Need for expediting planned growth of urea plants with natural gas!

As the fertiliser subsidy is reaching Himalayan heights at Rs67,970 crore, the  New Investment Policy should expedite planned growth of Urea plants and availability of natural gas

It is too early even for India Meteorological Department (IMD), to predict the type of monsoon that we may have this year. What is certain is the continued and increasing usage of fertilizers to grow more foodgrains, not only to meet our own needs, but also have enough for export, as we have now a number of established markets for these.


Over the past 13 years, there have been no developments in this industry; no expansion plans as manufacturers have been saddled with lower or inadequate supplies of fuel, resulting in the short fall of about 8 million tonnes, against our annual requirement of 29-30 million tonnes, with the domestic production almost static at 22 million tonnes. These 8 million tonnes have been imported so far.


The international price of urea has been ruling around $350-$360 a tonne and has now dipped down to a $300 level; other nutrient prices have also come down. Our first move, therefore, should be to ensure that serious and immediate steps are taken to negotiate better prices with our established suppliers to plan shipments in time so that we are ready before the monsoon arrives.


The New Investment Policy was notified in January 2013 to boost urea production in country, whose manufacturers have not expanded their production capacities in the last 13 years. A Group of Ministers, who studied the issue of the industry, have recommended increasing the fixed production cost of Urea plants that are 30 years old or more by Rs150 per tonne and for all others by Rs350 per tonne. Consequently, the fixed cost would be uniformly at Rs2,300 per tonne.


For easy reference, it may be mentioned that "fixed cost" refers to the salary and wages paid, contract labour cost, repair and maintenance and selling expenses. The new policy also eliminates the expression of "guaranteed

buy-back" of the urea produced, as, in the true sense of the term, the

Government does not buy back the production


In so far as the increase in gas price, effective from 1st April is concerned, the policy has already a prescribed formula of a flexible floor and ceiling price of gas based on $6.5 to $14 per mmbtu. The floor price has been determined at a return on equity of 12% and the ceiling price at a ROE of 20%.


Beyond delivered gas price of $14 per mmbtu only the floor price will be increased.


By 2017, the demand for Urea is expected to reach 34 million tonnes, as against the current requirement of 30 million tonnes (indigenous production is now 22 mt), and instead of continuing to import, the new investment policy has brought keen interest for development of brownfield projects by existing makers like Indian Farmers Fertiliser Cooperative Ltd (IFFCO), Rashtriya Chemicals and Fertilizers Ltd (RCF), Chambal Fertilisers and Tata Chemicals, with two new players to start greenfield projects of 1.3 million tonnes each. If all these projects go through without hiccups, the total output is envisaged at 41.5 million tonnes, more than what we might need. As much as Rs25,000 crore may thus be invested in these expansions and new projects in the next few years. One of the most important conditions that the government wants to make is to provide a bank guarantee that they will complete the projects on schedule.


To support this, the government plans to give subsidy at a certain percentage for a period of eight years, for those projects that comes up after the amended policy comes into force. It may be noted that the fertiliser subsidy has grown to a staggering Rs67,971 crore (revised) for 2013-14 from Rs18,460 crore in 2005-06 and the budget estimate for 2014-15 remains practically unchanged at Rs67,970 crore.


The only one thing that the Government can consider seriously is if and when increased gas production is available from Reliance Industries Ltd and ONGC can they allocate some for the Urea plants? One option is to decontrol urea prices to assess the impact that it may have?


(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)


Subrata Roy Sahara surrenders before UP police

According to Sahara release, Subrata Roy went out of Lucknow to consult a panel of doctors about certain medical reports of his mother and then also to visit a lawyer’s residence, when the UP police team visited his home yesterday

Subrata Roy, the chief of Sahara group, against whom the Supreme Court had issued a non-bailable warrant, on Friday surrendered before the Uttar Pradesh police.


At the same time, his lawyers have also moved to the Supreme Court for cancellation of non-bailable warrant.


Appearing for Roy in the Supreme Court, senior advocate Ram Jethmalani told a Bench headed by Justice KS Radhakrishnan that 65-year-old Roy is in police custody.


He submitted that the Special Bench, comprising Justices Radhakrishnan and JS Khehar, which heard the case be assembled today to hear his application.


The Supreme Court, however turned down Roy’s plea, saying it is not possible for the Special Bench assembled today to hear it.


On Thursday a team of UP police visited Roy's home in Lucknow but could not find him there.


In a statement, Sahara group said, "During the same time (police visit), he (Roy) was out of Sahara Shaher Lucknow to consult with the panel of doctors with certain medical reports of his mother and then also to visit a lawyer’s residence. On his return late in the evening, he was informed by the family members about the police visit and about the news appearing in certain section of India across the country. On 28th February, in the early morning hours, as a law abiding citizen, he wilfully decided to submit himself to Lucknow police based on the warrant issued and asked them to proceed with their call of duty as per the directions given by the Supreme Court."


“There are plenty of opportunities but little encouragement from the government”, says Laxmi Lobo

Laxmi Lobo the founder of Spring Blossoms, a popular Mumbai-based flower retailer with an online presence that gives her a national footprint says, one has to take many risks to grow the business and succeed. In her case, the risks seem to have paid off well in her journey from Air India to the wholesale flower business to a well-established retail enterprise

After a long stint in Air India, Laxmi Lobo has had an eventful transition to the wholesale flower business and later to Spring Blossoms, a retailer, with a national footprint and strong corporate clientele. Spring Blossoms is able to deliver flowers to all major towns and cities and her corporate clients include HDFC Bank, Cox & Kings and ITC. She works with a small team of 10 and is determined to retain the personal touch, which ensures each floral bouquet or arrangement is unique and perfectly delivered. Laxmi, who has previously trained under Sogetsu school of Ikebana (School of Flower Arrangement in Tokyo) and apprenticed with a florist in Singapore acquired the skills to turn this shop into a full-fledged business with an annual turnover of Rs70-80 lakh.

Excerpts from an interview with Moneylife:

Moneylife (ML): Tell us about your journey to become an entrepreneur?

Laxmi Lobo (LL): I worked in the in-flight services of Air India and enjoyed it. But there were multiple reasons for leaving the aviation industry at the end of 1996. My daughter was five years old and I was keen on spending more time with her. Marriage was not life-changing for me, but having a baby was – I wanted to have flexi-time to be able to be around her. I thought of switching to a ground job in Air India so that I was not out town for 10 days at a stretch. Then an opportunity came along, which allowed me to start my wholesale business of selling export-rejected fresh roses in the local markets.

I weighed my options, Air India had started faltering badly by then, and there were talks of a merger with Indian Airlines, which even I knew would sound the death knell for us. I may have had to resign anyway, since Air India had a retirement age of 35 for women cabin crew in those days. Women cabin crew were discriminated against for a long time those days, so all in all I had made a good decision when I left.

ML: How and when did you transition from wholesale business in flowers to Spring Blossoms?

LL: The wholesaling of roses, in an unorganised flower market, was an eye-opener for a newbie like me, but I survived it and then went on to export too until that opportunity got stymied by horrible bureaucratic regulations. The timing of wholesale flower business was not feasible for a young mother and women entrepreneur. Mornings started at 3.30am and then again in the evening, flowers from various growers would arrive between 7:30pm to 10pm. It was really hard managing the time.

This gave me the idea to shift to a retail business as it had creative appeal and no time constraints. Initially I did weddings and events for corporates and also did two years of full time floral consultation for JW Marriott. But I wanted a steady business so started dreaming of a retail shop, especially after I had helped set up the floral shop at the Marriott.

I believed that good service and getting on to e-commerce in a booming economy of 2004 was a good opportunity. That is when I set up Spring Blossoms and I have never looked back or regretted it. But I do have doubts for the first time this year as our economy has hit a pause button!


ML: What were the main challenges while starting the business? How did you overcome them?

LL: The main challenge was staff training, customer service standards and capital costs.

I started training the ‘karigars’ myself after having learnt how to arrange and care for flowers in Singapore. Similarly, I would train my staff to accommodate customers’ needs and preferences and give proper service. I used to prepare pamphlets in regional languages and would make them read it and do mock selling sessions with them. Delivering fresh and unique floral arrangements is key to the business. There were also issues like not having a cold-chain in India for flowers, which exists all over the world.


ML: The online platform that you created -- I think that helped you to go national, didn’t it? When and how did you decide to set up the website and build a network of affiliates?

LL: I set up the website by the end of 2004, initially just for Mumbai deliveries. The affiliations came, when I travelled and met other flower shop-owners, especially those run by women. Telecommunication was improving and I thought I would be able to reach out to many more customers through the internet. It was an interesting journey and a very interesting learning curve. I still manage most of my online campaigns myself.

ML: I am sure there must be some nail-biting times that were a learning experience and some really satisfying ones too. Would you tell us about those? 

LL: Indeed. One nail-biting episode was when an entire flower consignment of flowers got rejected by a Japanese buyer because of the lack of a proper cold chain in India. It is still the greatest impediment to the fresh flowers business. I lost out on this one.

Flowers typically need to "sleep" at 4°c so that they remain fresh till they are 'awakened by the florist'. That is the norm world over. Here, our flowers come for sale on the tops of public buses and in tempos with loaders sitting on them! Instead of awakening them, the florist has to "resuscitate" them! But seriously, half the shelf life of the flower is gone by then.

Another nail-biting moment was when I had to convince the bride, who felt that her gorgeous wedding plans were coming undone because of the colour of flowers dispatched by the foreign grower from Thailand. I managed to team those lovely white orchids we received (instead of the yellow that were ordered) with our local "gonda" or marigold into lovely cascading balls of flowers and the bride had her hallowed saffron colour. In the end, she was happier than before I think.

One of my worst moments was when I was quite categorically asked to partner with a local if I wanted to remain a wholesaler in the then specifically monopolised market. 

ML: What drives you to work everyday?

LL: The passion of work and growth are my biggest motivations. Also, I love interaction with customers, be it online or offline customers, the corporates and individuals. They are my biggest supporters. Their support encourages me to keep moving ahead. After setting up an online presence to deliver flowers across the country, the challenge was to have affiliates who also ensured good designs, excellent quality and prompt service guarantee.


ML: Why is it important to encourage entrepreneurship in India, especially among women?

LL: Women need to be economically independent and flexi timing jobs are difficult to come by in our economy. So entrepreneurship, where a woman chooses her work hours and how much work she wishes to do, is the real way forward.


ML: What were the biggest challenges you faced as a woman entrepreneur?

LL: As mentioned before, timing was a big challenge in my line of business. Other than that I face the usual army of tax officers that are not specific to women, but to general small entrepreneurs. It is a great cost to maintain so many consultants to resolve tax issues that constantly crop up due to harassment from all government agencies.


ML: What are the best ways to connect in your industry?

LL: My Industry is non-organised, so the best way to meet is through social networking and we organise our own small conferences.


ML: What internet apps and tools do you use to run your business efficiently? 

LL: Google apps are really my secret weapon, I adapted to Google for the business as soon as I opened my website. I use Google ad words and manage almost all connections through Google and Android tools.


ML: What plans do you have for the future for your company?

LL: My business is well established, so I look for ways to innovate and increase growth through different additions. My real future plan is to have a training center. I have an optimal run of my business, as I want to maintain the personal and creative touch for the client to have a great experience at Spring Blossoms. I do not want to be a faceless corporate. I am a “Click and mortar Biz” and plan to stay that way. Although my business has always been self-financed, I am happy that the government has now started a women’s bank, which I shall approach for a loan for the expansion.


ML: What are the major opportunities for women to start their businesses?

LL: There are plenty of opportunities but less encouragement from the government. I feel it should give added incentives to women entrepreneurs, as we always manage two businesses, viz. the household and the company.


ML: Who is your role model?

LL: My mother is my role model, she never gave up working and she gave us a warm house.


ML: What are your tips for women entrepreneurs trying to make it in a competitive world?

LL: The three most important things are to have immense passion for what you are doing, have faith in yourself and to remain strong. The path will not always be smooth, but do not give up. Understand or make an effort to study accounting and budgeting before you start any entrepreneurship. One cannot be penny wise and pound foolish to run a business. Proper budgeting is most important for any business to be successful and run with a decent profit margin. I feel most entrepreneurs make a mistake here; they have grand plans, which do not always succeed as the market varies constantly. If you have pulled on too much liability, be sure it will pull you down too.

Most speakers at Moneylife Foundation events love the bright bouquet of fresh yellow flowers and roses that has become a part of our events. The flowers come from Spring Blossoms, founded by Laxmi Lobo in March 2004 at Dadar. She has been donating one bouquet every month to Moneylife Foundation for a long time!



Abhijit Gosavi

3 years ago

What a journey! And "market varies constantly" ...priceless advice.


laxmi lobo

In Reply to Abhijit Gosavi 3 years ago

Thank you Abhijit.

We are listening!

Solve the equation and enter in the Captcha field.

To continue

Sign Up or Sign In


To continue

Sign Up or Sign In



The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)