Fertiliser companies may have to wait to get money from additional subsidy provision

Fertiliser companies may have to wait for some time to get money from additional subsidy of ₹65,000 crore, as the Budget allocation for the current fiscal has almost been exhausted.

“They (companies) will get it before the end of the financial year (2020-21, ending on March, 31),” a senior Finance Ministry official told BusinessLine. With demand for fertiliser going up, so has the need for subsidy during the current fiscal on account of higher sowing during crop seasons of 2019-20 and 2020-21.

In the Budget for FY21, the government had provided ₹47,805 crore as subsidy for urea and ₹23,504 crore for nutrient based subsidy. On November 12, Finance Minister Nirmala Sitharaman announced that as fertiliser consumption was going up significantly, ₹65,000 crore will be provided to ensure increased supply of fertilisers to farmers to enable timely availability of fertilisers in the upcoming crop season. Demand for fertilisers is estimated to go up by 25 per cent.

Some companies said they are facing problems as they have already sold fertilisers but have not got dues on account of the subsidy. However, Satish Chander, Director General of the Fertiliser Association of India, does not see much of a problem. “We are thankful for additional provision. We understand the amount of ₹65,000 crore has been included in the Revised Estimate. We are hopeful of getting this once Parliament approves additional expenditure of the government during the forthcoming session,” he said.

As the winter session of Parliament has been scrapped, the Finance Ministry could not present the second Supplementary Demands for Grants (SDG). This will be presented during the Budget session of Parliament, expected to start from January 27. The Finance Ministry has already initiated the process for presenting second and final SDG during the ensuing session.

Subsidy mechanism

There are two subsidy mechanisms for fertilisers, and in both cases, companies get the subsidy amount. As far as urea is concerned, it is provided to farmers at a statutory notified MRP. The MRP of a 45-kg bag of urea is ₹242 per bag and the MRP of a 50-kg bag of urea is ₹268 per bag (both exclusive of charges towards neem coating and taxes as applicable). The difference between the delivered cost of fertilisers at the farm-gate and the net market realisation by the urea unit is given as subsidy to the urea manufacturer/importer.

In the case of phosphatic and potassic (P&K) fertilisers, the government had implemented a nutrient-based subsidy policy from April 1, 2010. Under the policy, a fixed amount of subsidy, decided on an annual basis, is provided on subsidised P&K fertilisers depending on their nutrient content. The MRP is fixed by fertiliser companies as per market dynamics at a reasonable level, which is monitored by the government.