Brazil Gas Subsidy Plan is hindered by fiscal concerns
The Brazilian fiscal constraints may prevent a proposal to subsidise the price of natural gases used to make nitrogen fertilizers, Bernardo Silva said, executive director of the fertilizer lobby Sinprifert.
The group, which includes Mosaic, Eurochem, and Yara in Brazil as members, is pleased with the plan, because it will help reduce Brazil's dependence on imported fertilisers.
According to the proposal, approved by a committee of the Congress this week, subsidies of 1.7 billion reals ($281million) would be used to cover the difference between market prices of natural gas, and "a value of reference" of $4 per thousand BTUs.
Silva, citing research, said that in order to be competitive, Brazilian nitrogen fertiliser producers would prefer to buy natural gas between $4 and $7 for every million BTUs. The current price ranges between $12 and $15.
Brazil is a major agriculture powerhouse. It imports 85% of the crop nutrients it needs from Russia, China, and Canada among others.
Petrobras, a state-run energy firm that announced plans to return to fertilizer production, may also be able play a major role in lowering gas prices at home.
The company currently re-injects gas from wells back into reservoirs to maximize oil production. Petrobras can still make money by increasing its internal gas supplies and reducing the rate of reinjection.
Silva stated that aside from the high cost of gas, Brazil's tax regime currently favors fertilizer imports at the expense of domestic production. There are few signs for short-term change.
Silva explained that a proposal to impose tariffs on imports of ammonium-nitrate (used to produce certain crop nutrients) was withdrawn following opposition from farm lobbyists in the United States.
The domestic agriculture lobby was concerned that the move would increase the cost of certain fertilizers. $1 = 6.500 reais (Reporting and editing by Jonathan Oatis).
(source: Reuters)
