NEW DELHI, Aug 24: Three fertiliser majors -- Tata Chemicals, Kumarmangalam Birla's Indo Gulf Fertilizers and KK Birla's Zuari Agro - are believed to be undecided about the implementation of their large expansion projects, in the absence of a clear-cut future government policy on fertiliser subsidy.

The country importing about 22.3 lakh tonnes of urea and domestic manufacturers already operating at the highest ever industry average of 95 per cent, most producers had shown interest in expanding their existing capacities. However, all recent expansions are seen either in the public sector or in the co-operative sector.

The fertiliser supply from the domestic industry will go up in the current fiscal following the availability of full capacity of the IFFCO plant and the NFL Vijaypur plant which were commissioned in the last fiscal. Both these plants are of 7.26 lakh tonnes per annum capacity. Another IFFCO plant of 7.26 lakh tonnes is expected to be commissioned in October.

The additional capacity is expected to restrict the urea import in the current financial year to the last year's level of 22.3 lakh tonnes.

Industry sources say that prolonged controversy over the retention of fertiliser subsidy and constant pressure on the government by IMF and World Bank have dampened investor interest in fertilisers. Although foreign investment proposals are pouring in many other core sectors of the industry, there is no overseas interest in investing in fertilisers for the present. Fertilisers is a capital intensive industry and an economic size plant having a capacity of 7.26 lakh tonnes per annum costs as much as Rs 1,500 crore.

The absence of a proper feed-stock policy for making available adequate supply of natural gas, naphtha and furnace oil has also been standing in the way of the fertiliser industry taking a long-term view on capacity expansion.Meanwhile, the imports of all three categories of nutrients - nitrogenic, phosphatic and potassic - continue to account for significant forex outgo.

The cost of importing fertilisers is significantly higher than that of indigenous production. For instance, last year imported urea cost about Rs 2,500 more per tonne than indigenously produced urea. The price of imported urea is not cost-based but is determined by the demand and supply position in the international market. Imports by India and China have a major impact on international prices. Last fiscal, the country's import of 22.3 lakh tonnes of urea cost the exchequer around Rs 560 crore more than it would have if the same quantity was indigenously manufactured. Under such a scenario, an increase in domestic production needs to be emphasised to reduce the nation's dependence on imported fertilisers.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.