Mumbai: Budget 2009 could boost working capital for fertilizer companies, but end up increasing the fiscal deficit.
Fertilizer secretary Atul Chaturvedi, in an interview, confirmed that the fertilizer industry had sought an all-cash subsidy payment instead of a mix of cash and bonds, which sell at discounts, resulting in working capital disruptions and losses.
The last word, however, lies with the finance ministry that’s likely to adopt a cautious approach because an all-cash subsidy payment would widen the government’s already high fiscal deficit. Chaturvedi made clear that the subsidy payment still stands at Rs60,000 crore for fiscal 2010, compared with Rs1 trillion in the previous year when it rose because of high input costs.
On a separate issue, Chaturvedi said he had written a letter to the petroleum ministry for confirmation on behalf of the Fertilizer Association that all present and future contracts by Reliance Industries Ltd (RIL) will be honoured. The industry wants reassurances that the 15 million metric standard cubic metres a day (mscmd), out of a total 42mscmd of natural gas, supplied to fertilizer plants by RIL’s deep-sea block in the Krishna-Godavari basin off the eastern coast, will not be disrupted.
The Bombay high court in June asked Mukesh Ambani-led RIL to supply 28 mscmd of natural gas a day for 17 years at $2.34 per mBtu to Reliance Natural Resources Ltd, run by his estranged younger brother Anil Ambani.