New Delhi: Budget 2008 may have placed the agricultural sector firmly centrestage with the Rs60,000 crore farm loan waiver, but it has provided inadequate subsidy allocation for fertilizers, a key input to raise soil productivity. As a result, given the liquidity crunch fertilizer manufacturers face, fertilizer availability could be affected as early as the kharif season (the summer crop season, which begins in July), said R.C. Gupta, deputy director general of industry body Fertiliser Association of India (FAI).
Against a demand of Rs50,000 crore by the department of fertilizers, the subsidy allocation in 2008-09 is Rs30,986 crore, or 1.6% more than the revised estimates for 2007-08. “The Budget allocation is grossly inadequate. The actual subsidy dues for 2007-08 would be close to Rs48,000 crore. So, even after including the bonds (worth Rs7,500 crore), there is a likely carry-forward of Rs10,000 crore to the next financial year,” said Gupta. The revised estimates (for 2007-08) do not include Rs7,500 crore given through bonds as it is an off-balance-sheet item.
Grim forecast: Fertilizer availability could be affected during the kharif season, when crops such as paddy are sown, deputy director general of industry body Fertiliser Association of India R.C. Gupta has said.
Industry estimates show an increase in the amount of imports over the last two years. “While the quantity of total fertilizer imports in 2006-07 was around 11 million tonnes (mt), in 2007-08 the final figure is likely to be close to 14mt,” said another FAI official, who did not wish to be identified.
Government estimates state that 88% of the increase in subsidy is due to a sharp increase in international prices of inputs and finished fertilizer even as the domestic administered prices remained unchanged. “The industry is already cash-starved. We are not like the oil companies who can accommodate more bonds. We need ready cash to continue production. The turnaround in agriculture cannot come at the cost of the fertilizer industry,” Gupta said.
Under the current system, the government compensates manufacturers for the difference between the delivered costs of the fertilizer and the maximum retail price, which is set by the government.
“Most fertilizer stocks have been performing poorly especially since the Budget, yet it is difficult to say whether it is only because of the Budget allocation being lower or part of a general trend,” said a Mumbai-based stock analyst, who did not wish to be identified.