The fertiliser industry has urged the government to provide subsidy in the form of cash and not bonds, saying the long-term special securities are trading at heavy discounts, impacting the balance sheet of companies.
The Fertiliser Association of India (FAI), a representative body of the fertiliser units across the country, has, in its recent submission to the department of fertilisers (DoF), said that for meeting the working capital requirements of the fertiliser industry, the mandatory agricultural lending target of 18% of the net bank credit may be made available to the fertiliser sector. This would help in meeting the short-term working capital requirements of the industry. In the case of reimbursement of subsidy, which has soared to a record level of Rs 1.2 lakh crore, the FAI has suggested that direct subsidy to farmers may be introduced or subsidy be given to the target groups of farmers.
FAI sources told FE on Tuesday that as against the stipulated lending target of 18%, banks are able to achieve hardly 15%, and part of the remaining portion of the amount is mopped up by the government under the rural infrastructure development fund (RIDF). ?The rest of the money, which is unutilised, should ideally go to sectors which contribute to enhancing the agriculture production. Fertiliser is one of the most critical inputs and it would only be natural if the unutilised portion of the credit meant for agriculture, is made available for enhancing the fertiliser production in the country,? the FAI said.
According to the FAI?s estimates, through this route of direct credit flow, the fertiliser sector may be able to access a bank credit of around Rs 35,000 crore, which will go a long way in meeting the credit needs of the sector. This measure will not be adverse for the banks as they will get market driven rates, as well as back up security in the form of unrealised portion of the subsidy.
The FAI also said that the subsidy reimbursement is an important factor for making any investment in the fertiliser sector, which is currently starved of funds. Against the demand of Rs 1.2 lakh crore, the government has provided only Rs 31,000 crore in the Budget and it has almost been exhausted in the first quarter itself. The FAI noted that it is not certain when the first supplementary will come and what amount will be allocated. The industry is overstretched for a working capital loan from the banks and the interest burden is increasing. The FAI even claimed that the industry has incurred heavy losses on bonds and reiterated that the government may provide direct subsidy to the farmers or give it to the target group of farmers.