New Delhi: The Union fertiliser ministry has exhausted subsidy funds meant for indigenous urea manufacture, including banking arrangement of Rs 7,000 crore, staring at liquidity crisis, if the government does not allocate more funds to the ministry.
In the interim budget presented in February this year, the finance ministry had estimated the fertiliser subsidy at Rs 67,970 crore for 2014-15, including Rs 31,000 crore on domestic urea, Rs 24,670 crore on decontrolled phosphatic and potassic fertilisers and Rs 12,300 crore on imported urea.
“So far, about Rs 12,000 crore allocated under the interim budget for domestic urea subsidy and Rs 7,000 crore granted under banking arrangement have been fully distributed to manufacturers," a source said.
The ministry is able to make payments for subsidy bills till April 30 only. There is no fund left under the domestic urea subsidy head to make further payments, sources said.
According to sources, the ministry, which has ruled out an increase in the urea prices, is looking for release of more funds in the budget, which is all set to make containing fiscal deficit a difficult task for finance minister Arun Jaitely.
Urea is the most commonly used soil nutrient and its prices are fixed at a maximum retail price (MRP) of Rs 5,360 per tonne. The government pays manufacturers the difference between the cost of production and MRP as subsidy.
Though deferred for a few months, a hike in gas prices could have a cascading effect on the fertiliser prices. “If the government doubles the gas price, the urea production costs would increase by Rs 10,000 crore,” according to an expert in the fertiliser business.
Meanwhile, fertiliser minister Ananth Kumar had also said that there is no proposal to increase urea prices and reduce the subsidy.
The country’s urea production has also remained at 22 million tonnes since 2007-08, while current demand is about 30 million tonnes. The shortfall is met through imports.
According to the fertiliser ministry, more than 90 per cent of India’s phosphatic and potassic fertilisers requirement is met by imports from North America and former Soviet Union....