Prime Minister Manmohan Singh has asked the finance ministry to release an amount over and above the Rs 22,451.01 crore that was earmarked in the Budget for 2007-08. The additional provision is expected to meet the needs of fertiliser subsidy till December 2007.
The stock prices of fertiliser firms on the NSE closed in positive territory on Wednesday, with Chambal Fertiliser (Rs 33.90) NFL (32.75) and GSFC (Rs 227) showing good gains.
Of the total amount, the government has decided to pay out Rs 9,000 crore as cash support from the budgetary pool, while Rs 6,000 crore would be mopped up through bonds.
Fertiliser firms have to sell their products to farmers at government-controlled rates. Currently, the farm gate price of urea is Rs 4,000 a tonne whereas the companies estimate the actual price at above Rs 12,000 per tonne. The government keeps the prices low to ensure that farmers get fertilizer at affordable prices, and therefore ensures food security.
As the initial subsidy provision was inadequate because of strong demand for fertilizer, chemical and fertilizer minister, Ram Vilas Paswan had demanded an additional allocation amounting to Rs 39,674 crore to meet the subsidy bill for the current year. This includes a backlog of Rs 8,788 crore for the previous year.
Chairing a meeting for reviewing availability of funds for fertiliser subsidy on Wednesday, Singh directed both the finance and fertiliser ministries to ensure that adequate funds are available to meet the disbursal requirements for fertilizer subsidy. According to an official release, while the existing subsidy system may have to be reviewed in the future, the government was committed to the present system and will ensure that adequate funds are available to meet the requirements this year. The Prime Ministers office will resolve matters in this regard, the release added.
The sum would be provided through the first batch of supplementary demand for grants to be cleared through Parliament by the finance ministry, in the monsoon session.
Wednesdays meeting was attended by agriculture minister Sharad Pawar, finance minister P Chidambaram, fertiliser minister Ram Vilas Paswan and principal secretary to the prime minister TKA Nair.