Credit rating agency Crisil in its latest report has said that India's fertiliser subsidy is likely to touch an all-time high of Rs 1.65 lakh crore this financial year (FY23) against the budget estimate of Rs 1.05 lakh crore due to an unprecedented rise in the cost of raw materials and fertilisers globally. It said an additional subsidy and revision in the nutrient-based subsidy (NBS) rates are crucial in order to sustain the credit profiles of fertiliser makers.
The report said ‘our assessment assumes 3 per cent year-on-year growth in demand for fertilisers and a moderation of raw material and fertiliser prices in the second half of this fiscal. If demand is higher than expected, or input prices do not soften even in the second half, the subsidy bill may inch up to Rs 1.8-1.9 lakh crore. According to the report, in the past two fiscals, the government has paid an additional Rs 1.2 lakh crore and increased the budgeted subsidy. However, it said the steep rise in raw material prices has been negating this and another intervention may be needed in 2022-23.
According to the report, over 85 per cent of the subsidy arrears could be contributed by urea. This is because pooled gas prices - a blend of domestic gas and imported LNG considered for billing to fertilisers plants - had shot up more than 75 per cent last fiscal, and is expected to remain elevated for most part of 2022-23, because of the Russia-Ukraine conflict. It noted that at the same time, retail prices of urea have stayed put, increasing the government's subsidy burden. It said this would be despite some respite likely from the commissioning of new domestic capacities that could potentially halve India's import dependence for urea from nearly 28 per cent in fiscal 2021.
