The government on Friday announced the issuance of 8.3% special fertiliser bonds for Rs 3,890 crore. The first tranche of the special bonds would be issued at par to 22 fertiliser companies as compensation towards fertiliser subsidy during the current fiscal, an official press release said on Friday.
The Fertiliser Association of India (FAI) had earlier alleged that it has become a practice to carry forward a large amount of unpaid from a year to the next year for want of allocated funds. According to FAI estimate, the outstanding subsidy dues carried forward from the previous year amounted to about Rs 4,000 crore in 2005-06, Rs 6,000 crore in 2006-07 and Rs 8,000 crore in 2007-08. Even during the current year, the subsidy allocation so far has been only at Rs 37,451 crore against an estimated requirement of about Rs 48,000 crore.
The Rs 37,451 crore subsidy allocation included Rs 15,000 crore in the first supplementary. Out of the Rs 15,000 crore allocation in the first supplementary, Rs 7,500 crore was in form of bonds, in lieu of fertiliser subsidy.
FAI has said that mere issuance of bonds would not help the fertiliser industry as they are under cash crunch.
According to a recent government notification the investment in the Fertiliser Companies? Government of Special Bonds 2023 by banks and insurance companies will not be reckoned as an eligible investment in government. However, such investment by the insurance companies will be eligible to be reckoned as investment under ?other approved securities? category as defined under IRDA (Investment) Regulations, 2000.
Further, the investment by the provident funds, gratuity funds, superannuation funds, in the special bonds will be treated as an eligible investment under the administrative order of the ministry of finance.
The special bonds will be transferable and eligible for market ready forward transactions (repo). The bonds, however, will not be an eligible underlying security for ready forward transactions (repo/ reverse repo) with the RBI.