Fertiliser firms likely to get Rs 10,000 cr more as bank credit bl-premium-article-image

Shishir Sinha Updated - November 23, 2017 at 07:24 PM.

Instead of extending subsidy, Govt to bear 8% of interest

BL21_P1_promo FERTILISER

Fertiliser companies may get up to Rs 10,000 crore more under the special banking arrangement against the subsidy due for the current fiscal year.

This is in addition to the Rs 5,500 crore approved earlier. Under the arrangement, fertiliser companies will get short-term credit from the banks. Originally, the interest rate for such an arrangement was 10.5 per cent.

However, banks agreed to lend only at 10.7 per cent. Of this, the Government will bear 8 per cent, while remaining is to be borne by the companies. The amount will be repaid through provisions made in the supplementary demands for grants to be tabled during the Winter session of Parliament starting December 5

“It is yet to be decided how much money will be used immediately. But, considering the current financial situation of the fertiliser companies, such a fund flow will be critical, even if companies have to pay a small interest on that,” a senior Government official said. Last year, fertiliser companies availed credit facility to the tune of Rs 5,000 crore.

However, the final interest rate on additional banking arrangement could go up, as banks agreed to lend the first tranche of Rs 5,500 crore for the current fiscal only at 10.7 per cent interest.

This means that fertiliser companies will have to pay an extra 20 basis points (bps). Since, there is no possibility of the overall interest rate going down in the near future, there will be no option except getting credit at 10.7 per cent. The industry estimates a rise in total fertiliser subsidy to Rs 30,000 crore. Against this, the Fertiliser Ministry has sought Rs 15,000 crore under the special banking arrangement to clear subsidy arrears. The rise in subsidy is due to the increase in the cost of imported fertilisers due to the rupee depreciating against the dollar.

For 2013-14, the Government reduced the fertiliser subsidy to Rs 65,971.50 crore from the revised estimate of Rs 65,974 crore in 2012-13 but it was higher than the budget estimate of Rs 60,974 in 2012-13.

shishir.s@thehindu.co.in

Published on November 20, 2013 16:55