within the Government had opposed the move.

But now it has been included into the new pricing scheme (NPS) basically to get "an in-principle approval" and the modalities would be worked out eventually, sources said.

The joint venture company will handle import of fertilisers and raw materials.

Raw materials

Simultaneously, it will explore setting up joint venture companies in input rich countries, with a focus on rock phosphate, potassium and sulphur deposits.

The domestic fertiliser sector is faced with severe shortage of raw materials such as rock phosphate, phosphoric acid, sulphur and ammonia.

Apart from these, every year the country imports all the three main fertilisers, namely urea, di-ammonium phosphate (DAP) and muriate of potash (MoP).

Although the domestic production capacity is adequate to meet the total demand, import becomes necessary because the producers are unable to utilise the full capacity because of non-availability of raw materials arising out of Government delay in subsidy.

Joint venture co

As shortage increases, imports increase, and India being one of the largest users, as soon as India starts buying from the international market, foreign producers raise their prices.

According to Government sources, it is primarily to get out of this vicious cycle that the joint venture company is being planned.

Currently discussions are on within the Fertiliser Ministry and comments from a few other related Ministries too have been sought.

This company, Government sources said, would also enable the Government to establish a control over private sector producers who on occasions project a false picture to the Government about imports of raw materials in order to hide their inefficiencies.

Since this company will directly operate in the international market in all the segments, there would be total transparency on information and that is expected to have a positive impact on the subsidy bill too, they said.

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Fertiliser PSUs plan joint venture for global operations

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