Major private-sector urea manufacturers are Tata Chemicals and Indo Gulf Fertilisers and Chemicals Corporation. In the case of Tata Chemicals, urea sales are over one million tonnes per annum. This contributes around 48 per cent to the total sales of the company. Urea production of Indo Gulf, the Aditya Birla Group company, topped 9.3 lakh tonnes during 1997-98. Urea contributes 573 crore to the turnover which 90 per cent to the sales.

In a bold decision, the finance minister has made urea, a popular fertiliser, dearer by Re 1 per kg (Rs 1,000 per tonne) with immediate effect. This will save the government a subsidy outgo of Rs 600 crore on indigenous urea and would thus reduce the burden to Rs 6,000 crore.

The farmer's price of urea will subsequently increase to Rs 4,660 per tonne from Rs 3,660.The decision stems from the fact that the NPK ratio had become highly distorted to 10:2.9:1 in 1996-97, from a rather balanced one of 5.9:2.4:1 way back in 1991-92.

An increase in the urea price will restore the balance, said Yashwant Sinha in his budget speech. According to Tata Chemicals managing director Manu Seth, "This will not affect the bottomline of the company as the season is expected to be good. The offtake and demand of urea is largely dependent on the season."

It is a step in the direction towards adopting the Hanumantha Rao recommendations, said Seth. The urea price increase will benefit manufacturers of potassic and phosphatic fertilisers which had to face the brunt at the time of the partial decontrol in 1992, when urea became a favoured fertiliser.

The benefit to decontrolled fertiliser manufacturers will be in terms of an expected increase in offtake. Analysts feel that this may lead to higher inventory levels for urea manufacturers as a result of a shift in demand for otherdecontrolled fertilisers.

The budgetary subsidy allocation for decontrolled phosphatic and potassic fertilisers has increased by 15 per cent to Rs 3,000 crore.

Urea is the only controlled fertiliser while others like Diammonium phosphate (DAP), single super phosphate (SSP) and other complex fertilisers are partially decontrolled. While the government is currently evaluating the Hanumantha Rao Committee recommendations, Yashwant Sinha said that the existing system would continue for the moment.

As per the Hanumantha Rao committee recommendation, the subsidy burden on the government would reduce with higher fertiliser prices for farmers. For instance, the report has suggested, the farmgate price for urea would go up to Rs 6,500 per tonne.

The fertiliser industry, due to bottlenecks, was not attracting fresh investments of substantive nature. Deceleration of investments was a cause of worry since India imports fertilisers in bulk to contain the widening demand-supply gap. Further subsidy burden hadincreased from Rs 4,800 crore in 1990-91 to Rs 7,767 crore in 1996-97.

The government has also made several serious moves to link up the farm sector with the financial markets, which will have a substantial beneficiary effect oon patterns of fertiliser consumption not only in terms of quantity, but also in terms of quality, feel analysts.

With better credit delivery says that are being proposed and hopefully put in place before the end of the current fiscal it is going to be possible for farmers to use their funds more efficiently to purchase fertilisers, said fertiliser industry analysts.

They mentioned in particular the provisions of the government for the introduction of farm sector credit cards, through which the agriculturists will be able to ensure more efficient use of their funds to further their business activity.

Also, allowing farmers access to international markets through export of commodities is going to make their businesses far more capital intensive and will unleash powerfulpurchasing power forces, said analysts, which will benefit the fertiliser sector in general.

It is believed that the government has concentrated in this year'sd budget far more on agriculture than usual in order to ensure an appropriate reaction to the disastrous series of 316 suicides that occurred in the Indian rural areas last year due to failure of credit delivery mechanisms.