Fertilizer companies shop abroad to cut costs

By agencies   |   Tuesday, 27 December 2005, 08:00 Hrs
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NEW DELHI: Two big-ticket M&A deals, a string of high-profile joint ventures between Indian and foreign players and commencement of urea supplies from the $640 million JV between Iffco-Kribhco and Oman Oil Company put the Indian fertilizer industry in limelight during the year.

The most important development, of course, was the commencement of urea supplies from the Iffco-Kribhco and Oman Oil JV, which has significantly reduced the country’s dependence on imports, a newspaper reported.

The government implemented a pricing policy for setting up new urea projects and expansion of existing units. It allowed the units to enter into joint ventures abroad, especially in the Middle East and Africa, the Financial Express said.

The Abhijit Sen committee proposed new norms for pricing of phosphatic fertilizers, creating a level-playing field for the companies and providing them the required competitive edge in the international market,Seeing the core competence of the Indian companies, several foreign fertilizer majors have shown interest to enter into JVs with Indian companies. The major ones being that of El Naser, an Egyptian company, which signed an agreement with Iffco for setting up a $325 million phosphoric acid plant in Egypt where Iffco will hold 76 percent stake.

Similarly, south-based company Coromandel Fertilizers, part of the $1 billion Murugappa group has firmed up an agreement with Groupe Chimique Tunisien of Tunisia for producing phosphoric acid, a critical input for manufacture of DAP.

Fertilizer is one industry where the private sector is losing ground. Public sector units like National Fertilizers Limited (NFL), Rashtriya Chemicals and Fertilizers Ltd (RCF) have done far better with their combined market share rising from 29 percent in 2000 to 31 percent in 2004-05.

The expansion and JV plans charted out by these companies are the result of a spurt in demand, propelled by increased agricultural activity and a strong food security cover, the paper said.

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