NEW DELHI: Faced with liquidity crunch, the Fertiliser Ministry is likely to approach the Finance Ministry seeking fund release through special banking arrangement for subsidy payment to indigenous urea manufacturers.
In the interim budget, the government had allocated Rs 65,970 crore for fertiliser subsidy against the estimated bill of Rs 1.05 lakh crore, including last year’s arrears.
According to sources, government has released about Rs 28,122 crore for fertiliser subsidy so far this year, including Rs 13,173 crore for indigenous urea.
“This Rs 13,173 crore subsidy has almost been finished and the ministry is now cash-strapped,” a source said.
Last year also the Fertiliser Ministry had sought release of additional funds under the special banking arrangement.
Under this arrangement, banks provide loans to pay subsidies and a major part of interest was paid by the Fertiliser Ministry.
Urea is provided to farmers at a fixed subsidised maximum retail price (MRP) of Rs 5,360 per tonne. The difference between the delivered cost and MRP of urea is provided as subsidy by the government.
The subsidy bill on indigenous urea is expected to rise this year as government has approved the modified New Pricing Scheme (NPS) III for urea. Under this scheme the department calculates production cost of urea to pay subsidy.
As per the scheme, the fixed cost of urea produced by plants which are 30 years old or more would be increased by Rs 150 per tonne, while for all other plants it would be raised by Rs 350 per tonne.
India produces about 22 million tonnes of urea in a year, as against the demand of over 30 million tonnes. The remaining is met through imports.