Liberty Phosphate Ltd.

Liberty Phosphate Ltd.TMGovernment regulations/subsidyThe Ministry of Chemicals and Fertilizers approved the NBS in March 2010, in an effort to decontrol prices, moving away fromregulated returns in complex fertilizers to import parity realizations. Since the announcement, fertilizer sales volumes have risensignificantly. For example, in FY11, sales of complex fertilizers other than DAP rose by ~40% despite a significant increase in prices.Under the new regime, there is a fixed subsidy for nutrients and unlike in the past, when the government set the MRP, the currentregime lets manufacturers determine their own selling prices. MRP is expected to fluctuate depending on price variations in fertilizers& raw materials in international markets.Finance Act, 2012 has given stimulus to the fertilizer industry. The government announced that investment linked deductionof capital expenditure incurred, is proposed to be provided at an enhanced rate of 150% as against 100% at present for fertilizers. Ithas exempted 5% customs duty on import of equipment for initial setting up or substantial expansion of fertilizer projects for a periodof three years. This move should encourage new entrants and expansion of capacity by existing players. The focus would now be toencourage the use of SSP more, because, subsidy on SSP is easy to control and product is good for the crops as well. Basic customs dutyon a few soluble fertilizers and liquid fertilizers, other than urea, has been reduced from 7.5% to 5% and from 5% to 2.5% respectively.On 29th March ’12 the Government announced the revised nutrient subsidy rates applicable for FY13. Nutrient subsidieshave declined substantially as compared to FY ’12, with the largest decline in Phosphorus mainly to reduce subsidy outgo in line withdeclining raw material prices. Urea still remains the cheapest fertilizer and hence overused by Indian farmers impacting soil quality.Subsidy on SSP (0-16-0-11) has been fixed at ` 3673 per MT.In order to ensure quality of SSP, the SSP manufacturers are required to produce a certificate of quality issued by the StateGovernments in which the units are located. The units are required to write/print “Quality Certified” on each bag of the SSP. Only thoseSSP manufacturers are allowed to claim subsidy, which produce 50% of the annual installed capacity or 40,000 MTs per annum. TheSSP units are allowed to claim 85% ‘On Account’ payment of concession to be settled subsequently by Department Of Fertilizers (DOF)based on the certification of sales issued by the State Governments. In addition to subsidy per kilo of NBS for Phosphate and Sulphurin the SSP, a lumpsum freight subsidy is also allowed. As per latest reports freight subsidy is discontinued.Government is considering change in the method of computation of subsidy on P&K fertilizers grades having less than 85%water soluble P2O5 content.Nutrient based Subsidy - ` per kg. of NutrientNutrients/Year (`) FY '13 FY '12 % changeNitrogen 24 27.2 -11.8Phophorus 21.8 32.3 -32.5Potassium 24 26.8 -10.4Sulphur 1.677 1.7 -1.4Liberty Phosphate Ltd. is also available on www.balance-equity.co.in