Fertilizer industry seeks 15 year tax holiday for new projects

Fertilizer industry seeks 15 year tax holiday for new projects
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First Published: Fri, Jun 19 2009. 04 57 PM IST
Updated: Fri, Jun 19 2009. 04 57 PM IST
New Delhi: The fertilizer industry has demanded that tax holiday for at least 15 years be extended to all new projects to attract funds into the sector, which has not witnessed any major investment for over a decade.
“Tax holiday under the Income Tax Act for at least a period of 15 years to all new fertilizer projects be offered,” Fertilizer Association of India (FAI) director-general Satish Chander said.
In its pre-Budget memorandum, the FAI has also submitted that the subsidy paid to companies on the sale of different farm nutrients at lower rates be paid in cash and not in bonds. Moreover, the losses incurred on the sale of securities issued earlier be compensated fully.
“Payment of subsidy be made in cash only and not in the form of special securities (fertiliser bonds). The loss on the sale of bonds issued in lieu of cash should be compensated to the fertiliser companies,” the association has said.
The government had issued bonds worth Rs4,000 crore on 24 December last year and those worth Rs10,000 crore and Rs6,000 crore on 10 December and 29 January this year, respectively, to fertiliser companies to help meet their working capital requirements.
The government controls the pricing of key fertilizers and offers funds to companies, called fertilizer subsidy, to compensate them for selling key farm nutrients at the rates determined by it.
The government had proposed fertiliser subsidy of Rs30,986 crore in the Budget 2008-09. After that it came out with first supplementary grants for providing additional Rs52,000 crore subsidy. While Rs38,000 crore was given in cash, bonds were to be issued for Rs14,000 crore.
The industry is of the view that the long-term special securities provided by the government are trading at a discount. Moreover, since these bonds are classified as “Other Approved Securities”, banks and insurance firms are not obliged to buy them, making them unattractive against other AAA rated corporate bonds with higher yields.
The fertilizer subsidy bill is estimated to surge to over Rs1,02,000 crore in 2008-09 from just Rs45,659 crore last year, mainly due to the unprecedented rise in the prices of farm nutrients in the initial part of the last fiscal.
The FAI has also sought exemption in excise duty, sales tax and VAT on capital goods used in fertilizer projects.
The association is pitching for the withdrawal of customs duty on the import of LNG, fuel oil and basic raw materials like ammonia, phosphoric acid, rock phosphate, sulphur, sulphuric acid, among others.
These apart, the industry body has also sought the removal of service tax in the sector.
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First Published: Fri, Jun 19 2009. 04 57 PM IST