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MFL seeks tenders for import of 15,000 tonnes of potash

August 22: Madras Fertilizers Limited (MFL) has invited bids for supply of 15,000 tonnes of muriate of potash (MOP) for shipment to Chennai port during September-October 2014.
8The company has stipulated supply of fertilizer of only pink or red colour. It has asked for “Crystalline, free-flowing pinkish in colour and free from visible contamination of clay or grit.”
8The tender document says: “The supplier shall quote in USD on CFR basis for discharge at Chennai port…The price should be quoted for payment by Letter of Credit (L/C) against 180 days free credit period, from the date of Bill of Lading.”
8The last date for submission of offers is 4th September.

MMTC solicits offers for importing 30,000 tonnes of APS complex fert

August 22: MMTC Limited is seeking tenders for prompt supply of 30,000 tonnes of ammonium phosphate sulphate (APS) (20-20-0-13) complex fertilizer at Tuticorin port.
8The last date for submission of tenders is 27th August 2014.
8The tender document says “offer to be kept valid till 01.09.2014 at 1700 hrs. in case of l1, bidder might be asked for extension of validity for further one week.”

Saurabh Chandra pushes for using LNG by power stations-I: Cost of using diesel and FO higher than LNG

August 21: With a view to resolving the problem of stranded gas-based power stations and reducing frequent power cuts in the country, the petroleum secretary Saurabh Chandra is pushing for the use of LNG by power stations.
8Chandra had got a comparison done showing the cost of power generation by using both domestic and imported gas vis-a-vis diesel and furnace oil (FO) and found out that, at the current price levels, even spot LNG based power generation turns out to cheaper than diesel or FO-based generation.
8While the cost of producing 1 KWH of power from diesel (Rs 57.84/litre) and FO (at Rs 42,140/MT) works out to Rs 13.57 and Rs 11.63, respectively, the cost, if produced from spot LNG (at a rate of $16.5/mmBtu), comes to only Rs 10.33/KWH. Again, if this is produced from term LNG (at $14/mmBtu), the cost works out even cheaper at Rs 9.02/KWH.
8To put things in perspective, at the current domestic price of $4.2/mmBtu, the cost is only Rs 3.39/KWH.
8The ministry, it seems, is quite serious about
pushing for the use of LNG by power plants. It had earlier suggested that the power ministry should devise modalities for supply of gas at a uniformed pooled price for all power plants to address the minimum requirement of natural gas for stranded gas-based power plants. The additional demand, above the minimum requirement of gas-based power plants, could then be met by supply of additional volume of RLNG.
8Another suggestion made by the petroleum ministry was that the power ministry should make purchase of a certain percentage of power produced from gas-based plants mandatory so that the high cost of gas-based power could be spread over the total quantity of power being sold by the distribution companies.
Comment: Chandra's calculations highlight the contradictions in the Indian power sector. On the one hand, there is rampant use of captive power plants running on diesel and FO, even when using LNG is cheaper, while on the other there are no takers for gas prices perhaps higher than around $5 or $6/mmbtu. The merit order power purchase policy just leaves no room for expensive power to be pumped into the grid. A lot has to change in the power sector before LNG can be used as feed for gas based power plants.

Saurabh Chandra pushes for using LNG by power stations-II: Delivered cost matrix for gas in Delhi

August 21: The website carries here, for reference purposes, the delivered cost matrix of gas (domestic, term and spot) in Delhi.
8While, the delivered cost of term LNG (at $14/mmBtu) in Delhi works out to $16.84/mmBtu, the cost of spot LNG (at 16.6/mmBtu) comes higher at $19.6/mmBtu.
8The delivered cost of domestic gas (at 4.2/mmBtu) works out to $5.02/mmBtu.
8It is because of components like import duty on R-LNG, re-gasification charges (which is not applicable for domestic gas), marketing margin, state VAT on re-gasification, local sales tax, transportation charges and service tax that the cost of gas gets inflated by the time it is delivered in Delhi.
8The break-up of all the components (for domestic, term and spot gas) is carried in details.
8Along with this, the VAT rate in Delhi, rate of import duty and the rate of service tax on transportation charges is also given.

CVA to set up SSP plant in Odisha

August 21: Cee Vee Agrience Pvt. Ltd. (CVA) has proposed to set up 30,000 tonnes per annum (tpa) Single Super Phosphate (SSP) unit in Cuttack district of Odisha.
8CVA would like to market its products through Paradeep Phosphates Limited if a statement in the project feasibility report (PFR) is any indication.
8As put by PFR, “the company has held discussions with Paradeep Phosphates Limited wherein they have shown inclination to enter into a long term marketing arrangement.”
8The cost of the project is estimated at Rs 4.84 crore.

Biofertilizer subsidy for pulses trebled under NFSM

August 21: The Union Department of Agriculture and Cooperation (DAC) has announced a significant increase in the subsidy on biofertilizers applied on pulses under the National Food Security Mission (NFSM).
8In a communication dated 14th August addressed to the States, DAC says: “With the approval of competent authority it has been decided to increase the rate of subsidy for biofertilizers under NFSM-Pulses from Rs. 100 per hectare to Rs.300 per hectare.”

Fertilizer consumption in 2014-15 likely to be at the same level as in last year

August 20: Coromandel International Limited (CIL) expects flat growth in fertilizer consumption during the current financial year.
8At recent conference call on with investment analysts, CIL Managing Director Kapil Mehan said: “We expect that fertilizer consumption per se may not grow, but definitely the domestic sale of decontrolled fertilizers will grow as well as urea also will grow if the government does not revive its prices upwards.”
8He pointed out that the demand would come under stress in the ongoing Kharif season. The growth in consumption might not happen because last year last year, the consumption of complex fertilizers including DAP was 17.5-18 million tonnes. And the urea consumption touched over 30 million tonnes.
8He said: “I think they should remain at same level or urea may go up a little bit. But you will see increase in sales of decontrolled fertilizers because pipeline inventory is much less as compared to last year. It is a little bit of a paradox to understand that consumption may stay same and sales go up. It is primarily because of the pipeline inventory impact which was visible during last year.”
8Answering another question, Mr. Mehan said: “I think our first request to the government has always been for the last two years is that there is a need to correct the imbalance in the views of nutrient ratios and that means urea selling price needs to go up and one way to do that would be to put urea under nutrient based subsidy scheme so that while once a year the subsidy number gets recalibrated, but during the year whatever cost increases etc. happens, the industry is able to pass it on to the farmer as the industry will have the freedom to fix the selling prices. So that is really what we expect the government to do. Second thing, we expect the government that over a period of time they must provide for full budgetary allocation as far as subsidy payouts are concerned because that puts a huge burden on the working capital for each company and that is something which I think the government is very keen on both these issues.”
8He said another issue was of inventory duty structure where raw material and finished goods carry more or less the same level of duty and that needs some correction.
8He added: “I think these are the couple of demands that we have with the industry and of course industry stand is always that and then industry expects that the government at some day will start giving this subsidy directly to the farmers.”

CIL makes significant savings by changing its borrowings strategy

August 20: Coromandel International Limited (CIL) has reduced its finance charges significantly by shifting borrowings from hard currency to the Rupee.
8At recent conference call on with investment analysts, CIL Chief Financial Officer S.Sankarasubramainan explained: “We have slightly shifted our strategy in terms of foreign exchange exposure with a fully hedged cost being costlier, we shifted to rupee borrowings. When we take a dollar borrowing, the dollar interest rate alone gets grouped under the financing cost and the premiums are grouped under other expenditure. If you see our other expenditure, has shown a significant drop basically because our premiums have come down almost by Rs.22-23 crores.”
8He continued: “Since we shifted from dollar borrowing to rupee borrowing, our total interest burden gets booked into financing cost. In terms of cash flow, there is an improvement and debt is at the same level of fourth quarter. But due to the shift in borrowing mix from dollar to rupee there has been an impact on the reported interest charges.”
8Asked whether the company any plan for further expansion or whether it is looking for merger and acquisition (M&A) in the current financial year, CIL Managing Director Kapil Mehan said: “See, M&A acquisition is a very much part of our growth strategy and if you look at our history, we have grown through this. So this is very much part of our strategy to grow inorganically, but as you would appreciate that we cannot discuss these things prematurely. We constantly keep evaluating opportunities in space around agriculture and agriculture inputs. As and when there is a strategic fit, there is a value creating opportunity we do get in, but I cannot put any timeline to it or I cannot give more details on that.”

TCL positioning itself as branded solutions entity in agri & consumer space

August 19: In its platinum jubilee year, Tata Chemicals Limited (TCL) is transforming itself as a “branded solutions company in the agri business and retail consumer space” from being a leader in the Inorganic Industrial Chemicals segment.
8In its annual report for 2013-14, TCL explains: “Within the Agri business space, bulk fertilisers like urea, Di-ammonium Phosphate (DAP) and NPK are regulated commodities and are therefore, dependent on subsidy payments. This is the reason the Company is moving towards branded and specialty agricultural products. The Company’s TKS (Tata Kisan Sansar) network comprises 957 stores and continues to grow through greater farmer connect. The network provides products and solutions under one roof, along with value-added advisory services that benefit farmers. The Company’s subsidiaries Rallis and Metahelix are also playing a significant role in the transformation process.”
8It says: “The focus, going forward, will be to adopt technology as a differentiator, to invest in high-tech products such as specialty fertilisers, herbicides, weedicides and high-grade seeds. TCL (including its subsidiaries Rallis and Metahelix) is continuing to strengthen its deep engagement with the Indian farming community.
8It adds: “Nutritional Solutions, the new business line that the Company developed from its Innovation Centre, is expecting to start commercial production for its first product called Fructooligosaccharide (FOS) soon. This is an outcome of the Company’s continued focus and investments in technology that will continue
to be the driver for growth through differentiated products and offerings, many of which are already in the pipeline.”

TCL voices concern over adverse policy framework urea self-sufficiency

August 19: Tata Chemicals Limited (TCL) has voiced concern over the unfavourable business environment for urea business and imbalanced application of nutrients to crops.
8According to the Company's annual report for 2013-14, “Given that the gas prices are slated to increase in FY 2014-15, the domestic production over “cut off ” levels may see some reduction if the international prices do not prove to be supportive.”
8The Report observes: “The New Investment Policy 2012 for urea has been tweaked during the year and may undergo further changes with the functioning of the Government. The policy, as it stands today, is not attractive enough to invest in the expansion of urea capacity. The Government announced an increase in the fixed cost subsidy for existing urea plants, effective for FY 2014-15. The fixed cost considered is now moving closer to the actual expenses incurred by the companies.”
8As regards customised fertilizers, the report says: “The Company has so far registered four grades for major crops like paddy, wheat, potato and sugarcane for Western U.P. Although the product has received a favourable response from farmers, with respect to the convenience of use, increased yield, as well as the improved quality of the produce, sales have been low, due to the drastic increase in the prices of decontrolled fertilizers and initial hesitation in adopting a new fertiliser application practice. The Company is continuing its eff orts in popularizing the product by targeting select clusters and conducting focused awareness-building activities in those areas. In the case of sugarcane grade, the Company is trying to popularise the products by involving sugar mills in the process.”
8The report notes that the key concern for FY 2014-15 would be the impact of El Nino conditions on the monsoon, which is currently predicted at 95% of the long period average. This could see some shift in the cropping patterns. Another concern involves the insuffi cient subsidy allocation, which will lead to high arrears of subsidy. The Government intends to monitor the farmer prices (MRP) even in the decontrolled segments. In addition, the caution displayed by the manufacturers and importers may adversely impact the availability of fertilisers whenever prices are strengthening. The dis-proportionate use of nitrogen and its impact on balanced nutrition continues to remain a concern; the current NPK balance in soil has deteriorated to 8.7:3.4:1.

MMTC solicits offers for urea supply in September

August 18: 8MMTC Limited has invited tenders for import of 20,000 quantity of urea for arrival at Indian port by first half of September 2014.
8The prospective suppliers have the flexibility to offer prilled urea in bulk or in bags. While specifying the packaging format, MMTC has, stated: "Buyer holds the right to decide the final form of packaging."
8The last date for submission of bids is 21st August.

PPL expected to complete debottlenecking & CPP during Q4 2014-15

August 18: Paradeep Phosphates Limited (PPL) is bracing to complete its debottlenecking project and captive power plant during the fourth quarter of current financial year.
8While revising its outlook on the company’s rating on long-term debt to stable from negative, ICRA says: "the company is expected to complete its debottlenecking projects and captive power plant during Q4 FY15 (delayed to some extent due to cyclone during October 2013, although significant cost overruns are not expected), which should help improve the cost structure further."
8The Rs 715-crore project would help PPL increase its production capacity for diammonium phosphate, NPK complex fertilizer as well as for sulphuric acid & phosphoric acid at Paradeep plant in Odisha.
8According to an ICRA release, PPL has been short-listed for a US$ 1.2 billion ammonia-urea complex in Tanzania. In case the company is awarded the project, it may result in a significant commitment in terms of capital and technical requirements. Since there is no clarity regarding the award of the project and possible financial implications, ICRA has not factored in the same while reaffirming the rating.
8PPL is currently among the top few integrated DAP plants in India with an installed annual capacity of 0.72 million metric tonnes per annum (MMTPA) of DAP / NPK complex fertilisers, 0.225 MMTPA of phosphoric acid and 0.66 MMTPA of sulphuric acid. Actual production of DAP / NPK fertilisers has remained higher than the installed capacity over the past few years due to initiation of several operational improvement and debottlenecking projects by the management.
8The company has also scaled up trading operations of various P&K fertilisers, pesticides and agro-chemicals, etc. in recent years.
It says: "The revision in outlook on the long-term rating reflects the improvement in financial performance in H1 CY14 (revenues of Rs. 2038 crore, EBITDA of Rs. 124 crore and net profit of Rs. 46 crore) post substantial losses (net loss of Rs. 173 crore) in 9m FY14."

August 14: NFL eyes potash extraction from underground brine water in Kutch   Details
August 14: RCF mulls 'leasing' of its phosphogypsum derivatives plant   Details
August 13: NFL turns corner in first quarter of 2014-15   Details
August 13: ABNL's agri business boosts its Q1 profit by 30%   Details
August 12: BRPSE moots additional compensation for FACT for using RLNG   Details
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