The Center plans to revive the strategic sale of state-owned fertilizer companies beginning next fiscal year, two people aware of the matter said, even as it works to boost domestic production and reduce imports.
Apart from putting eight major fertilizer public sector units (PSUs) on the block in a phased manner, some shuttered units may be revived and prepared for sale, the people mentioned above said on the condition of anonymity.
The eight fertilizer PSUs are Brahmaputra Valley Fertilizer Corp. Ltd, Fertilizers and Chemicals Travancore, FCI Aravali Gypsum and Mineral Ltd, Madras Fertilizers Ltd, National Fertilizers Ltd, Rashtriya Chemicals & Fertilizers, Fertilizer Corp. India Ltd and Hindustan Fertilizer Corp. Ltd, one of the two people cited above said.
“Several units of Fertilizer Corp. located in Gorakhpur in Uttar Pradesh, Sindri in Jharkhand, Talcher in Odisha and Ramagundam in Telangana are also in the disinvestment list,” the person added. “The plan is at discussion levels and a final decision in this regard will be taken soon,” this person said.
Eight identified
In 2022, Niti Aayog had identified eight fertilizer PSUs for strategic sale; however, the Center put the plan on hold the next year as it prioritized increasing domestic production.
“The Center is working on reducing dependence on imports and attaining self-sufficiency before opting for divestment of fertilizer PSUs,” the second person cited above said. It plans to reduce imports of urea by 30% by the end of 2024.
Federal fertilizer subsidies have seen a significant cut, from 1,88,894 crore (revised estimates) in FY24 to 1,64,000 crore (budget estimates) in FY25. However, the stake sale will not affect subsidy payments, the first person said.
Experts said the push to revive old plants and set up new ones has helped, with domestic production increasing by 20% to 31.4 mt and imports dropping by at least 10% annually in FY24.
“Recent policy measures have brought the industry and units in the mainstream focus, and effectively helped the country reduce its import bill, initiating from volumes and invariably the overall value. These initiatives and results will bring a boost to these PSUs improving their efficiency and a possible view of being profitable,” said Chirag Jain, partner, Grant Thornton Bharat LLP.
“The Catch-22 situation with these PSUs after decades of wait has ended, which will help them to reach new heights, bring profitability, address the country’s food security challenges and reduce the import bill,” he added.
In FY24, the Center imported 7.04 mt of urea worth $2.61 billion, lower than 7.57 mt in FY23, Anupriya Patel, minister of state in the fertilizers ministry informed the Rajya Sabha earlier this month.
Ending imports
India, which imports urea mainly from Oman, Qatar, Saudi Arabia and the UAE, plans to completely end urea imports by FY26.
“In order to attain self-sufficiency in urea in the country, the Government of India mandated revival of Ramagundam (Telangana), Gorakhpur (Uttar Pradesh), Sindri (Jharkhand) and Talcher (Odisha) units of Fertilizer Corp. of India Ltd and Barauni (Bihar) unit of Hindustan Fertilizer Corp. Ltd through joint venture company of nominated PSUs for setting up new ammonia-urea plants of 12.7 LMTPA (lakh metric tonnes per annum) capacity each,” Patel said.
“The Ramagundam and Gorakhpur units have been commissioned on 22 March 2021 and 07 December 2021, respectively. Also, Barauni and Sindri units started urea production on 18 October 2022 and 5 November 2022, respectively. These plants have added 50.8 LMT per annum of indigenous urea production in the country,” she added.
Spokespersons for the ministry of finance and the department of fertilizers did not respond to emailed queries.
stable prices
In recent months, fertilizer prices have remained stable due to improved domestic production and lower input costs, according to the World Bank.
The World Bank’s fertilizer price index has remained relatively stable in the June quarter, following a 20% annual drop in the March quarter. The index is 24% lower annually in the June quarter, primarily due to a significant decline in phosphate rock prices (-56%) and potassium prices (-17%).
“This broad weakness is due to improved production and lower input costs,” the World Bank said in a blog post last month. “Compared to 2023, prices are expected to average lower in 2024 and 2025 but remain well above 2015-19 levels due to robust demand and some export restrictions (particularly from China) and sanctions (mainly Belarus),” it said.
“Upside risks to the forecast include potential increases in input costs, especially natural gas. However, a resumption of China’s exports and lower-than-expected crop prices could contribute to further declines in fertilizer prices,” it added.