India's Fertilizers Industry Fallen on Hard Times

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New Urea Investment Policy to Become Gamechanger?

Despite the challenges, the announcement of the New Urea Investment Policy has spurred various incumbents. Fifteen companies have filed proposals for urea brownfield / greenfield projects with the DoF, leading to stiff competition for the award of the projects under the scenario of constrained gas availability.

ICRA believes that the award of the urea projects would be based on several considerations such as domestic and international demand-supply scenario, gas availability at reasonable prices, global urea prices, availability of land, etc. Subsequently, the GoI may consider approving certain coal gas-based projects on account of uncertainty of domestic gas availability and increase in its price.

Subsidiaries and New Projects Drive the Fertilizer Industry

For the next financial year, the demand scenario is expected to be better than it was in FY12-13. The industry is awaiting approval of projects under the NUIP-2012, which are directly dependent on gas availability. Subsidies are expected to continue to be delayed in FY13-14 due to under-budgeting. This will in turn affect net profitability of the players due to reliance on short-term borrowings. While the demand scenario looks positive, gas pricing, subsidy delays and currency fluctuations will continue to remain the key challenges.

* Courteousy of PROCESS India

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