The Fertiliser Association of India (FAI) has demanded Rs 89,000 crore from the government to meet its fertiliser subsidy requirement for 2008-09. The association has also demanded full gas allocation to meet the entire requirement of fertiliser plants.
There is an apprehension that the production, import and availability of fertilisers will be affected if the government does not make up the deficit of Rs 89,000 crore in the current budget.
In an interaction with Business Standard, FAI Director General Satish Chander said, “Despite the good track record the industry is in crisis due to government policies. The core of the problem is ‘subsidy’. The industry is able to recover only 20 per cent of the cost from the farmers and for the rest 80 per cent it is totally dependent on the government. This misery is compounded by the fact that not all of the 80 per cent is paid in cash. A certain portion of this 80 per cent is paid in the form of bonds, which the industry is forced to sell at discounted rates. The entire process has become so time-consuming that the industry is starved of funds, which in turn has created serious cash flow problems for the industry. This has badly affected the industry’s bottom line and burden of consequent interest to the banks on working capital requirements.”
It is interesting to note that against the total subsidy requirement of Rs 120,000 crore for the year 2008-09, the actual allocation in the budget is only Rs 31,000 crore. This amount has been able to take care of the fertilisers supplied up to June 2008 only. The industry can in no way wish away this deficit of Rs 89,000 crore and continue to function normally, not to speak of creating additional capacity.
This is the reason why no investment has come to the fertiliser sector during the last one decade, resulting in increasing dependence on imports which in turn eats away larger portion of the available funds. The requiremnt is 50 million metric tonnes (in all forms), while the production is about 34 metric tonnes.
He added further that under the circumstances, it is no wonder that domestic fertiliser industry is unable to realise its full potential mainly due to the absence of conducive investment and pricing policies, inadequate budget provision to cover the ‘subsidy’ offered to farmers, inordinate delay in recovering major portion of its delivered cost and further payment of certain portion of the ‘subsidy’ in the form of bonds.
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All these are bound to affect the food security of the country. Unless the Government takes a fresh look at the issues facing the industry immediately.
The industry looks upon the government to recognise the current realities and take appropriate measures immediately to bail out the industry from the current crisis.
In the first place, the government has to make good the deficit of Rs 89,000 crore in the current budget. This should be paid to the industry in cash only.