Urea subsidy: CCEA approves Rs 7,000 cr loan from banks

The Centre provides urea to farmers at a fixed MRP of Rs 5,360 per tonne

The Cabinet Committee on Economic Affairs (CCEA) on Wednesday gave approval for Rs 7,000 crore loan that was taken by the government from public sector banks to clear outstanding urea subsidy bill during the last fiscal.

The Centre provides urea to farmers at a fixed maximum retail price (MRP) of Rs 5,360 per tonne. The difference between the cost of production and MRP is provided as subsidy to manufacturers.

The CCEA has "given its ex-post facto approval for a special banking arrangement (SBA) for a loan of Rs 7,000 crore with the consortium of public sector banks, led by State Bank of India (SBI) and Punjab National Bank (PNB), for settlement of outstanding indigenous urea subsidy bills of fertiliser companies in 2014-15", an official statement said.

The SBA has already been implemented or operationalised to overcome the liquidity problems of the fertiliser companies, it added.

"Under the above SBA, a total of Rs 6,806.66 crore for settlement of subsidy bills with the two consortiums of public sector banks, led by SBI and PNB, was raised by government.

"The above loan amount along with interest liability on the part of government thereon amounting to Rs 64.03 crore was paid to the banks," the statement said.

Briefing media about the CCEA decision, telecom minister Ravi Shankar Prasad said, "this shows our commitment to the cause of farmers who are entitled to get fertilisers at a reduced cost."

The loan together with government interest thereon has been repaid from budget estimate for 2015-16 within the sanctioned budget under the vote on account.

The Centre is making available fertilisers, namely urea and 22 grades of P&K fertilisers, to farmers at subsidised prices through fertiliser manufacturers or importers.

"For making funds available to the fertiliser companies against their subsidy claims, the Ministry of Finance had approved SBA for an amount of Rs 7,000 crore with government interest liability limited to G-Sec rate.

India produces about 22 million tonnes of urea and imports about 8-9 million tonnes to meet the domestic shortfall. The fertiliser subsidy stood at about Rs 70,000 crore during last fiscal.