Fertiliser Ministry seeks Rs 10,000 crore as subsidy

16 Dec 2013 Evaluate

Concerned over acute liquidity crunch faced by the Indian fertiliser sector, the Fertiliser Ministry has sought an additional Rs 10,000 crore from the government as the Department of Fertiliser (DoF) did not get funds under the first supplementary grants and second supplementary grants would be made available only in December. So far this fiscal, the government has allocated Rs 70,586 crore funds to Department of Fertiliser (DoF) as against the total demand of Rs 1,05,497 crore for the 2013-14 fiscal. Commodity wise, a subsidy of Rs 41,158.85 crore was allocated for urea and Rs 29,426.88 crore for P&K fertilisers. The DoF has been able to pay subsidy dues till May to fertiliser firms manufacturing urea locally, while for non-urea fertilizers, it can pay subsidy only till this month.

Non-allocation of subsidy fund to fertilizer industry on time has left it with no money to pay subsidy bills for the third and fourth quarters of the financial year ending in March 2014. IFFCO, country's largest producer of urea, may witness decline in its profitability by 50 per cent in the current financial year due to a pending subsidy payment of about Rs 4,500 crore, while, state-run National Fertilisers Ltd (NFL) and Madras Fertilisers Ltd (MFL) could face closure by the end of this month due to liquidity crisis.

Earlier in September, the Finance ministry had agreed to pay only Rs 5,500 crore subsidy under a special banking arrangement (SBA) as against Rs 12,000 crore sought by the Department of Fertilisers (DoF). Meanwhile, in order to boost the fertilizer sector, the government has taken measures. The government agreed to bear interest of 8 per cent per annum with 2.7 per cent interest to be borne by the industry. Furthermore, it is also considering an additional Rs 10,000 crore more under the special banking arrangement against the subsidy due for the current year. Regarding the gas availability to fertilizer sector, the government has recently stated that the gas allocation policy will be revised to remove the cap imposed on the supply of domestic gas to fertiliser sector and accorded priority for gas utilisation policy 2008 in order to make new investments in the sector.

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