This week the Indian government announced that it would start closing its state-owned trading companies, State Trading Corp. (STC) and Metals and Minerals Trading Corp. (MMTC).
The announcement said the closing would take place one at a time, without a specified timetable.
The first to go is expected to be STC, which showed losses in the 2018/19 fiscal year exceeding US$124 million. The government will also exit Project and Equipment Corp. of India (PEC), which does not trade fertilizer.
The closing of MMTC as a state-owned enterprise will come in steps, according to Indian media reports. The plan announced so far will reduce the government’s stake in MMTC from 90 percent to 75 percent. Other reports indicated that the government may move to completely divest itself of MMTC.
International urea traders called the announcement significant. Currently, all urea for agriculture use is imported by MMTC, STC, and Indian Potash Ltd. (IPL). So far this year, only MMTC has been importing urea.
Urea, unlike the phosphate and potassium fertilizers, is heavily subsidized and remains a politically volatile commodity. Efforts to lower subsidies or to move urea sales to a market-based system have been met with opposition from farmers and agriculture groups in the country.
One source told Green Markets that the move to close or divest from the state-owned trading houses could open a window of opportunity for private-sector companies to import urea. However, given the political nature of urea imports, the government will most likely remain involved in the urea market.
International traders said the departure of MMTC from the urea importing business may take longer than the government wants. One trader said the original plan of the government was for India to be self-sufficient in urea by the end of next year. Sources said while the country has made strides toward that goal, it will not reach it as planned.
Five older urea plants are being upgraded and restarted to add another 6.3 million mt to the country’s production (GM June 21, p. 26). The last of those revamps is slated to be up in September 2023. The company hopes these initiatives will make it self-sufficient in urea.