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Boom for grain, fertilisers

New Delhi, Nov. 30: Fertiliser sales and foodgrain production will boom this rabi season, according to a study prepared by the Fertiliser Association of India (FAI).

In its report titled ‘Fertiliser Situation in India’, FAI said ample availability of moisture in the soil and the high water level in reservoirs indicated a substantial increase in foodgrain output in the Rabi cropping season and consequently could lead to a boom in fertiliser sales this winter.

The report said the year 2002-03 was a setback in consumption of fertilisers, caused largely by unfavourable weather conditions.

During the current year, the weather has taken a turn for the better, which augurs well for the fertiliser industry and may put it back on the track.

The association says majority of the urea manufacturing units will be seriously affected under the New Pricing Scheme (NPS) introduced from April this year.

These units will be particularly severely affected in stage II under the NPS when, apart from reduction in the capital related charges (CRC) for as many as 12 units, energy consumption norms will also be tightened.

FAI officials feel that there is an urgent need for review of NPS and restructuring it to ensure the viability of the units and enable them earn a reasonable return on investment.

The policy for the period after the stage II, beginning from April 1, 2006 has not been announced.

The policy for new urea projects as well as expansion or revamp of existing plants is still under formulation. This implies continued uncertainty for attracting fresh investments for growth of the industry.

According to a blueprint prepared by the companies in the fertiliser sector, FAI will be asking the government to prepare appropriate strategies for the for the fertiliser sector.

Officials say that these strategies should take into account the recommendations of the World Trade Organisation (WTO) task force on fertiliser to primarily ensure reasonable protection to the domestic industry.

The FAI study has pointed out that the high volatility in the prices of liquid hydrocarbon, like naphtha and fuel oil is a cause of concern for the fertiliser industry.

Equally worrisome is the exploitation of the monopoly position by the oil public sector undertakings (PSUs) during periods of increase in fertiliser production, the study says.

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