Fertiliser subsidy was allotted `72,659 crore for 2015-16
New Delhi: Due to insufficient allocation in the Union budget towards fertiliser subsidy, pending dues to the industry are likely to touch ₹ 45,000 crore by the end of this financial year, lobby group Fertiliser Association of India said on Monday.
Expenditure on account of the subsidy does not reflect in the budget and manufacturers have to bear an interest burden of nearly ₹ 3,500 crore due to the pending dues, Satish Chander, director general of FAI, said.
“We get only 25% of our payments from the farmer as 75% of the price of urea is the subsidy amount for which we have to chase the government every year," Chander said, adding, “Budget for subsidy on urea was exhausted in August this year and as of now pending dues to the industry is more than ₹ 30,000 crore."
Fertiliser subsidy, the second big ticket subsidy (after the food subsidy of ₹ 1.24 trillion) given by the Centre, was allotted ₹ 72,659 crore for 2015-16. However, out of this amount, ₹ 7,000 crore was used to repay bank loans for 2014-15, leaving ₹ 65,969 crore for this year’s payment to the industry.
Urea is provided to farmers at a subsidised price of ₹ 5,360 per tonne. The difference between the cost of production and the retail price is provided as subsidy to manufacturers.
Presently, the Centre routes the fertiliser subsidy through manufacturers, although the government has said that it intends to directly pass on the subsidy amount to farmers through the direct benefit transfer (DBT) route.
A major challenge in cash transfer of fertiliser subsidies is identification of beneficiaries since land records are neither accurate nor updated in many states, the government informed Parliament in July.
Earlier this year, a high-level committee on restructuring Food Corporation of India, chaired by Bharatiya Janata Party leader Shanta Kumar, recommended direct cash subsidy of about ₹ 7,000 per hectare to farmers.
The implementation of DBT for fertiliser subsidy is getting delayed, the FAI said in a statement on Monday, adding that the industry is cooperating with the government but payments should not be held up in the process.
According to FAI’s calculations, ₹ 3,353 crore is the outstanding subsidy due to manufacturers from 2012-13, ₹ 5,609 crore from 2013-14, ₹ 9,646 crore from 2014-15, and ₹ 11,603 crore up to August this year.
The fertiliser ministry asked for more than ₹ 25,000 crore from the finance ministry for making subsidy payments to domestic urea manufacturers, as it is facing liquidity crunch, the Press Trust of India reported on 15 November.
The FAI further said that governance issues are glaring when it comes to the fertiliser sector. “The cabinet approved an increase in fixed costs for urea plants on 2 April but this is yet to be implemented," Chander said, adding, “on this account the dues to industry is ₹ 1,000 crore".
According to FAI, the price distortion in urea, phosphorus and potassium fertiliser needs to be corrected for balanced use of fertilisers but the central scheme of giving soil health cards to every farmer is not enough to reduce over-use of urea.