The increase of Rs 350 per tonne will add an extra burden on the urea subsidy to the tune of Rs 900 crore. Already, the subsidy of Rs 32,000 was rolled over and there was no money with the government to pay the industry even on account bill after April and May (2013).
Hailing Cabinet Committee on Economic Affairs' (CCEA) move to hike the fixed cost for urea plants by Rs 350/tonne , experts believe the government has given some relief, but is yet to meet the industry expectations.
Suresh Krishnan, MD, Zuari Industries believes the fixed cost of urea has been increasing substantially over a period of time and the industry was looking forward to a revision to the tune of Rs 500-700 per tonne but has been relieved only by Rs 350/tonne.
He says the urea industry will take the discussion forward with the government to get some further relief. Krishnan says, for Zuari Industries, which produces about 4 lakh tonnes, will see Rs 12 crore additional profit before tax as a result of this decision.
Echoing his views, Satish Chander, DG, Fertiliser Association of India says the industry's fixed cost can be pegged at Rs 800/tonne on an average, but the government has given only Rs 350/tonne relief.
The total impact for the industry will be about Rs 900 crore/ annum, which will be what the government will bear as additional subsidy. Chander also says that the move is unlikely to affect retail prices as they are decided by the government but the fixed cost hike will entirely go to the industry.
Speaking about the subsidy, Chander said the subsidy of Rs 32,000 crore was rolled over and there was no money with the government to pay the industry even on account bill after April and May (2013).
He expects a similar rollover for the industry this fiscal, except in case of imported urea which is entirely on the government account and is paid upfront.
Zuari Agro Chem stock price
On February 28, 2014, Zuari Agro Chemicals closed at Rs 129.10, down Rs 1.75, or 1.34 percent. The 52-week high of the share was Rs 214.00 and the 52-week low was Rs 73.50.
The latest book value of the company is Rs 188.85 per share. At current value, the price-to-book value of the company was 0.68.
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