No more bonds, fertiliser industry wants subsidy in cash

The fertiliser industry has urged the government to provide subsidy in the form of cash and not bonds, saying the long-term special securities are trading at heavy discounts impacting the balance sheet of companies.     

"The bonds given to fertiliser companies are quoting at a discount of about 15 per cent. So a bond with a face value of Rs 100 will fetch only Rs 85. This amounts to the government paying only Rs 85 against the dues of Rs 100," Fertiliser Association of India Director General Satish Chander told PTI.     

Since these bonds are classified under the Other Approved Securities, banks and insurance firms are not obliged to buy them, making them unattractive against other AAA rated corporate bonds with higher yields, industry experts said.     

To further his point, the FAI official said, "The companies are asking for delivered costs of fertilisers. They have to give cash to raw inputs providers, transporters and others. Moreover, when they deposit tax, they will have to give it in cash. So what they need is cash and not bonds."     

These apart, the government imports urea at about Rs 31,000 per tonne where as domestic producers get about Rs 13,000 a tonne, Chander said, adding that the government has been paying in cash to overseas sellers.     

Moreover, payment in the form of bonds is not an economically viable option for a cash-strapped sector like fertiliser, the experts said.     

Fertiliser companies will find it extremely difficult to either gather additional working capital to meet requirements of funds blocked in bonds of 16 to 18 years long tenure or sell them in markets at heavy discounts and incur losses, the FAI DG explained.