Q. What is the present status of the Chemical industry in general and Fertiliser industry in particular in India? A. As far as chemical industry is concerned the domestic demand by and large is holding on in different sectors and industry is operating at almost full capacity. However, export dependent industries like dyestuff and some of the other chemical products are affected as export demand has declined across various sectors. Further, the prices are also under pressure because of dumping by different countries especially, from China which is adversely impacting domestic producers, both in terms of the available market and price realisations. As far as fertiliser is concerned, by and large the demand is holding on and is also growing a little bit, especially, in phosphate segment. Nitrogen demand is lower, primarily due to impact of monsoon, but, that has not impacted the domestic production but has largely impacted imports. As far as Phosphate demand is concerned, the farmers are stocking it in advance. So, that's where we are seeing a bit of a surge in the demand, but I think overall, for the year that should level off and we should see lower growth of 2 - 3% in domestic fertilisers consumption. Q. How will Government's intention to move towards a nutrient based subsidy regime benefit the fertiliser industry in general and Tata in particular? A. In India, the subsidies are being given at source which leads to its own complexities. So a nutrient based subsidy, where the subsidy is fixed for per unit of nutrient will free up the selling price leading to some degree of competition in the market. I think that will be good for the farmers, as it will lead to introduction of new products. It will also lead to industry engaging in educating the farmers on various soil health aspects, improving use, efficiency of nutrients and new techniques to apply fertilisers etc. Further, I think that it will open up big opportunity for the industry to grow. Tata Chemicals will benefit with introduction of Nutrient Based Subsidy as it will be able to grow and introduce new products.

Q. What is the fertiliser industry's scope for development?

A. The fertiliser industry in India and even globally, has a very unique role to play in ensuring a hunger free world. The globe will have a larger population to feed. There will also be a growing middle class demanding higher order protein rich diets. Especially in the developing countries, middle class is growing, the food habits are changing and that is putting lot of pressure on agricultural demand. It is estimated that crop nutrients account for 40 - 50% of total food production in the world. As demand for food grows, there will be more demand for fertilisers. I think that augurs well for the fertiliser industry and its growth. The current food basket is changing and better quality food is being demanded by the middle class in China, India and in South America, and in all the developing economies. This led to the food supply being less than demand for the first time in 2007. The year 2008 has witnessed one of the highest food production growth in history with record food production.

Q. What are the issues that affect the competitiveness of the Indian fertiliser industry?

A. The domestic competitiveness is affected primarily because of raw material availability which is a very critical issue. Unfortunately, we do not have any known sources of phosphate & potassic fertilisers. For nitrogenous fertilisers, though we now have the resources in terms of natural gas but it is not readily available. There is an opportunity for the domestic industry to create six to eight million tons of additional capacity of nitrogenous fertilizers. However, until and unless the government intervenes and comes out with a very clear policy for future allocation to urea projects, no investment would come in and no project will be able to achieve financial closure. Another factor is the cost of energy in India, which relatively is higher as compared to other countries that are producing fertilisers especially nitrogenous fertilisers. Third factor which impacts this industry is the infrastructure cost. Infrastructure cost at ports, road transport costs, ocean freight etc., are much higher than in some of the other countries and that impacts the competitiveness.

Q. What according to you should be the way ahead in terms of fertiliser subsidies?

A. The best way would be that the government pays subsidy directly to the farmers without involving the industry, because the moment industry gets involved, all kind of controls and regulations come into play. Farmers need support and to keep the food prices low, agricultural subsidies are a norm all over the world and it should be no different in India. The Indian government needs to subsidise agriculture and the best way is to subsidise Mr Kapil Mehan Executive Director, Tata Chemicals Limited 112 it directly. The government is thinking about this and I believe that's the right way to go and we as an industry fully support the government's efforts.

Q. What according to you should be the course of action that the government should take to develop the soda ash industry?

A. Soda ash industry is dependent on availability of three most important inputs like salt, limestone and energy. India, so far has been very competitive in terms of its cost of production of soda ash. If the government is able to allocate large tracks of salt pan land to industries and develop salt industry the salt availability will improve. Further, availability of chemical grade limestone and a most competitive infrastructure cost will also help the industry to grow.

Q. What has been the strategic advantages of General Chemical Industrial Products' (GCIP) acquisition by Tata Chemicals?

A. This acquisition was primarily done for two reasons: a) to expand our market base and b) to improve our overall competitiveness. GCIP produces soda ash from natural sources. The natural soda ash cost is definitely much, much better than the synthetic soda ash, which is produced with a chemical process. It is this kind of a rationale which led us to acquire this asset. Overall, this fitted very well in our strategy to become globally cost competitive as well as improve our supply base, so that we can service our global customers in a very seamless manner.

Q. What are the issues that affect the competitiveness of the Indian soda ash industry?

A. The issues that affect the competitiveness of the industry are the infrastructure costs and the raw material availability. These are the key aspects, in terms of production capabilities, profitability, capital cost and operational cost. For instance, transportation is a subset of infrastructure cost and it is very high. Especially to move products from West to East of the country is very costly. The domestic cost of transportation is much higher as compared to Chinese producer whose product will reach the east coast of India in just US$ 20 unlike domestic cost of around US$ 50 to transport from West to East. If there was a well developed ocean freight industry, it would have enabled the domestic producers to compete with imports. Another solution would be to develop tracks of land, which can produce salt in other areas. Further, large scale dumping is also hurting the industry on the realisation front, which is impacting the domestic manufacturers very adversely.

Q. Which segments of your business do you think will achieve a higher growth rate in the coming years?

A. In the coming years, we will see more investments and growth happening in our agri-sector businesses, primarily in fertilisers, specialty crop nutrients and in our agri-retail and agri - supply chain businesses. We will also be consolidating our soda ash business because now we are the second largest player in that segment. Salt of course is our very, very precious business which I think will continue to see growth with the introduction of new products and new brands. As a result of growing middle class population in India, more people will switch over to high quality salt consumption and that provides a perfect setting for our key businesses to grow.

Q. What are the strategies adopted by the company to combat the Global slowdown?

A. We have a very special strategy to combat the slowdown. We had a program, called ADAPT (Action for Downturn Alleviation and Profitability in Turbulent Times), under which there was a lot of focus on conservation of cash, capital, cost and connect with the customers and communication with people of Tata Chemicals. I think all these factors led us to save a lot of cash from our inventories and receivables. We have been able to keep overheads and costs under control and that has helped us to be in a healthy financial situation. So much so that recently we consolidated the shareholding of the group in Rallis by spending over Rs. 400 crores.

Q. Could you comment on the future plans of the company?

A. We will continue to look at opportunities for growth, and our major growth will come from expansion of our fertiliser capacity, which is part of our existing chemical assets and a major thrust area, and consolidating our position in the soda ash market.

We will continue to grow our agriculture inputs portfolio, both within Tata Chemicals as well as through Rallis. We also have our innovation center in Pune which is looking at biotechnology and nano technology products. These are the few opportunities that we will pursue going forward.