The government’s decision to deregulate non-urea fertiliser and increase urea prices has come as a clear winner for the industry. While non-urea fertiliser producing companies will see a rise in profits going forward, the ones producing urea will benefit in the long run, once the government decides to deregulate the prices fully.
The Cabinet also announced an increase in the price of urea by Rs 480 per tonne.
“Deregulation is a welcome move. It will allow companies to price their products rationally and lead to optimum utilisation of fertiliser,” said Jay Shankar, chief economist and vice-president at Religare Capital Markets.
While Zuari Industries and Coromandel fertilisers saw their share prices rise by 3.3 per cent and 2.8 per cent respectively on Friday, others like Chambal Fertiliser and Gujarat State Fertiliser and Chemical saw their share prices fall by over 4.5 per cent during the day.
“Non urea fertiliser producing companies will see a rise in profits,” said Hemant Nahata, analyst at India Infoline. “Urea producing companies will only see a slight change in their working capital but nothing on the earnings front as of now.”
Experts suggest that this is a move towards full deregulation and decontrol in urea prices will also take place subsequently. “The urea price increase should be viewed as an affirmation of the government’s intention to decontrol the fertiliser sector,” said an analyst at Emkay Global Financial Services.