Govt gives Rs 10,000 cr bonds to 23 fertiliser cos

The government today issued special bonds for Rs 10,000 crore to 23 fertiliser companies as compensation for subsidising prices in the current financial year.

A finance ministry statement said the government issued the bonds at the coupon rate of 7 per cent. These bonds will not be eligible as statutory requirements of banks for investment in government securities. However, such investment by the insurance companies can be reckoned as investment under “other approved securities” category as defined under Insurance Regulatory and Development Authority (Investment) Regulations, 2000.

Further, the investment by the provident funds, gratuity funds and superannuation funds in the bonds will be treated as an eligible investment under the administrative order of the ministry.
 

TOP SIX BENEFICIARIES (In Rs crore)
Company	Amount
Indian Farmers Fertilizer Co-operative Ltd	2980.97
Coromandel Fertilizers Ltd	1147.51
Indian Potash Ltd	1094.40
Zuari Industries Ltd	730.10
Tata Chemicals Ltd	611.93
Paradeep Phosphates Ltd	537.94
Rashtriya Chemicals & Fertilizers Ltd	462.46
Mosaic India Private Ltd	429.41
Source: Finance ministry

The bonds will be transferable and eligible for market ready forward transactions (Repo).

The government, in the first supplementary demand for grants, had sought approval for Rs 38,863 crore for fertiliser subsidy by way of cash outgo and Rs 14,000 crore through fertiliser subsidy bond. The fertiliser subsidy bill in 2007-08 was estimated at around Rs 40,300 crore. However, an estimate of fertiliser subsidy for the current financial year was not available.

With crude oil prices coming down sharply, the fertiliser subsidy bill in the current financial year is expected to be lower. According to the arrangement, fertiliser companies sell their products at a discount to farmers and the government reimburses the subsidy component by way of cash transfer and fertiliser bonds. The calculation for subsidy is based on cost-plus basis. When crude oil prices go up, the cost of feedstock for fertiliser units also spiral upwards.