Demand R3,500-cr compensation for loss
The fertiliser industry has taken the government to court over compensation for the losses incurred on the distress sale of bonds issued by the Centre. The companies have demanded around Rs 3,500 crore as compensation from the government against bonds issued against subsidy for 2007-08 and 2008-09.
The industry could not sell the entire quantum of these bonds as only a limited window was available and it also suffered losses as the RBI buyback of these ?poor quality bonds? was at a discount.
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The Fertiliser Association of India (FAI) on behalf of all the companies have filed a case against the government in the Delhi high court for compensation for the losses. The fertiliser ministry is yet to file its response in the court.
The government issued bonds towards payment of subsidy of Rs 27,500 crore to the fertiliser companies during 2007-08 and 2008-09. ?These bonds issued by the government were not of good quality with coupon ranging from 6.2%-8.3% and the duration being of 15-18 years. Later in 2011, RBI bought back bonds worth Rs 11,795 crores at a discount and in this, the companies suffered a loss of Rs 1,782 crore,? a fertiliser company official said. Some of the companies could not submit the application with the RBI to dispose their bonds worth Rs 1,947 crore when the buyback took place. Therefore, the companies are still holding these residual bonds which have no takers.
For the remaining bonds, the companies were forced to sell the papers at the open market at abysmally low prices to raise cash and for business operations, than holding it for the full term. By selling these bonds at the open market, the companies incurred losses to the tune of Rs 2,331 crore. The government subsequently provided some compensation for these losses but the industry reckons that in all, Rs 3,500 crore is still due to it.
Around Rs 31,580 crore of fertiliser subsidy payment is likely to remain outstanding in 2012-13, chemicals and fertilisers minister Srikant Jena said in Parliament recently. “The Budget estimates for fertiliser subsidy in 2012-13 was Rs 65,874 crore. Against a projected requirement of Rs 1,02,207.38 crore, the Revised Estimates (RE) allocated is Rs 70,628 crore,? he said. For the 2013-14 fiscal, the government budgeted the fertiliser subsidy at Rs 65,971.50 crore.