FERTILIZER INDUSTRY SHOULD GEAR UP TO MEET THE CHALLENGE EMERGING
FROM THE DISMANTLING OF APM - S. S. DHINDSA
INDUSTRY SHOULD WORK TOWARDS
GETTING FEEDSTOCK AT IMPORT-PARITY PRICE
Minister for Chemicals and Fertilizers,
Shri S. S. Dhindsa said that the dismantling of Administered Price
Mechanism (APM) in the Energy Marketing Sector in general and
petroleum products in particular is an indication of the Government’s
commitment to phase out controls. Shri Dhindsa said that the fertilizer
industry will have to gear itself to the future scenario to meet
the challenge which emerges from the change in environment. Shri
Dhindsa was delivering the keynote address at a conference on
"Regulation in Energy Markets – Post APM and its impact on the
core sectors of the economy", here today. The conference was organised
by Infrastructure Power & Petroleum Association of India and
Independent Power Producers Association of India.
Shri Dhindsa said that petroleum
products constitute a significant part of the total cost of production
of urea. While cost of gas constitutes half of cost of urea in
gas based plants, the percentage could go upto as much as 80%
in some Naphtha based plants. Over the years, the government has
been examining the need to decontrol the marketing of urea. Controls
can be removed from the urea markets only in a phased manner.
In the interim therefore, the fertilizer industry will have to
come to terms with a situation where the output remains controlled,
though the input cost would be market determined. The fertilizer
industry has experienced the future scenario, as the prices of
naphtha/FO/LSHS had been decontrolled four years back. With the
gas prices also shifted from the administered regime to the market
determine regime, the industry will have to gear itself to the
future scenario.
It is likely that in the short term,
the fertilizer industry may be faced with operating in a sellers
market as far as petroleum products are concerned, wherein the
major suppliers may join together to have an artificial price
at the cost of the consumers. This could severely strain the margins
of the urea manufacturers considering the high percentage of cost
of feed stock on the total cost of production. It would be imperative
that the industry creates environment where it would have multiple
choice in terms of source of energy to be able to maximise the
benefit of globalisation and a market driven economy. The fertilizer
industry should work its strategy in a manner that it gets its
feedstock at import-parity price. Since existing facilities at
ports to import fertilizers are concentrated in the hands of a
few oil companies, the industry associations have a role, cut
out for them in creating common infrastructure facilities.
APM in the hydrocarbon sector has
been dismantled w.e.f. 1st April, 2002. As a result,
the consumer prices of even MS & HSD will be market determined.
Only PDS kerosene and domestic LPG pricing will continue to be
controlled by the Government. There are far reaching implication
of these measures which may affect various segments of society
and industry. Impact can be softened by building the necessary
safeguards in the post APM regulatory environment, the Minister
added.
