Fertiliser subsidy may go up over and above budgeted amount

Additional Rs 18,230 cr needed forpayment to urea manufacturers

The fertiliser ministry soon proposes to approach for a short term line of credit for payments to the indigenous urea plants pending the formation of the new cabinet and budget thereafter.

This follows a tight budget provisions made for the industry where the fertiliser subsidy for the year 2014-15 was almost kept at similar levels of last fiscal.

According to officials close to the development, at present, the ministry is cash strapped for payments to urea manufacturers and will need around RS 18,230 crores in the interim for such paymentsThis is over and above the fertiliser subsidy allotted for the year 2014-15.

Officials said shortly a proposal will be submitted to the ministry of finance for arranging this line of credit as bank loan.
In the vote on account , the finance ministry had pegged the subsidy on crop nutrients at Rs 67,970 crore for the financial year ending March 2014 compared to the revised estimate of about Rs 67,971 crore in 2013-14.

The provisions are inadequate for the fertiliser industry and the industry had then projected that this will lead to a large carryover of subsidy payment.

Of the total fertiliser subsidy of Rs 67,970 crore in 2014-15 fiscal, subsidy for imported urea is pegged at Rs 12,300 crore, domestic urea is Rs 31,000 crore and sale of de-controlled fertilisers (like phosphate & potassic fertilisers) is Rs 24,670 crore.

Officials in explaining the subsidy break up clarified that the finance ministry has already disbursed Rs 10,000 crore as part of the special bank loan package to fertilizer units in the form of interest subvented loan. Moreover there will be rollover of unutilized subsidy of Rs 22,000-23,000 crore from current fiscal to the next. In total, the fertilizer subsidy for the new financial year thus will stand at around RS 1.05 lakh crore.

According to official sources, the finance ministry meanwhile is not budgeting for the proposed in hike in the fixed price of urea which as per a ministerial panel reports would go up by Rs 350 per tonne while the government will subsidise the additional cost, pegged at Rs 900 crore.

Fertiliser Ministry had moved the proposal for modified New Pricing Scheme (NPS) III, according to which department calculates production cost of urea to pay subsidy. As per the proposal of the ministry, the fixed cost of urea produced by plants which are 30 years old or more would be increased by Rs 150 per tonne, while for all other plants it would be raised by Rs 350 per tonne.

For a urea plant, fixed cost mainly includes salary & wages, contract labour, repair & maintenance and selling expenses.

Similarly, the decision of the inter-ministerial committee on nutrient based subsidy (NBS) has deferred its decision to recommend any hike in phosphate and potassium (P&K) fertiliser subsidy for 2014-15 because of stable rates of nutrients in global markets, sources said.

Official sources said, due to current account situation, there is move to contain subsidies in general. Moreover farmers mostly use urea and less of phosphate and potassium (P&K) fertilizer.