Mumbai: The government has approved the nutrient based fertiliser subsidy (NBS) plan with effect from April 1. This is likely to have positive sentimental impact on share prices of fertiliser companies.

Under the new policy, the companies can fix retail fertiliser prices. However the urea prices will be increased by Rs 483 per tonne or 10 per cent.

“The hike in urea prices is not going to impact the bottomline or EPS of fertiliser companies as extra 10 per cent will go from farmer’s pocket directly. However, looking at the shift in policy, it’s a big positive for the industry,” said an analyst from a local brokerage.

The companies have assured the government to keep the fertiliser prices stable this year.

Last week, Fertiliser Minister M K Alagiri had met Finance Minister Pranab Mukherjee and sought deferring nutrient based subsidy plan as the industry did not give any written assurance on not increasing prices.

Fertilisers are sold at government-fixed prices, which are lower than their costs of production or import. The difference is met through subsidy.

The NBS does away with maximum retail price. It proposes to replace the current system of giving subsidy to the industry with direct assistance to farmers.

Shares of fertiliser companies ended higher ahead of the announcement. RCF shares ended at Rs 106.60, higher by 3.44 per cent or Rs 3.55 on the NSE, Chambal Fertilisers closed 2.95 per cent up at Rs 71.45, GNFC closed 3.24 per cent up at Rs 119.40 and Nagarjuna Fertilisers climbed 5.6 per cent or Rs 1.95 to Rs 36.80.