Mumbai, Oct. 24: The arrangement under which Rallis India marketed urea produced by Tata Chemicals was called off today by boards of both companies.
The decision, part of Tata Chemicals’ drive to consolidate its core business, will be effective from April 1 next year.
Rallis, also a Tata group firm, will now focus on low-volume, high-value pesticides, speciality fertilisers, fine chemicals, seeds, and farm management services. Tata Chemicals, on the other hand, will deal in high-volume bulk fertilisers, soda-ash and salt.
Tata officials said the changed market scenario meant that managing Rallis’ portfolio of products would be different from selling items that Tata Chem makes.
“Tata Chemicals is the only urea major which does not carry out its marketing on its own. Given the supply-demand scenario, it needs to have full control of its entire value-chain. Hence, the disengagement from the agreement for urea between the two firms,” a release said.
Tata Chemicals will benefit in terms of enhanced profitability as the transfer of the arrangement is expected to optimise the money it spends on marketing. The move is also seen opening up fresh opportunities to expand into related areas, such as phosphates.
The agreement was reached in 1994, but was being reviewed annually since 1997. Both companies monitored the benefits and the value-add from this arrangement.