Fertiliser stocks hit fresh highs on hopes of exemption under GST

Fertiliser stocks such as RCF, FACT, Chambal and Coromandel, rocketed to record highs on hopes that the forthcoming meeting on Goods and Services Tax (GST) rates may take a call to recommend exempting necessary plant food from taxes in a bid to lower farming costs in rural India.

The Fitment Committee is likely to propose to the GST Council to consider removing the 5 per cent levy on fertilisers on June 22. This will be the panel’s first meeting after Narendra Modi took oath for the third time as Prime Minister.

Meanwhile, five government-run fertiliser units – NFL, RCF, GSFC, GNFC and FACT – rose between 1-7 per cent in a weak market on hopes that a proposed cut in taxes will boost the demand of fertiliser. In any case, these stocks have been on a sharp uptick on the back of good monsoons and ahead of the annual budget, slated on July 22.

Private sector fertiliser stocks such as Chambal and Coromandel participated in the rally as well, hitting record highs of Rs 474 and Rs 1,594 respectively. Both shares gained more than 3 per cent each amid higher-than-average volume. Stocks such as Khaitan Chemicals surged 12 per cent and Tata-owned Rallis India gained 3 per cent.

The BJP-led NDA coalition government, that took charge earlier in June, has been working overtime to ameliorate rural stress and provide financial relief to farmers and to lower parts of the working pyramid after some voting patterns in the recently held national elections indicated widespread annoyance among parts of the farming community in agricultural states such as Punjab and Uttar Pradesh.

The process of removing tax on a product is cumbersome. After the panel’s request to the Council, the proposal reaches the desks of the Group of Ministers, which in turn makes its recommendations to the government.