India: FinMin raises concern over Rs.28,700-crore default by state-run fertiliser firms

The ministry of finance has raised concerns over default by state-run fertiliser firms on account of principal and interest payments amounting to Rs.28,768 crore, and called it a ‘constraint’ in extending budget to other departments.

 

“The finance ministry recently conveyed to the department of fertilisers that the total default on account of principal and interest payments with respect to state-run fertiliser public sector undertakings stands at Rs.11,571 crore and Rs.17,197 crore, respectively, as on 31 March 2016,” said a senior government official requesting anonymity.

 

Another official, who also did not wish to be named, confirmed the development. “There are liabilities over various companies such as Madras Fertiliser Ltd, Fertilisers And Chemicals Travancore Ltd and Brahmaputra Valley Fertilizer Corp. Ltd, which have not been able to make payments due to their waning financial condition,” said the official quoted above.

 

The fertiliser department being asked by the finance ministry to take effective steps in bringing down the subsidy on urea.

 

“The default is a constraint to the government’s ability to extend budget to other departments, including department of fertiliser,” the finance ministry said in a recent communication to the fertiliser department, which was reviewed by InfraCircle.

 

Queries emailed to the ministries of chemical and fertilisers and finance on 18 January went unanswered. The finance ministry has also agreed for a special banking arrangement of Rs.10,000 crore to clear pending subsidy claims of domestic fertiliser firms between August 2016 and February 2017.

 

Also, it has asked the department of fertilisers to give details of savings made in fertiliser subsidy on account of reforms and other factors such as neem coating of urea, new urea policy, pooled gas mechanism, reduction in gas prices and international fall in fertiliser prices.