A wide gap between Budget estimates (BE) and revised estimates (RE) of fertiliser subsidy since 2020-21 has resulted in delayed payment of subsidies to companies, adversely impacting financial performance of the sector, a parliament standing committee on chemical and fertiliser has stated in its report.
The panel chaired by Kanimozhi Karunanidhi has stated that in 2021-22, against BE of Rs 0.84 trillion, allocation for fertiliser subsidy was hiked by 78% to Rs 1.49 trillion at RE stage which reflects “the poor planning by both the ministry of finance and the department of fertilisers”.
The panel has observed that the fertiliser department has been allocated Rs 1.09 trillion for 2022-23 as per BE against the demand of Rs 1.76 trillion.
Meanwhile, the government may revise the BE for fertiliser subsidy in the current fiscal by around 140% to Rs 2.5 trillion, as elevated global prices of fertilisers and natural gas, the key feedstock, have inflated costs. This will be the largest ever outlay for fertiliser subsidy.
Stating that there is a huge gap between BE and RE of the department of fertiliser in 2022-23 and 2021-22, the panel observed that the fund approved at RE stage mostly reaches the department of fertiliser during the last quarter of the fiscal thus impacting disbursal of subsidies to companies.
“Gap between the projected requirement for 2022-23 and the budgetary allocation may eventually result in delayed payment or settlement of claims in respect of both Urea and phosphorus (P) and potassium (K) fertilisers subsidies and will thereby adversely affect the financial performance of the fertiliser sector as a whole,” the panel has noted.
Expressing concern, the panel has said that Rs 21, 673 crore is likely to be accumulated as carry-over liabilities in respect of indigenous and imported urea and P and K fertilisers by the end of 2021-22.
It has recommended the department of fertiliser to strengthen its budgetary planning process and provide accurate demand for funds so as to convince the ministry of finance to allocate funds as per its requirements at BE stage itself without any cuts. It stated that the finance ministry should facilitate timely allocation of funds to the department of fertiliser for optimum utilisation of funds, which would eventually give a boost to the agriculture sector in the country.
Chemicals and fertilisers minister Mansukh Mandaviya has recently stated that the government would not pass on the burden of rise in global prices to farmers. The government has been raising the subsidy on urea in tandem with the increase in costs as the retail prices of the nutrient are fixed. The country’s annual demand for urea is around 35 million tonne (MT) of which 26 MT are domestically produced while the rest is imported. Urea is mostly imported from Oman, Oman, Egypt, the UAE, South Africa and Ukraine.
Under the nutrient-based subsidy scheme, the aim is to insulate farmers to some extent from the increases in the prices of diammonium phosphate and other non-urea nutrients in the global markets. Subsidies on P&K fertilisers were capped in 2010, but the government has increased the subsidy rates in recent years due to high prices of imported DAP and MoP.