Fertiliser stocks are up in the green, swaying happily to the winds of subsidy. Chambal Fertiliser hit a new high today at Rs.310; GSFC too at Rs.124.70; GNFC surged over 4%; RCF is up over 8.5%; Deepak Fertiliser hit a new high at Rs.310; NFL rose 10.5% and Coromandel Fertiliser was up over 6%.

The Govt yesterday, hiked its share of subsidy for Di-Ammonia Phosphate (DAP) by 140%, from Rs.500 per bag to Rs 1200 per bag; this effectively means, it has now rolled back the 58% price hike by companies in April.

This increase in subsidy means that fertilizer companies will now be able to sell DAP at the old rate of Rs 1200 per bag v/s new price of Rs 1900 per bag. This will lead to better offtake for the kharif crops, meaning higher despatches by fertiliser companies in current Q1.

Earlier, on the price of Rs.1700/bag, the Govt was giving a subsidy of Rs.500, meaning companies were selling for Rs.1200/bag. But with international prices of phosphoric acid, ammonia going up over 60%, DAP is actually now priced at Rs.2400/bag. And now with this decision of yesterday, farmers will continue to get DAP at the same old rate of Rs.1200/bag.

The burden of the subsidy will be borne by the Govt.