The total fertiliser subsidy budget for the fiscal 2013—14 is anticipated to be in the range of Rs 65,000 -70,000 crore excluding carryover subsidy of last years, a ratings agency said in a report today.
The government has fixed the subsidy budget for the year 2013—14 around Rs 66,000 crore, with this given budget and carryover subsidy of Rs 36,000 the delay in subsidy payments are likely to continue, according to ICRA ratings report on fertiliser sector.
The agency added that delayed subsidy payments would lead to stretched cash flows and adverse impact on net profitability due to high interest costs, despite better demand scenario on the back of the good monsoon.
The subsidy for phosphatic and potassic (P&K) fertilisers such as di—ammonium phosphate (DAP) is expected to remain in the range of Rs 29,000 -30,000 crore, the report added.
Despite decline the international urea prices, the subsidy on urea is estimated to stay at Rs 36,000 - 40,000 crore, as rupee depreciation has neutralised the effect of fall in international prices.
Meanwhile, depreciation of the rupee has lead to increase in gas cost, which is the major cost of urea production and, in turn, will increase the subsidy bill, the report added.
ICRA said any meaningful reform in urea pricing is likely only after the general elections in 2014.
Healthy monsoon in the current year is likely to lead to favourable demand outlook for fertiliser sector in the current year, with kharif and rabi off—take likely to improve significantly compared to last year, the report added.