The decade-old fertiliser marketing arrangement between Tata Chemicals and Rallis India is heading for a split. Tata Chemicals, which sells branded urea through the marketing outfits of Rallis, is set to make its own arrangements for marketing.

Both companies have informally agreed to discontinue the arrangement, which comes up for renewal every three years. The move, caused by the restructuring initiatives in both Tata Group companies, will be taken up by the respective boards for approval shortly. Rallis, which has been the sole marketing agency for Tata Chemicals, sells fertiliser products worth Rs 325 crore mainly in Uttar Pradesh, Bihar and certain parts of West Bengal, Punjab and Haryana.

A Tata group spokesperson denied the development by saying that no such decision has been taken. Sources said officials from both companies have been discussing the matter for the last few days and they have agreed on a time span for separation. An official announcement is expected shortly.

Industry sources said the move would benefit both companies since it streamlines the operations to a large extent. Tata Chemicals, perhaps the only domestic fertiliser company, which does not market directly, can have better operational control. The company produces around 8.5 lakh tonnes of urea at its facility in Barbala, Uttar Pradesh.

It originally tied up with Rallis due to the latter's vast marketing network. It is not clear as to how Tata Chemicals plans to do the urea marketing. Industry sources said that it may tap the existing dealers of Rallis. Fertiliser marketing is no longer a major revenue earner for Rallis after it stopped the marketing of imported fertiliser products sometime last year.

In addition to Tata Chemical's urea product, Rallis, with its marketing network across the country, used to market other products including di-ammonium phosphate (DAP). Sources said that Rallis exited from the marketing of imported fertiliser products in an attempt to bring focus to its operations.

The company has been reducing its exposure on other imported products. It recently called off a seed marketing arrangement with the US major Monsanto Chemicals. Post-recast, Rallis will focus mainly on pesticides and is diversifying into new-age businesses such as biotechnology.