All fertilizer - urea, non urea units to get soft banking loan

MoF to clear RS 10000-12000 crore to be disbursed as soft loan by banks to fertilizer units. Govt to subsidise interest rate up to G- sec yield of 8%

The department of fertilizer plans to roll our special baking arrangement for the first time for all categories of fertilizer and not only urea unlike earlier.

This follows a proposal for soft loan soon to be finalized by the ministry of finance to the tune of RS 10000-12,000 crore over and above the subsidy of RS 5500 crore already disbursed to the ministry of fertilizer.

According to official sources in the fertilizer ministry, this soft loan in the form of bank credit will be given to urea manufacturing units and also those engaged in manufacturing nitrogen, phosphorous and potash or potassium containing complex fertilizers and others.

Prior to this, such special credit facility was available only for urea manufacturing units. However since the finance ministry is considering a higher amount of loan for the fertilizer industry, such loans will be available to all.

This special banking arrangement will be in the form of 60-90 day working capital facility to help the companies tide over the liquidity crisis.  While the government will sub vent the interest portion up to the government security yield rate of around 8%, the companies will have to pay the rest of the amount along with the principal to the banks. These loans will be made available at an interest rate of 10.5 -10.75%.

Due to fall in global prices and over supply in the domestic market, prices of fertilizer have come down. Over and above that, in order to moderate the burgeoning prices of non urea fertilizers, the government decided to fix reasonable maximum retail price for such varieties (NPK). Under the current regime, while the urea price is fixed, prices of non urea varieties are deregulated. In subsidy terms, the urea manufacturing units get subsided to the tune the market price varies with the fixed priced at which urea is sold in the market. On the other hand, the non urea fertilizers are sold at market determined prices and subsidy is fixed.  Therefore the non urea complex manufacturers have to adjust the market price in order to recover cost.

Over last two years, the maximum retail price (MRP) of di-ammonium phosphate (DAP) rose from Rs 9,350 to around Rs 24,000 a tonne, while for muriate of potash (MOP), prices have gone up from Rs 4,455 to Rs 17,000 and from Rs 7,197 to Rs 22,000 for the popular NPK complex fertilizer. On the other hand, since urea prices rose marginally from Rs 4,830 to Rs 5,365 during the same period.

In order to curtail undue profiteering, the government since April 1, 2013 started fixing ‘reasonable MRPs for non urea fertilizer complexes.  These have been determined at Rs 22,500 for DAP, Rs 16,000 for MOP and Rs 19,590 for NPK  complexes – lower than the rates at which they were selling in the last rabi season.  The industry though vehemently opposed it since it was done at a time when the rupee has crashed against the dollar, and price reduction will make it difficult to recover the import cost of the complexes.  

For most of the non urea imports,   the country delayed and trimmed purchases in 2013 due to a build-up in inventories at suppliers.