Senate Rural and Regional Affairs and Transport Legislation Committee, , 1:27:31 to 1:34:22
The department addresses concerns from Fertilizer Australia regarding potential market distortion and explains the 'tranching' approach used to prioritize company access to the facility.
Topics: Food security, Integrity
Speakers: Matt Lowe, Senator Paul Scarr, Sarah Burr, Unknown Speaker
>> Is it was it set up so it was one company per shipment?
>> No.
>> So, it could be multiple companies per shipment.
>> Oh, sorry. It was set up such that um one as a company um we would there's the ability for the facility to support multiple shipments as long as they could be proved to be additional to what would otherwise be able to be obtained on the commercial market.
>> Okay. So your evidence is that each of those additional companies which uh Miss Burr listed enumerated Thank you. uh had the opportunity to participate but it was their commercial decision not to participate. Is that your evidence?
>> That is absolutely our evidence.
>> And would I just could I just add to that that some may have chosen not to participate but some are still engaged in negotiations with Export Finance Australia um regarding future participation.
So there were some of those companies that presumably were in discussions with Export Finance Australia uh at the time or have been for some time. They haven't declined. They're just in continuing discussions. Is that correct? >> So with respect to those companies, it's not really correct to say that they declined to participate. They're in ongoing negotiations. Is that a more
appropriate option? >> There are there are some that have opted out and there are some that are in ongoing
>> that haven't managed to settle terms yet. Is that the >> And and do you have any transparency with respect to what terms are the sticking points?
>> Um so the terms are negotiated with Export Finance Australia and they're essentially commercially sensitive because they'll they'll make the basis of they'll they'll form the basis of a contract.
>> Sure. But you should be able to give us some sort of indication as to general subject matters or areas where there is a failure to come to agreement at this point in time. That's not commercially sensitive.
>> No. Um so in in general terms this wouldn't necessarily be correct for every company but in general terms um we understand that um the uh uh design of the mechanism in the sense that it um shares both upside risk and downside risk um has potentially been a sticking point for some companies um >> uh and then other specific terms might be um uh more particular to um individual companies >> so I didn't go into those
>> and Senator um we're we're eager to of assistance, but um ultimately those commercial matters are matters between EFA and those companies and and kind of the the more substantive detail might be best directed to EFA.
>> No, I appreciate that. But you've got a role in the >> in the process presumably you you you can have discussions with EFA if it's not delivering the outcomes the department wants. >> Um so I'd expect that consultation to occur, but that's that's useful. Thank so what what advice did you actually give the minister then after fertilizer Australia wrote to wrote saying it was concerned raised its concerns on form a what advice did the department give?
>> Uh just to clarify do you mean um advice regarding the claim that the facility
response to the letter which fertilizer Australia wrote on for May concerned about the impact of underwriting the institech pivot fertilizers and CSBP could distort the prices. Yeah.
>> Yeah. So maybe Senator I think maybe if I could kind of just answer the question um more broadly um what we were conscious of is that it was um an extraordinary intervention in the market. >> Sure. Um and it was done so in the national interest.
>> Sure.
>> Um we were also conscious that um having more companies um signed up to the scheme was exact was was absolutely in the national interest as well. >> So having more of Australia's companies out on the global market chasing fertilizer in the interests of Australian producers was exactly what we wanted. However, um in a resource constrained environment, what we needed to do was tranch I guess um the the facility the the companies that EFA engaged with to sign them up and that was very much um I guess a starting point for EFA as well given they were also doing the fuel facility at the same time as well.
>> So Mr. Low you said use the term trench the companies that were >> dealing with EFA. What do you mean by that?
>> So in the first instance um there were uh there was CSBP and Insitech that were referred and then in um subsequent there were further companies that were referred and that was simply acknowledging that there was a significant amount of time and resource required um by EFA to come to commercial terms with number of companies.
>> Okay. So Mr. Leo that means there was a queue if I can put it that way in in terms of who could access this facility. So decisions were made as to who was at the front of the queue and decisions were made who was towards the back end of the queue and that could have commercial ramifications for the companies were that were at the back end of of the queue if I can put it that way. >> Uh how did you address that issue >> especially given as I understand it the facilities suspended now. Is that correct? >> it's paused. Okay, I'll use your term. It's paused. So, how did you deal with that issue?
>> So, um return to the eligibility criteria that we used effectively also a way for us to think about how we um h how we prioritized um referrals of companies. Uh Institute Pivot and CSBP uh acknowledged large importers of URA to Australia. They have significant domestic supply chain reach um institect pivot across the east coast CSBP across the west coast uh with the ability to get ura in the hands of farmers um when it's needed. In addition to that, they had the abil they had, I guess, um long supply chains internationally uh and the ability to source fertilizer in the international market from a range of different markets and to take um security of those shipments on the international market as well.
>> Okay, understood. So, as I understand it, the DAP and DACA policy parameters proposed that only one preapproved Australian company could bid on each supported shipment. Is that correct?