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Exclusive: India likely to overshoot fertiliser aid bill by $4.2 billion, banks may chip in - sources

Reuters  |  NEW DELHI/MUMBAI 

By and Rajendra Jadhav

NEW DELHI/MUMBAI (Reuters) - is likely to overshoot its fertiliser bill for this financial year by 300 billion rupees ($4.2 billion), three sources with direct knowledge of the matter said, and the government could tap state banks to fund the extra spending.

Prime budgeted 700.8 billion rupees for fertiliser subsidies for the 2018/19 year ending March 31, but the sources said nearly half of the money was used to settle dues from the previous year.

A rise in fertiliser prices overseas and a fall in the rupee currency also made imported fertilisers more expensive, lifting the total requirement for the year to 1 trillion rupees, the highest ever, the sources said.

Since the denied extra money to the for this year, the government is considering a "special arrangement" for local fertiliser companies, two of the sources said.

Such a move would be in keeping with other recent financially-draining measure taken by to win the support of farmers, small business owners and the less well-off, after the ruling party suffered setbacks in state elections and with a due in months.

The could also help the government meet its decade-low headline fiscal deficit target of 3.3 percent of the

The of India, which has the authority to review state and national budgets, last week criticised the government for increasingly resorting to "off-budget financing https://cag.gov.in/sites/default/files/audit_report_files/Report_No_20_of_2018_Compliance_of_the_Fiscal_Responsibility_and_Budget_Management_Act_2003_Department_of_Economic_Affairs_Minis.pdf" - such as asking banks to fund gaps - and said such arrangements had "fiscal implications".

A for the declined to comment. The fertiliser ministry did not immediately respond to an email seeking comment.

In the past, too, has rolled over subsidy requirements by using special arrangements with banks such as State Bank of or by delaying payments to companies.

"Considering the poor tax collections, we don't think the government would pay the entire subsidy this year," said a with a fertiliser company, declining to be named or to identify his employer.

"Like last year, it will be rolled over to the next year."

Monthly goods and services tax collection has been averaging below expectation at 967.8 billion rupees since April, compared with an average target of over 1.2 trillion rupees.

For the next fiscal year the fertiliser ministry has asked for 1 trillion in subsidies from the ministry, which will present an interim budget for next fiscal year on Feb. 1, ahead of a due by May.

The compensates state and private fertiliser companies such as Coromandel International Ltd, and Chemicals Ltd, Narmada Valley Fertilizers & Chemicals Ltd and for selling crop nutrients to the country's millions of farmers at discounted rates.

($1 = 70.7900 Indian rupees)

(Reporting by in NEW DELHI and in MUMBAI; Editing by Krishna N. Das; Editing by Tom Hogue)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, January 14 2019. 16:28 IST
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