Fertliser cos surge over 7% on urea price hike hopes

MUMBAI: Shares of fertilizer companies gained momentum in trade today following reports that the government may raise urea prices by 10 per cent to cut subsidy costs.

According to analysts, the move will improve profitability of the fertilizer sector and increased prices will be a positive for urea manufacturers.

Urea prices have been left static past many years as any increase in price would lead to higher food grains prices. Urea, as of now, is highly subsidised even the cost of production is going up.

In terms of urea, the ministry is still struggling to pay out subsidies. In the interim Budget, the UPA government dedicated $11 billion to fertilizer subsidies. Last year the same ministry also struggled to pay out subsidies, and banks had to step in to provide loans.

Currently, a metric tonne of urea can be purchased by farmers at a maximum retail price (MRP) of Rs 5,360 ($90). The difference between the MRP and the delivered costs of urea is paid as a subsidy to fertilizer producers.

The Finance minister Arun Jaitley reportedly said that the government aims to create positive action through economic reforms in the forthcoming budget to revive investor sentiment and promote growth.

At 10:15 a.m.; Rashtriya Chemical Fertilisers was up 7.67 per cent, National Fertilisers surged 8.06 per cent, GSFC moved up 2.99 per cent and Chambal Fertilisers gained 7.02 per cent.