The fertiliser ministry had demanded the additional funds over and above the fertiliser subsidy allotted for 2014-15. The special banking facility or short term concessional loan will be disbursed at 10- year government bond yield as was the case in the previous SBL provided last year in 2013. 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.
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.
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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.
The second tranche of special banking facility is partly due to increase is also due to the change in fixed cost of urea. Earlier, the Government approved an increase in fixed cost by Rs150/tonne to Rs 350/tonne. Since there is no revision in the selling price and the difference between cost and selling price is paid by the government, the subsidy goes up.
Fertiliser plants are collectively the biggest consumer of domestically produced gas, getting supplies of 31.5 million standard cubic meters of the fuel daily. Natural gas accounts for as much as 65% of urea production costs in India.
There are also proposals for hike in urea prices to cut down fertiliser subsidy but the fertiliser minister has put the proposal on hold for the time being. India is one of the largest importers of fertiliser urea and non urea variety. Therefore the importers could negotiate better price and manage the fluctuating price rather than just entering into long term contracts, said official sources. “Even if the importers enter into long term contracts there should scope for hedging prices and revising it”, said an official source.
For urea, the government in the month of January 2014 increased the fixed cost paid to urea by Rs 350 per tonne without affecting any increase in the rate of crop nutrient for farmers (urea price). An official source said, a 10% rise in urea prices would bring down the subsidy component by around Rs 1,600 crore. The government had last revised the urea prices on April 1, 2010 from Rs 4,380 a tonne to Rs 5,310 a tonne.