Hike in margins paid to urea dealers likely to add pressure on fiscal spending, says CARE Ratings

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Published: April 2, 2018 4:12:06 PM

The government’s decision to hike margins paid to urea dealers may lead to additional pressure on the fiscal spending of the government, CARE Ratings said.

urea, agriculture, agriculture sector, agriculture industryThe government has allocated Rs 70,080 crore as the fertiliser subsidy for FY19. (Reuters)

The government’s decision to hike margins paid to urea dealers may lead to additional pressure on the fiscal spending of the government. “Increase in debt margins will add additional pressure towards the fiscal spending of the government as this move is expected to entail an additional subsidy burden of Rs 515.16 crore per annum on the government,” CARE Ratings said. The government has approved the margins paid to urea dealers from Rs 354/MT to 180/MT. Earlier, the government used to pay Rs 200/MT to institutional agencies.

Only when the sale of urea is directed by the POS machine through the DBT mechanism, the margins will be paid. The government has allocated Rs 70,080 crore as the fertiliser subsidy for FY19. Out of this amount Rs 44,989.50 crore is earmarked as subsidy for urea. The latest move by the government may add extra subsidy burden of Rs 515.16 crore each year on the government, CARE Ratings said.

“The MRP of urea will not be revised till FY20, hence we could expect fertiliser subsidy and the subsidy earmarked towards urea to be increased during FY20,” CARE Ratings said.

Nearly 300 fertiliser retailers in the six districts in various states didn’t renew their licenses after DBT implementation, according to a report by Micro Save. The need of the soil nutrient for soil turns lower in comparison to normal urea after neem coating. Neem coating also helps in slow release of urea in the soil.

The government made 100 percent neem-coated urea mandatory for both domestic and imported fertiliser from December 2015.

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