Policy

Fertiliser industry welcomes additional ₹65,000-crore subsidy allocation

Our Bureau New Delhi | Updated on November 12, 2020 Published on November 12, 2020

The Fertiliser Association of India (FAI) on Thursday welcomed the government decision to allocate an additional ₹65,000 crore towards fertiliser subsidy in order to ensure adequate supply of nutrients available to farmers in the country.

“We not only welcome the move but also thank the government. This has been a long-pending issue. The over-carry of arrears year after year will be solved now,” said FAI Director General Satish Chander here.

Rating agency ICRA agreed with Chander and said this landmark decision will solve the issue of subsidy delays being faced by the fertiliser industry over the last several years.

“The subsidy backlog had resulted in elevated working capital borrowings and significant interest outgo for the industry weakening the credit profile and profitability of the industry. With this additional allocation over the budgeted subsidy of ₹70,000 crore, the Indian fertiliser industry will witness improvement in its profitability,” said K Ravichandran, Senior Vice-President and Group Head-Corporate Ratings at ICRA, in a statement.

Potential backlog

According to ICRA’s estimates, the fertiliser subsidy backlog would have reached around ₹57,000-60,000 crore by the end of FY21, given the strong volume growth being witnessed in fertiliser sales in the current fiscal. Such a backlog would have significantly weakened the liquidity position of the industry, he said.

“The current additional allocation indicates a change in the stance by the government towards the fertiliser sector, and ICRA expects several other reforms to be undertaken to ensure that the industry remains in a healthy state, as it caters to the food security of the nation,” Ravichandran said.

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Published on November 12, 2020
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