Dept of Fertilisers wants Budget to double subsidy

The Department of Fertilisers (DoF) has sought a Rs 45,000 subsidy in the coming Budget for the fertiliser sector. This is almost double the amount disbursed last fiscal (2006-07), which stood at approximately Rs 23,000 (revised estimates). “The DoF has written to the finance ministry to increase the allocation of the fertiliser subsidy, as against what has currently been provided by the latter. The letter has been flagged off at the highest level,” said a senior DoF official. According to the official, even the fertiliser ministry has demanded an increase in the subsidy amount.

Further, industry sources confirm that the finance ministry has currently made a subsidy allocation to the tune of Rs 36,500 crore, as against the DoF’s estimate of Rs 45,000 crore. “According to the industry, this Budget should allocate nothing less than Rs 50,000 crore as subsidy, including the carryover from last year. Similarly, for next fiscal, the industry talks about a subsidy figure of Rs 60,000-Rs 65,000 crore while the government estimates are only Rs 50,000 crore,” said Fertiliser Association of India dy director general R C Gupta.

The industry is reportedly unhappy about the huge carryover figures from past years. The ‘carryover to next year’ figures have been constantly increasing in recent times, from about Rs 2,000 crore in 2003-04 to Rs 3,372 crore in 2004-05, Rs 5,914 crore in 2005-06 and Rs 8,788 in 2006-07. The industry claims to be severely hit, with the unpaid subsidies seeing a sharp increase every year. By not receiving the required subsidy amounts, fertiliser companies have reportedly resorted to taking loans from banks to meet their cost requirements.

With the burden of debt and interest payments, smaller companies are reportedly facing losses and even closure. Further, the industry doesn’t receive subsidies on any of its raw materials. “Only gas is under the administered price mechanism and its quality is getting reduced by 30-40 per cent,” claimed an industry source. However, the DoF claims that the carryover figures aren’t much of an issue. “Though these figures seem large, they actually aren’t. It is the price factor that causes the amounts to look huge,” said a DoF official.