Fertiliser Ministry seeks Rs 10,000 cr for subsidy payments

The Fertiliser Ministry has sought an additional Rs 10,000 crore from the Ministry of Finance as the fertiliser subsidy for the current financial year is likely to be exhausted by the month-end.

The government had provided Rs 70,586 crore for fertiliser subsidy in 2013-14 against a demand of Rs 1,05,497 crore by the Department of Fertilisers.

The urea subsidy was exhausted after making payments till July, while the provision for phosphatic and potassic (P&K) fertilisers will finish by December end after making payments till September, a senior government official told PTI.

A subsidy of Rs 41,158.85 crore was allocated for urea and Rs 29,426.88 crore for P&K fertilisers.

The official said the fertiliser ministry will not be left with money to pay subsidy bills for the third and fourth quarters of the financial year ending in March 2014.

An outstanding amount of Rs 22,000 crore was carried over from 2011-12 to 2012-13. The backlog for 2012-13 was higher at Rs 32,000 and has to be paid from this year's allocations.

Amid the liquidity crisis, Fertiliser Minister Srikant Jena had written to Finance Minister P Chidambaram in October seeking immediate additional funds, saying the situation was of "grave concern" and two state-run fertiliser firms faced closure.

Against Rs 12,000 crore sought by the Department of Fertilisers, the Finance Ministry approved Rs 5,500 crore under a special banking arrangement at an interest rate of 10.7% per annum.

The government agreed to bear interest of 8% per annum with 2.7% interest to be borne by the industry.

Non-payment of subsidy and freight bills on time means non-recovery of a significant portion of cost of production or imports, Fertiliser Association of India Chairman R G Rajan said at its annual conference this month. Such a situation is unsustainable and severely affects the capacity of the industry to maintain operations, he said.

Profitability at IFFCO, the country's largest producer of urea, may come down by 50% in the current financial year due to a pending subsidy payment of about Rs 4,500 crore, Chairman and Managing Director U S Awasthi said last month.

Finance costs for fertiliser companies are set to rise as delayed subsidy payments force them to borrow money to run operations.