CCEA approves Rs 7,000 crore loan from Consortium of Banks to clear urea subsidy

In a relief measure for the financially strained fertiliser industry, the Cabinet Committee on Economic Affairs (CCEA), chaired by the Prime Minister Shri Narendra Modi, has approved a Special Banking Arrangement (SBA) for Rs 7,000 crore loan from consortium public sector banks led by State Bank of India and Punjab National Bank in order to settle the outstanding urea subsidy bill during 2014-15.

In a bid to overcome the liquidity problems of the fertilizer companies, the SBA has already been implemented. Under SBA, a total of Rs 6,806.66 crore for settlement of subsidy bills with the two consortiums of public sector banks was raised by government. The above loan amount along with interest liability on the part of government thereon amounting to Rs 64.03 crore was paid to the banks. The loan together with government interest thereon has been repaid from budget estimate for 2015-16 within the sanctioned budget under the vote on account.

Government is making available fertilizers namely urea and 22 grades of P&K fertilisers, to farmers at subsidised prices through fertiliser manufacturers/importers. Government provides urea to farmers at a fixed maximum retail price (MRP) of Rs 5,360 per tonne where the difference between the cost of production and MRP is provided as subsidy to manufacturers. India produces about 22 million tonnes of urea and imports about 8-9 million tonnes to meet the domestic shortfall.