Fertiliser subsidy higher by only 3% in 2014-15

Marginal rise is partly due to less imports despite sharp exchange rate fluctuations in the current financial year and excessive use of urea by the farmers

The fertiliser subsidy for the year 2014-15 has been pegged at around Rs 70,000 crore, marginally higher than Rs 68,000 crore doled out in 2013-14 as per estimates of fertilizer ministry.
 
According to official sources, a proposal has been sent for disbursal to the finance ministry which will be announcing the subsidy figures for 2014-15 as part of its budget proposal in vote of account session on Monday next week.
 
However, officials clarified that the finance ministry has already disbursed Rs 10,000 crore as part of  the special bank loan package to fertilizer units in the form of interest subvented loan. Moreover there will be rollover of unutilized subsidy of Rs 22,000-23,000 crore from current fiscal to the next. In total, the fertilizer subsidy for the new financial year thus will stand at around RS 1.05 lakh crore.  

 

Official sources said, the actual fertilizer subsidy for the new financial year is far less than what was projected to be  10-15 per cent higher than current fiscal. The marginal three percent year-on-year increase is partly due to less imports despite sharp exchange rate fluctuations in the current financial year and excessive use of urea by the farmers. More use of urea has ensured that the urea imports which was way more than the requirement in the year 2012-13 and lying in stock was mostly used without impacting the import bill for the exchequer.
 
According to official sources, the finance ministry, meanwhile is not budgeting for the proposed in hike in the fixed price of urea which as per an ministerial panel reports would go up by Rs 350 per tonne while the government will subsidise the additional cost, pegged at Rs 900 crore.

 
Fertiliser Ministry had moved the proposal for modified New Pricing Scheme (NPS) III, according to which department calculates production cost of urea to pay subsidy. As per the proposal of the ministry, the fixed cost of urea produced by plants which are 30 years old or more would be increased by Rs 150 per tonne, while for all other plants it would be raised by Rs 350 per tonne.
 
For a urea plant, fixed cost mainly includes salary & wages, contract labour, repair & maintenance and selling expenses.
 
Similarly, the decision of the inter-ministerial committee on nutrient based subsidy (NBS) has deferred its decision to recommend any hike in phosphate and potassium (P&K) fertiliser subsidy for 2014-15 because of stable rates of nutrients in global markets, sources said. Official sources said, due to current account situation, there is move to contain subsidies in general. Moreover farmers mostly use urea and less of phosphate and potassium (P&K) fertilizer.

 
The panel, set up for the implementation of nutrient-based subsidy (NBS) policy for P&K fertilizers had met recently  and was likely to recommend no change in P&K subsidy, sources said.
 
In 2007, the Government approved the New Pricing Scheme (NPS) Stage-III for urea units in the country. The scheme was originally effective from October 2006 to March 2010 and now has been extended for three more years. NPS-III scheme was based on cost of production with 2002-03 as the base year.