Fert subsidy budget to remain around Rs 68K cr in FY15: Care

The fertiliser subsidy budget for FY15 is expected to remain around Rs 68,000 core, the level declared during interim budget, mainly due to government's target to contain the fiscal deficit and reluctance to increase urea price and other fertilisers, Care Ratings said.
However, the estimated fertiliser subsidy requirements are likely to be around Rs 1,10,000 core, which includes rollover of subsidy from FY14, likely increase in subsidy due to higher gas cost and increase in fixed cost for urea, the agency said in its Budget analysis.
Commenting on budget proposal for formulation of new urea policy, Care (Credit Analysis and Research Ltd) Ratings said, the new urea policy is likely to aim at boosting domestic production of urea which is short of domestic demand.

The exact contours of the policy are not yet known, however, the way the new policy deals with issues like guaranteed buy back and allocation of cost effective gas would be crucial.
Urea comprises 59 per cent of the total fertiliser consumption in India based on volume.
The increase in subsidy for urea would certainly aid all the stakeholders of urea. However, the overall subsidy budget over the past few years have fallen short of the actual figures. This is expected to continue for FY'15 also, it said.

The fertiliser industry is facing the challenges and uncertainties such as delays in subsidy payments, unavailability of domestic gas for urea units, high cost of re gasified liquefied natural gas (R-LNG) and likely upward revision in domestic gas price.

The Finance Minister announced enhanced credit to the farm sector through agriculture credit outlay of Rs 8 lakh crore, extension of interest subvention scheme, creation of long term rural credit fund of Rs 5,000 crore, increased allocation to short term cooperative rural credit by Rs 5,000 crore and credit to landless joint farming groups.
Fertiliser demand would to get a fillip on account of easier credit availability and may also influence farmers to use complex fertilisers suiting their soil needs rather than opting for the low cost urea. This may lead to improved yield especially in the scenario of delayed monsoon, the report said.

Domestic fertiliser consumption reduced by 4 per cent year on year (y-o-y) in FY14 to 51 million tonnes (MT) with urea consumption remaining stable at 30 MT while the demand for non urea (decontrolled) fertilisers reduced by 10 per cent y-o-y in FY'14.
The demand for fertilisers under the present scenario is likely to increase marginally in FY15 with stable urea consumption.
The government is expected to boost the domestic urea production by revival of sick units of Fertilizer Corporation of India Ltd and Hindustan Fertilisers Corporation Ltd, however, it would be capitalised over the period of 3-4 years and would require substantial capital outlay, the report said.