Fertiliser subsidy on urea is expected to go up in near future as the fertiliser ministry is likely to propose increase of subsidy by Rs 350 per tonne in urea as against the industry’s demand for a hike of Rs 700 per tonne. Currently, fertilizer companies are demanding for more subsidy owing to the rising fixed costs of urea production, which mainly includes establishment cost, annual maintenance cost, working capital, salaries, interest and other items. India produces about 22 million tonnes of urea and imports around 8 million tonnes in order to meet the shortfall. Presently urea is sold at a maximum retail price (MRP) of Rs 5,360 per tonne to farmers and the difference between production cost and MRP is reimbursed to manufacturers in the form of subsidy.
Further, the ministry is also likely to modify New Pricing Scheme (NPS) Stage- III after factoring in rise in fixed production cost over the years. Scheme was approved by the government in 2007 and was based on cost of production for 2002-03. So far this fiscal, the Fertiliser Ministry has been allocated only Rs 70,586 crore funds towards subsidy payment to fertiliser firms against the total demand of Rs 1,05,497 crore for the 2013-14 fiscal. Commodity wise, a subsidy of Rs 41,158.85 crore was allocated for urea and Rs 29,426.88 crore for P&K fertilisers. Furthermore, most of the fertilizer firms are facing a liquidity crunch as the government has exhausted its funds towards subsidy payment on indigenous urea. Concerned over acute the liquidity crunch faced by the Indian fertiliser sector, the fertiliser industry has urged the Government to immediately allocate an additional Rs 40,000 crore to clear the subsidy dues for the current fiscal to help resolving the payment crisis faced by the industry.
Meanwhile, in September, the Finance ministry had agreed to pay only Rs 5,500 crore subsidy under a special banking arrangement (SBA) as against Rs 12,000 crore sought by the Department of Fertilisers (DoF) and also agreed to bear interest of 8 per cent per annum with 2.7 per cent interest to be borne by the industry.
Further, the ministry is also likely to modify New Pricing Scheme (NPS) Stage- III after factoring in rise in fixed production cost over the years. Scheme was approved by the government in 2007 and was based on cost of production for 2002-03. So far this fiscal, the Fertiliser Ministry has been allocated only Rs 70,586 crore funds towards subsidy payment to fertiliser firms against the total demand of Rs 1,05,497 crore for the 2013-14 fiscal. Commodity wise, a subsidy of Rs 41,158.85 crore was allocated for urea and Rs 29,426.88 crore for P&K fertilisers. Furthermore, most of the fertilizer firms are facing a liquidity crunch as the government has exhausted its funds towards subsidy payment on indigenous urea. Concerned over acute the liquidity crunch faced by the Indian fertiliser sector, the fertiliser industry has urged the Government to immediately allocate an additional Rs 40,000 crore to clear the subsidy dues for the current fiscal to help resolving the payment crisis faced by the industry.
Meanwhile, in September, the Finance ministry had agreed to pay only Rs 5,500 crore subsidy under a special banking arrangement (SBA) as against Rs 12,000 crore sought by the Department of Fertilisers (DoF) and also agreed to bear interest of 8 per cent per annum with 2.7 per cent interest to be borne by the industry.
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