Wcm of Fertilzer Industry

INTRODUCTION:

In the agriculture sector the fertilizers industry had been chosen for to analyze the working capital management. Agriculture the back bone of Indian economy still holds its relative importance today for more than a billion people. Here we have analyzed the performance of Fertilizer Industry being one of the vital parts in agricultural production. In the agricultural process, fertilizer is an important area of concern. Fertilizer industry in India has succeeded in meeting the demand of all chemical fertilizers in the recent years.

The Indian Fertilizer Industry is broadly divided into Nitrogenous, Phosphatic and Potassic segments. In addition to these, nutrients are combined to produce several complex fertilizers. Urea, a nitrogenous type of fertilizer, is most widely consumed in India. Currently the urea capacity is 20.2 million tonnes while consumption is 21.7 million tonnes. The demand of urea is expected to grow at a CAGR of 4 percent. The total production of phosphate in the country is around 3.36 million tonnes per annum.

Fertilizer production is highly energy intensive with cost of feedstock and fuel alone accounting for between 55 to 80 per cent of the cost of production. Plants in India are primarily based on three feed stock- Naphtha, Fuel oil and natural gas. A significant proportion of domestic capacity of urea plants are based on Naphtha or fuel oil whose cost is much higher than natural gas, on which most of the global capacity is based. So, because of the high costs involved in this industry the efficient use of working capital assumes even a greater importance.

Working capital management:

Working capital is a financial metric which represents operating liquidity available to a business, organization, or other entity, including governmental entity. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. Net working capital is calculated as current assets minus current...