The tussle between the government and the fertiliser industry over delayed release of the dole reached court rooms this year, but that won’t prevent a fiscally-stressed finance ministry from its plan to defer a record R34,000 crore payment to the coming years.
As against the budgeted fertiliser subsidy of R65,791 crore for FY14, the government has disbursed R31,500 crore to the fertiliser manufacturers so far this fiscal. The industry, through which the subsidy on these critical farming inputs are routed, is compensated under various heads. Official sources say the bulk of the amount released this fiscal was used to pay the arrears from previous years. The government, these sources said, would stick to the budgeted subsidy amount for this fiscal (which allows it to account for just over R34,000 crore for the rest of the year). Finance ministry estimates the payment obligation for the first half of this fiscal would cover the entire budgeted amount after paying arrears.
The second-half subsidy bill, the ministry reckons, would be a bit higher than in H1, considering the industry’s production pattern and import costs. This amount — R34,000-35,000 crore — would be rolled over. This is more than four times R8,234 crore rolled over in FY10.
The industry, on the other hand, estimates that this year’s subsidy bill, given the surge in prices of imported inputs and finished products and deferment of urea price hike, would be close to R80,000 crore. That apart, some arrears (on freight etc) are still unpaid, say industry officials.
The surge in fertiliser subsidy is despite the policy of fixed subsidy on phosphorous and potash (P&K) fertilisers adopted in early 2010. India imports its entire requirement of P&K fertilisers (it is another matter that the Planning Commission has been among those which flayed the steep rise in prices of P&K fertilisers after the 2010 decision, citing its likely adverse impact on farm GDP. The retail prices of urea, the most commonly used fertiliser, continue to be controlled by the government and the last major price revision (10% hike) was in early 2010. This is even as the industry believes urea prices need to be hiked by 40%.
Of the estimated fertiliser subsidy of R65,971 crore for this fiscal, R15,544 crore is for imported urea, R21,000 crore for indigenous urea and R29,427 crore for decontrolled fertilisers (DAP, MOP and complexes).
The industry has been in a severe liquidity crisis in the last