After Narendra Modi-led Bhartiya Janta Party won the mammoth Lok Sabha elections with a clear majority last week, India is hopeful of several reforms and policy changes across industries over the next five years.
Kapil Mehan, MD of Coromandel International, a fertilizer manufacturer, lists down a couple of policies for the new government, which if implemented will boost the fertilizer industry.
According to him, adequate provisioning of subsidy and timely payment is a necessity for the urea industry. Urea prices and duties need to be rationalised soon with urea being brought under the nutrient-based subsidy scheme, he says.
"We expect the government to change this inverted duty structure into a rationalised duty structure where raw materials attract less duty than the finished fertilizer," he adds.
Also Read: Hoping to maintain margins; monsoon key to sales: MCF
In an interview to CNBC-TV18, Mehan says the fertilizer industry is unlikely to get much affected by El Nino, which is a weather phenomenon affecting rainfall in different parts of the world given Indian Meteorological Department has predicted a reduction in rainfall for the country this year.
The fertilizer company has brought down its debt significantly led by various internal factors and there is still scope for further reduction, says Mehan.
Below is verbatim transcript of Kapil Mehan's interview with Ekta Batra and Reema Tendulkar on CNBC-TV18.
Reema: What are the expectations of the industry from the new government and how much can be actually implemented this year itself?
A: There are few things that can be implemented immediately. One of that is the adequate provisioning of subsidy or adequate management of subsidy budget in a manner that bills of subsidy are paid on time and that can be done in couple of ways.
One is by providing more provisions for that. Second is by rationalising the prices of urea which means they need upward revision. They have been static for last many years and today urea is highly subsidised and the cost of urea production is going up. So, if urea is brought under nutrient-based subsidy (NBS) that can help government save thousands of crore of subsidy, that will help the overall subsidy payouts to all the industries.
Two, we expect this government to have stability in fertiliser subsidy policy especially on the investment in new projects, allocation of gas, domestic gas particularly. Third, customs duty structure needs complete rationalisation because we have a situation where some of the raw materials attract more duty than finished fertiliser and that definitely puts domestic industry at a disadvantage vis-à-vis imports.
We expect the government to change this inverted duty structure into a rationalised duty structure where raw materials attract less duty than the finished fertiliser. This is something we have been taking up with the government for a long time. I am sure in the next Budget this is something which should find some mention. Stability, predictability and rationalisation of urea prices, brining it under NBS are few things which can be done immediately.
Coromandel Int stock price
On May 19, 2014, Coromandel International closed at Rs 241.75, up Rs 7.10, or 3.03 percent. The 52-week high of the share was Rs 260.50 and the 52-week low was Rs 162.40.
The company's trailing 12-month (TTM) EPS was at Rs 12.18 per share as per the quarter ended March 2014. The stock's price-to-earnings (P/E) ratio was 19.85. The latest book value of the company is Rs 89.01 per share. At current value, the price-to-book value of the company is 2.72.
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