India: FinMin agrees for Rs.10,000 crore special banking arrangement to clear subsidy dues of fertiliser firms

The finance ministry is learnt to have agreed for a special banking arrangement (SBA) of Rs.10,000 crore to clear pending subsidy claims of domestic fertiliser firms between August 2016 and February 2017. 

 

Fertiliser ministry had sought Rs.20,000 crore from the finance ministry under a special banking arrangement (SBA) to clear the pending dues of the fertiliser firms for the current financial year. 

 

“The finance ministry has considered and agreed for special banking arrangement of loan up to  Rs.10,000 crore to make subsidy payments of urea and potassic and phosphatic fertiliser firms. However, the government liability on account of interest on borrowings by fertiliser companies would not be more than the 10-year government security rate,” a senior government official said on condition of anonymity. 

 

Another government official said the finance ministry has asked department of fertilisers to make all efforts to reduce the government‘s subsidy burden. According to information provided by the department of fertilisers, total pending dues of fertiliser firms are at Rs.30,000 crore and may reach Rs.35,000 crore by the end of the financial year. 

 

“Fertiliser department has been asked to urgently take effective steps to bring down the high subsidy on urea, which has continued unabated and has reached  Rs.55,000 crore  in monetary terms. This has created an imbalance in soil nutrients,” the second official quoted above said. 

 

The government may allocate Rs.69,868 crore towards fertiliser subsidy in the upcoming budget 2017-18. 

 

A third official said the finance ministry has asked fertiliser department to give details of savings made in fertiliser subsidy on account of reforms and other factors like neem coating of urea, new urea policy, pooled gas mechanism, reduction in gas prices and international fall in various fertiliser prices. 

 

The fall in international fertiliser prices is also evident from the fact that the government imported initial 600,000 tonne of urea for financial year 2017 at a price of $227 per tonne, compared with an average price of $279 per tonne during the last financial year. 

 

Queries emailed to ministries of finance and chemical and fertilisers on 12 January remained unanswered. The government is planning a nationwide roll out of direct benefit transfer (DBT) in fertiliser sector from April and a pilot project is already on in 16 districts across the country.