Industry Overview
The year 2021-22 started with favourable monsoon with sufficient
precipitation and spread. As a result of this more area was sown creating an usual demand
of fertilizers during Khariff and Rabi seasons of the year. The total cropped area
increased by 4.75% over the normal coverage in the country.
As a result, the agricultural production increased during the year. The
increase in production of food grain is 1.71%; Oil seeds is 3.34 % and Sugarcane is 10.6%
over the previous year. The enhancement of support price by about 9% also propelled
additional area under cultivation.
The overall availability of Urea during the year was satisfactory, with
reports of non-availability in certain pockets during peak cultivation period. There was a
reduction in the supply of Urea by 3.5% over the last year due to reduction in the import
of Urea. However the supplies from the indigenous production increased by 1.89% at 25.07
million tonnes from 24.60 million tonnes a year ago. The total supplies during the year
stood at 33.48 million tonnes as against 34.71 million tonnes during the previous year.
Impact of COVID-19 Pandemic.
During the COVID Pandemic, your Company ensured continuity in business
and protected the employees through appropriate measures by facilitating large scale
testing and implementing the guidelines given the Government. Regular screening and
monitoring of all the employees who attended
the work also helped us to take appropriate preventive actions to
contain the spread of the virus.
Services extended to the Farmers (Consumers).
Your Company continued to provide services to the farmers in improved
cultivation practices, soil health management, integrated nutrient and pest management
practices to bring down the deposits of residues on the soil, crop and harvest.
Your Company undertook the following activities during the year.
1. DBT (Direct Benefit Transfer) in Fertilizers:
Your Company is the Lead Fertilizer Supplier (LFS) for Tamil Nadu and
Puducherry. As an LFS, we ensured the active usage of ePOS devices at the fertilizer
retail points. We conducted awareness programs among the farmers, capacity building
exercise to retailers to ensure effective utilisation of the ePOS machines while
conducting the sale of fertilisers in association with the officials of Agriculture
Department and National Informatics Centre (NIC). There are 12,673 numbers of ePOS devices
deployed in the states of Tamil Nadu and Puducherry.
2. Model Fertilizer Retails Shops (MFRS):
The Department of Fertilizers, Government of India has introduced a new
concept of Model Fertilizer Retail Shop (MFRS) during the year 2016-17, with an aim to
impart the latest technologies in Agriculture for resource optimization and to increase
the returns from the farms. As a result Your Company established 27 numbers of MFRS spread
across Tamil Nadu, Puducherry, Kerala, Karnataka and Andhra Pradesh. These Centres provide
Agro Services like soil testing, irrigation water testing, educating the farmers to
practice soil test based nutrient management, integrated pest management, soil health
management, etc.
3. Mobile Soil Testing Lab Services (MSTL):
Through our Mobile Soil Testing Facility, we have extended the soil
testing services to farmers located in the neighbouring states of Karnataka and Andhra
Pradesh; in addition to the farmers of Tamil Nadu. Based on soil health and nutritive
status of the soil analysed, we encouraged the farmers to follow soil health based
agronomical practices with due importance of using organic inputs for sustaining and
improving the soil fertility and productivity levels.
4. Trainings to Farmers.
We offered In-house training programs to progressive farmers from the
State of Tamil Nadu in our training centre located at Tuticorin. The outreach programs
were conducted to groups of farmers in different parts of the state.
5. Model Integrated Agriculture Farm.
As part of the In-house training programs, we have developed and are
managing an integrated agriculture farm having high value agriculture crops, medicinal
plants, farm animals in Tuticorin. The concept of integrated agriculture is being
demonstrated to the farmers to adopt this concept to further enhancing the returns from
farming.
6. Pannai Cheythi Malar.
The bimonthly Tamil Magazine covers pertinent articles related to
improved agricultural practices. The new technologies in
Agriculture with stories of success achieved by the fellow farmers in
the state is published. This is becoming a platform for sharing new found knowledge /
technologies in improving the productivity of farms.
Prospects for 2022-23:
Rainfall forecast and demand estimation of Urea:
India is likely to witness normal rainfall during the Southwest monsoon
season this year as per IMD predictions as the LPA considered so far has been revised to
868.6 mm (1971-2010) from the earlier value of 880.6 mm based on 1961-2010 period.
Considering this normal forecast, country will be working towards a targeted food grain
production at 328 million tonnes for the year compared to expected production of 316
million tonnes during 2021-22.
Demand is expected to be higher for urea by 3.3% during 2022-23 which
means, the domestic urea production should exceed 30 MT to reduce Indias dependence on
imports. The promising fact is that the demand can be met by enhanced domestic production
of urea as new plants are being commissioned and old ones are expected to produce more.
Nano Urea:
Nano Urea, a liquid formulation containing 4 ~ 14 % Nitrogen has been
introduced by Indian Farmers Fertiliser Cooperative Ltd (IFFCO) during 2021. This is
recommended as a substitute product for the prilled and granulated Urea. The acceptance of
this Nano Urea by the farmer is yet to gain momentum due to the instability of Nutrient
content, non-compatibility with other agro chemicals and higher cost of application. As
Urea forms 82 % of the total nitrogenous fertilisers consumed in India, Government is
encouraging fertilizer companies to formulate strategies to replace Urea with Nano-Urea.
Your Company has entered into a research tie up with Tamil Nadu
Agriculture University for a detailed field study to know the efficacy and phytotoxicity
of Nano Urea in comparison to SPIC Urea (Prilled Urea). This study will also reveal the
economic benefit of using Nano Urea over SPIC Urea in Paddy cultivation. Once the field
trails are completed, more information on the efficacy of the product to device suitable
strategy of employing Nano Technology in Nutrient Delivery Systems would be available.
All India Urea Production, Import, Supplies and sales with previous
year
All India U rea Producti on, Import, Supp lies and sales with previous
y ear
Tissue Culture Business:
Your Company supplies highest quality of Tissue Culture (TC) Banana
plants to the farmers at a price that is higher than the competitors. As a COVID relief
activity to farmers, the Tamil Nadu Horticulture Department supplied TC Banana plants free
of cost. This has curtailed the demand from a section of farmers and forced to slash the
prices, compromising on the margins. Since this scheme is likely to continue for some more
time, focus was shifted from low cost Banana Plants to high value Ornamental plants from
2021-22.
As a result, production of Tissue Cultured Ornamental plants was
started and supplied to another organisation on B2B format.
Having got the protocols streamlined your Company planned to produce
larger quantities of high value of ornamental plants including Orchids and market directly
to the large nurseries.
In order to increase the profitability by optimising the cost, we have
undertaken the replacement of high energy consuming machines with latest ones with low
energy consumptions. Replacement of old machines with latest one to increase the
productivity is also planned. The downsizing of employee to retain the core competencies
has resulted in substantial reduction in the cost of production during the year.
Continuous cost optimisation at all stages of production and inclusion
of high value products is showing positive results.
Financial Ratios
The significant changes in the financial ratios of the Company, which
are 25% or more as compared to the previous year are summarized below:
| Ratios |
2021-22 |
2020-21 |
Reasons for change |
| Net Profit Ratio (%) |
7.53% |
3.42% |
Increased Net Profit due to gas conversion
of plant had resulted in higher Net Profit ratio in current year. |
| Debt Service Coverage Ratio (times) |
2.13 |
0.42 |
Increased operating profit due to gas
conversion of plant and repayment of borrowings had improved debt coverage ratio in
current year. |
| Debtors Turnover Ratio (days) |
4 |
9 |
Due to high demand for Urea, Customer has
settled their dues in shorter period, which has let to reduction in debtors and overall
improvement in Debtors Turnover Ratio. |
CHALLENGES
Your Companys stable operation depends on completion of NG supply
infrastructure in all respects by IOC and sustained supply of gas thereafter. Reliable
availability of full quantity of NG (1.5 mmscmd) is most vital for full realisation of
benefits of gas conversion & other related investments. DBT stabilization using ePOS
machines at retail shops and addressing connectivity issues are of utmost importance.
While the subsidy disbursement has vastly improved, thanks to Government for clearing the
backlog in one go, concerns still remain due to huge jump in commodity prices globally.
Thus, the working capital pressure will continue to be a challenge. The policy evolution
regarding Urea sector decontrol is being carefully watched and proactive solutions to meet
those challenges are being evolved.
ACKNOWLEDGEMENT
Your Company is grateful for the co-operation and continued support
extended by the Department of Fertilizers, Ministry of Chemicals and Fertilizers, Ministry
of Petroleum and Natural Gas, Ministry of Agriculture, Ministry of Shipping, Ministry of
Corporate Affairs and other Departments of the Central Government, the Government of Tamil
Nadu, Governments of other States, Tamil Nadu Industrial Development Corporation Limited,
Tamil Nadu Generation and Distribution Corporation Limited, Indian Oil Corporation
Limited, Oil and Natural Gas Corporation Limited, Financial Institutions and Banks. The
Directors appreciate the dedicated and sincere services rendered by all the employees of
your Company.
|
For Southern Petrochemical Industries
Corporation Limited |
| Place: Singapore |
Ashwin C Muthiah |
| Date: 10th August 2022 |
Chairman |
Cautionary Statement:
This Report is based on information available to the Company in its
business and assumptions based on the experience in regard to domestic and global economic
conditions and Government and regulatory policies. The performance of the Company is
dependent on these factors. It may be materially influenced by macro environment changes,
which may be beyond Companys control, affecting the views expressed or perceived in this
Report
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