NEW DELHI: With a surge in fertliser subsidy requirements and the Central government already exceeding its fertiliser subsidy bill by Rs 12,000 crore, the Ministry of Finance has now approved a “special banking arrangement” for subsidies worth Rs 10,000 crore for the current financial year (FY19). The subsidy deficit thereafter will be rolled over to the next fiscal.
“The fertiliser subsidy expenditure has overshot the budgetary target. It is to the tune of Rs 12,000-15,000 crore. While some of the deficit would be rolled over to the next year, there would be special banking arrangement for Rs 10,000 crore. The proposal is already approved,” a senior finance ministry official told this publication.
The Indian government compensates state and private fertiliser companies for selling crop nutrients to the country’s millions of farmers at discounted rates. With the expenditure overshooting this year, the Ministry of Chemicals and Fertilizers had sought an additional Rs 23,000 crore. While the finance ministry did not allot this extra expenditure as the government is already struggling to meet the revised fiscal deficit target of 3.4 per cent, it instead approved the “special banking arrangement” for local fertiliser companies. The new arrangement will help the fertiliser firms procure funds from banks, subsequently easing the burden on the government.
The Centre had originally budgeted Rs 70,000 crore for fertiliser subsidies for FY19, which, according to official sources, was insufficient. “The budget was not sufficient. In fact, about half of the money was spent in settling dues from the previous year. Also, fall in the rupee value made imported fertilisers more expensive. This, combined with agrarian crisis, resulted in a surge in subsidy requirements,” the official said.
The domestic fertiliser industry is highly dependent on imports, with almost the entire raw materials used for manufacturing phosphatic fertilisers being procured thus.On the demand side, meanwhile, primary fertiliser sales witnessed a healthy growth of around 7 per cent YoY in the first half of FY19, driven by the sale of non-urea fertilisers. Non-urea fertiliser sales volume saw a healthy growth of 12 per cent during the same period.