SME Times News Bureau | 07 Dec, 2011
To control the high cost of importing potash and phosphates for the domestic fertiliser industry, manufacturers have asked for creation of a USD 20 billion sovereign fund to buy overseas assets of the minerals.

"Although there was a talk of USD 1 billion allocated for sovereign wealth fund for public sector companies, we have discussed with the government for a sovereign fund of about USD 20 billion for potash and phosphates," said A. Vellayan, chairman of Fertiliser Association of India (FAI) and group chairman of the Chennai-based Murugappa group.

According to Vellayan, India has to follow the Chinese example of securing long-term supplies for the fertiliser sector.

"China has done it and India have to go the same way. Or else we end up paying the USD 20 billion in subsidies, so it's better to secure resources," he told reporters on the sidelines of an event Tuesday evening.

The request by the fertiliser sector comes in the backdrop of increasing raw material prices and the depreciating value of the rupee.

The rupee has depreciated by nearly 16 percent against the US dollar in 2011.

Vellayan proposed that the sovereign fund should also be opened for private sector, even through the public-private-partnership (PPP) model.

"Today, there is a possibility of buying a stake in several mines that are in initial stages of operations and are located in three-to four countries spanning Africa, Canada and South America. This will have an impact on prices."

Currently, India imports 90 percent of raw material for phosphoric and potassium based fertilisers, as domestic production is only able to support 10 percent of the production.

Indian fertiliser companies have entered into joint venture (JV) agreements with countries like Morocco, Tunisia, Jordan and South Africa for securing raw material resources.

The country had consumed 58 million tonnes (mt) of fertilisers in 2010-11, of which 22 mt were imported. While, the rest of 36 mt produced in India had about 16 mt imported raw materials.

Currently India imports 100 percent of potash and 90 percent of di-ammonium phosphate (DAP). In 2010-11, the country imported 7.41 million tonnes of DAP and 4.5 million tonnes of potash.

The rising input cost led to a rise in prices of DAP -- which doubled from Rs.9,350 a tonne in April 2010 to Rs.18,500 a tonne at present.

In the same backdrop of pushing for reforms in the sector, the FIA is organising its annual seminar with the theme of 'Fertiliser Reforms: Challenges and opportunities' from Dec 7-9 being held in New Delhi.