India’s fertiliser subsidy set to rise by 62% in current financial year: Crisil

Our Bureau | | | Updated on: Dec 06, 2021
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This is on the back of swift rise in prices of raw materials and global natural gas

India is likely to witness an unprecedented jump in the Central government’s fertiliser subsidy on the back of swift rise in prices of raw materials and global natural gas. According to ratings agency Crisil, the government’s fertiliser subsidy bill is likely to be higher by ₹50,000 crore to touch the total outgo of ₹130,000 crore this financial year compared to last year’s ₹79,530 crore. This would be despite the sales volume of fertilisers declining by 10 per cent on-year, Crisil said.

Fertiliser subsidy may touch ₹1.5-lakh cr in FY22

According to Crisil, to encourage farmers to use fertilisers for better crop yield, the government keeps their retail sales price (RSP) significantly lower than the market rate, and reimburses the difference to manufacturers through subsidy payments.

Sowing hope: Fertiliser companies’ stocks gain on subsidy hike buzz

However, for long, government provisioning for such subsidy payments has been inadequate, which led to regular build-up of arrears that posed a challenge to the sector. But last fiscal, the government cleared the arrears through an additional disbursement of ₹62,638 crore.

Shortfall, largely for urea

Nitesh Jain, Director, Crisil Ratings, said, “The government has been proactive, given the strategic importance of the fertiliser sector. It has already announced an additional subsidy of ₹21,328 crore (₹14,775 crore in May 2021 and ₹6,553 crore in October 2021) for non-urea fertilisers. Despite this, there will likely be a shortfall of ₹30,000 crore, largely for urea.”

Published on December 06, 2021

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