Fert Min faces liquidity crunch to pay subsidy

Ministry expects release of more funds in the final budget

The Fertiliser Ministry has exhausted subsidy funds meant for indigenous urea manufacture, including banking arrangement of Rs 7,000 crore, and is looking for release of more funds in the budget.

In the interim budget presented in February this year, the Finance Ministry had estimated the fertiliser subsidy at Rs 67,970 crore for 2014-15, including Rs 31,000 crore on domestic urea, Rs 24,670 crore on decontrolled phosphatic and potassic fertilisers and Rs 12,300 crore on imported urea.

“So far, about Rs 12,000 crore allocated under the interim budget for domestic urea subsidy and Rs 7,000 crore granted under banking arrangement have been fully distributed to manufacturers,” a source said.

The ministry is able to make payments for subsidy bills till April 30 only. There is no fund left under the domestic urea subsidy head to make further payments, sources said. They expect release of more funds in the final budget.

Urea is the most commonly used soil nutrient and its prices are fixed at a maximum retail price (MRP) of Rs 5,360 per tonne.

The government pays manufacturers the difference between the cost of production and MRP as subsidy.

Meanwhile, Fertiliser Minister Ananth Kumar had also said that there is no proposal to increase urea prices and reduce the subsidy.

The country’s urea production has also remained at 22 mn tn from 2007-08, while present demand is about 30 mn tn.

The shortfall is met through imports.