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Cri-report.com Investment and Partnerships in India Fertilizer Industry

CRI-report: The fertilizer industry is a vital sector to ensure food security. The complexity of the industry -- with different players with diverse feedstock, and locations -- has made it difficult to enforce a uniformly consistent policy. The uncertainties of policy have resulted in a lack of incentives for growth, and no new investments in brown field and green field projects are being envisioned in the immediate future.

The Nutrient Based Scheme (NBS), which was made effective from Apr.1, 2010, for phosphate and potassic fertilizers, has seen encouraging demand despite price hikes. In the recently announced budget 2012-13, the government is actively considering extension of the NBS scheme to urea and plans to move towards direct cash transfers of subsidies.

The budget also proposes capital investments in fertilizer production to be included as an infrastructure sub-sector and to extend deductions under the income Tax Act. The implementation of this proposal needs to be watched.

The implementation of NBS for urea sector may be positive for the industry in the long run, as such a shift would encourage efficiency in the system. However, the exact modalities of the system require detailed planning in view of the complexity of the industry.

The proposal, which is believed to be backed by the Indian Finance Ministry and the Planning Commission, also calls for a complete decontrol of urea prices from 2012-13, in line with similar decontrols in the phosphate and potash commodity markets in 2010-11.

Key issues with regard to gas availability and pricing need to be addressed, along with a comprehensive long-term policy to encourage any significant investments in this vital sector.

The chemicals sector in India has evolved from being a basic chemical producer to a global innovator. With investments in R&D and government support, this sector is registering significant growth, especially in the specialty and fine chemicals segments.

A network of 200 national laboratories and 1,300 R&D centers provide a strong base to the Indian chemical industry to become innovation-oriented. Shifting focus towards R&D would also facilitate growing opportunities for R&D hubs and industry-specific institutes, according to "India Chemical Industry 2H11" on cri-report.com.

Beginning in April 2011, the government eased regulations for investment by foreign companies that are present in India through joint ventures or technical collaborations (formerly known as the Press Note 1 rule). Now, overseas companies will not have to seek a no-objection certificate from the Indian associate for investing in the sector where the joint ventures operate.

The restructured policy permits overseas firms in existing joint ventures to function independently in the same business segment. Previously, they needed prior approval from their Indian partners.

More details, please see: www.cri-report.com/521-india-chemical-in...