Rs 65,000 crore booster for fertiliser industry, to help clear subsidy dues

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    Rs 65,000 crore booster for fertiliser market, to assist clear aid fees

    Composed by Harish Damodaran
    | New Delhi |

    Updated: November 13, 2020 7: 48: 03 am





    Provided the subsidy arrangement of simply Rs 71,309 crore, it would have indicated a more increase in financial obligations to Rs 56,000-62,000 crore, to be brought forward to 2021-22 (Representational Image/File)

    The fertiliser industry has actually landed an unexpected pre-Diwali treasure trove, with the Financing Minister Nirmala Sitharaman, on Thursday, revealing an additional Rs 65,000 crore subsidy, over and above the Rs 71,309 crore currently offered in the Union Budget for 2020-21

    Fertiliser companies were owed around Rs 48,000 crore subsidy fees at the start of the present fiscal. The subsidy requirement for 2020-21 alone– based on the expected consumption of individual fertilisers, expense of imported urea and feedstock (gas), rupee-dollar exchange rate, etc– was pegged at Rs 80,000-85,000 crore. The 2 added up to Rs 128,000-133,000 crore.

    Explained| How fertiliser aid works

    Provided the subsidy provision of just Rs 71,309 crore, it would have suggested a further increase in financial obligations to Rs 56,000-62,000 crore, to be continued to 2021-22 “The Rs 65,000 crore extra allowance announced by the Financing Minister will clean all outstandings due to the industry. The extra expense will be authorized as part of the additional needs for grants in the upcoming winter session of Parliament or when the modified quotes for this fiscal are placed in addition to the Budget for 2021-22,” a fertiliser department authorities informed The Indian Express

    ” We couldn’t have asked for more. This is like beginning with a fresh start,” stated Satish Chander, director-general of the Fertiliser Association of India, a market body.

    It remains to be seen if this will likewise set the stage for reforms in the existing aid regime. The next Budget plan is due on February 1. While the Bihar polls are over– the judgment National Democratic Alliance has actually emerged triumphant there– assembly elections are also set up in West Bengal, Assam, Tamil Nadu and Kerala in May.

    Presently, farmers purchase fertilisers at MRPs (optimum list price) below what it costs to produce or import them. The distinction is footed by the Centre as subsidy payable to the manufacturers/importers.

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    In urea, the MRP is repaired by the government at Rs 5,92222 per tonne, while the aid varies depending upon the production and import expense. That, in turn, now ranges from an average of 17,000 to Rs 23,000 per tonne, respectively.

    In other fertilisers, the aid is repaired, while the MRPs are decontrolled. The per-tonne aid, for example, is a flat Rs 10,231 for di-ammonium phosphate (DAP), Rs 6,070 for muriate of potash (MOP) and Rs 8,380 for the popular ’10: 26: 26′ complicated fertiliser, whereas their matching MRPs (which vary from time to time and business to company) typical Rs 24,000, Rs 17,500 and Rs 23,500, respectively.

    The reforms that the market desires– which the government also wants to carry out, subject to political expediency– is bring urea on par with other fertilisers. In other words, decontrol its MRP and pay a repaired per-tonne nutrient-based subsidy similar to that on DAP, MOP or ’10: 26: 26′.

    That isn’t politically easy, though, considered that urea accounted for 33.69 lakh tonnes (lt) of the country’s overall retail fertiliser sales of 61.71 lt in 2019-20 Also, out of the allocated Rs 71,309 crore fertiliser subsidy for 2020-21, Rs 47,805 crore was towards urea. The standard MRP of urea (omitting taxes and neem-coating expense) has been raised by barely 11% from Rs 4,830 to Rs 5,360 per tonne given that April2010 The exact same duration, when other fertilisers were decontrolled, has seen the per-tonne MRP of DAP soar from Rs 9,350 to Rs 24,000 and from Rs 4,455 to 17,500 for MOP.

    Also Read| Agriculture an exception, fertiliser sales jump 45% in April despite lockdown

    But this state of affairs might not be fiscally sustainable, especially with the commissioning of new public sector urea plants. The very first of them, at Ramagundum in Telangana, is set to be prepared by December-end. The second one, at Gorakhpur in Uttar Pradesh, is likely to come up in August, with 2 more– at Barauni (Bihar) and Sindri (Jharkhand)– by November-December 2021.

    ” The urea from all four plants (each with 12.7 lt yearly production capability) will cost upwards of Rs 25,000 per tonne, after factoring in interest and depreciation. If the standard MRP stays at Rs 5,360 per tonne, the Centre’s subsidy bill will spiral beyond control,” confessed the earlier-quoted official.

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