NEW DELHI, Dec 30: Faced with severe liquidity crunch, the Fertiliser Ministry has sought bank loans of up to Rs 25,000 crore under a special banking arrangement to pay part of the mounting fertiliser subsidy bill.
With the fertiliser subsidy bill likely to shoot to Rs 1,04,000 crore this fiscal, the ministry has sent a proposal to Finance Ministry seeking a “special banking arrangement” to draw loan of Rs 25,000 crore from banks for subsidy payments.
“The ministry is facing a shortage of funds to pay the industry’s subsidy bills and has subsequently sent a proposal to Finance Ministry for a special banking arrangement so that it can draw a loan of Rs 25,000 crore from public sector banks at low interest,” a source in know of the development said.
Fertiliser Ministry has not paid the subsidy bills for phosphatic and potassic (P&K) fertilisers like muriate of poatsh (MoP) and di-ammonium phosphate (DAP) since July and for urea since August, the source revealed.
Another source, while confirming the ministry’s move of sending a proposal to Finance Ministry, added that the subsidy bill crossing Rs 1 lakh crore is not just the payments for the current fiscal.
“If Fertiliser Ministry is able to make all the payments, which total about Rs 1,04,000 crore, it will have paid Rs 21,000 crore inventory payment for previous years, payments for this fiscal as well as for the first quarter of 2013-14 fiscal,” the source explained.
The source added that it has also been suggested in a meeting held in the Fertiliser Ministry that the ministry can ask the government to ask banks to provide loans to the industry and pay a part of the interest payments ar all of it till the firm’s subsidy payments are re-reimbursed.
“It may seem that fertiliser subsidy bill has crossed one lakh crore this fiscal, but if this is approved then the subsidy bill in 2013-14 fiscal will be much less,” the source said.
A senior Fertiliser Ministry official, who refused to speak on the special banking arrangement, said that “In all probabilities ministry has exhausted its budgetary allocation of Rs 61,256 crore and would require more funds to pay for the subsidy bills.”
Meanwhile, industry-body Fertiliser Association of India
(FAI) said the Indian fertiliser industry is passing through a severe liquidity problem in view of non-payment of pending subsidy bills.
“The ‘on account’ payment for subsidy on imported P&K fertilisers has been made up to June, 2012 and for domestic P&K fertilisers, it has been paid till July 2012. The subsidy for domestic urea has been paid up to August, 2012,” FAI Director General Satish Chander told PTI.
In addition, there are other pending subsidy and freight bills which have not been paid for long time. Only for imported urea, which is on Government account, the payment is made up-front, he added.
“The budget allocation of Rs 60,974 crore for fertiliser subsidy as approved by Parliament has already been exhausted. An estimated amount of Rs 19,000 crore subsidy payment is outstanding for the period till October, 2012,” he said.
In addition, for the remaining period of 2012-13 fiscal, that is beyond October, 2012, the estimated requirement of funds is Rs 19,000 crore, Chander added.
“There is urgent need for arrangement for additional funds of about Rs 38,000-40,000 crore to save the fertiliser industry from the current financial crisis and enable to continue operations and supply fertilisers to the farmers,” he said.
Chander added that since the ministry has no funds for the payment of subsidy bills for this fiscal, the industry is forced to seek loans from banks.
“Under such a situation, the only hope left with the industry is to seek interim banking arrangement through which public sector banks can pay subsidy bills once they are approved by the Department of Fertilisers,” he suggested.
When the subsidy amount is available with the Department, it can directly re-pay these subsidy payments made by the banks. In 2008-09 also similar arrangements were made which helped fertiliser companies to recover their subsidy under such arrangements, he said.
“The Industry is prepared to share the interest burden beyond 9 per cent. This means the interest liability up to 9 per cent be taken by the Government and balance by the industry,” Chander added.
On an average, India consumes about 30 million tonnes of urea and around 25-26 million tonnes of DAP, MoP and complex fertilisers annually. (PTI)
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