Fertiliser subsidy to drain Rs 3,100 cr

MUMBAI, Jan 31: Notwithstanding the recent urea price hike, the finance ministry will have to make budgetary provisions for an extra Rs 3...

MUMBAI, Jan 31: Notwithstanding the recent urea price hike, the finance ministry will have to make budgetary provisions for an extra Rs 3100 crore on account of higher subsidy on fertilisers for the year 1998-99.

Official estimates show that the agriculture ministry may have to shell out an extra Rs 1500 crore on account of the hike with retrospective effect in the ad-hoc subsidy levels of domestically produced di-ammonium phosphate a vital crop nutrient from Rs 3500 to Rs 4400 per tonne and of imported DAP to Rs 3400 from Rs 2000 per tonne. Prices were also raised proportionately for other complex fertilisers.

The budget had allocated a sum of only Rs 3000 crore for ad-hoc subsidy for the year 1998-99. The extra outgo will have to be budgeted for by the finance ministry. It has now been estimated that savings on account of a 9.3 per cent increase in the basic price of urea from Rs 3660 to Rs 4000 would be roughly of the order of Rs 680 crore. In the current financial year, the amount saved would beonly around Rs 100 crore. This is because only two months are left of the year. What is more, bulk of the urea consumption has taken place the Rabi peak had already been scaled. The estimate, therefore, is that savings will not be more than Rs 100 crore in the current year.

If the finance ministry takes into account the routine escalations estimated at around Rs 100 crore given to the fertiliser industry on an annual basis under the retention pricing system, there would be no change in the outgo on fertiliser subsidy as a result of the price hike. The ministry, however, may decide not to allow payment for escalations in the current fiscal and instead cause this expenditure to spill over to the next year.The price hike must be seen in the context of the proposed Rs 1000 per tonne hike in the price of urea, which was later rolled back because of political opposition. The government had then made budgetary provisions of Rs 6983 crore as subsidy outgo on imported Rs 983 crore and indigenous urea on theassumption that there will be a Rs 1000 per tonne price increase. But the roll back had meant that the actual outgo would go up by another Rs 1400 crore to Rs 7400 crore.

Pertinently, while the centre did roll back the price hike in urea, sources said that the higher subsidy amount was apparently not incorporated in the expenditure budget. Supplementaries on this account will have to be moved now, it is claimed. Some savings, however, are likely on the subsidy on imported urea. This is on account of both, lower world prices and smaller import volumes. But the savings would be marginal and would not make a major difference to the overall subsidy outgo.