The nutrient based subsidy (NBS) plan has been approved by the government and will be effective from April 1. Fertilizer companies are likely to have a positive impact of this news and the share prices of such companies are expected to soar.

The new policy states that the company will be able to fix the prices of fertilizers on their own, whereas the price control of Urea still remains in the hands of government and are increased by Rs. 483/ tonne, which is about 10%.

The shift in policy is named as a big positive for the industry, but the 10% is not going to affect the bottom-line or EPS of fertilizer companies as the extra 10% is funded directly from the farmer's pocket. Fertilizer companies have ensured that the prices will remain stable this year without any major ups and downs.

The government fixes the price for fertilizers, and those are lower than their costs of production or import. The difference is later met through a subsidy. Fertilizer company shares ended on a positive note after the news which clearly indicates the outlook of market regarding the new development.