Comments
Stocks of urea makers — Chambal Fertiliser, GNFC, RCF and NFL — have seen sudden buying interest, gaining 5-6 per cent on Thursday.
Speculation that the new gas price may be lower than the Rangarajan Committee's recommended price of $ 8.4/mmbtu, has given a fillip to fertiliser stocks.
Lower gas price
Lower-than-expected gas price can help urea makers in two ways. One, lower cost of production on the existing urea capacity will reduce producers' dependence on the government subsidy and thereby improve their working capital cycle.
Second, lower gas price can boost profits on the incremental urea produced (on the revamped capacity) which is currently linked to international urea price.
New fertiliser policy
The Fertiliser Minister's statement earlier this week that the new fertiliser policy, currently being drafted, will ensure regulated use of fertiliser and help achieve self-sufficiency in fertiliser production, has also aided investor sentiment. While the policy for greenfield and brownfield investment was approved way back in December 2013, the policy for additional urea produced from the revamped capacity, is expected to be modified, to compensate for gas price increases.
Also, a roadmap for implementation of nutrient based subsidy for urea is awaited.
Comments
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.