Fertiliser makers may call off dealer sops to widen margins

HYDERABAD: Manufacturers of complex fertilisers are considering withdrawal of discounts and credit facilities extended to dealers to improve their margins, a strategy prompted by the forecast of a normal monsoon and anticipation of better sales this year.

"We expect at least 200-300 basis points of improvement in our margins due to increased demand and withdrawal of incentives to dealers," said a south-India-based company's executive, who did not wish to be named.

State-run Rashtriya Chemicals and Fertilizers has attributed the likely increase in demand to lowering of input cost as well. In a communique to stock exchanges last week, it said: "As the prices of inputs in the global markets are showing a downward trend, it is expected that there would be reduction in farm gate prices. Further, due to lower prices, demand is likely to increase and the working capital requirement is likely to be lower than at present."

Fertiliser Association of India director-general Satish Chander pointed to the monsoon forecast, the reduction in subsidy on Di-Ammonium Phosphate by Rs 2,000 a tonne and the government's directive to manufacturers to pass on the benefit of falling global prices. "With this, we expect the farm gate prices to come down and fertiliser sales to pick up," he told ET. Chander said the timely release of a subsidy of Rs 95,000 crore by the government would further lower the working capital requirements of the fertiliser companies.