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 or 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 probability ministry has exhausted its budgetary allocation of Rs 61,256 crore and would require more funds to pay for the subsidy bills.”

(This article was published on December 30, 2012)
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