Fertiliser subsidy is budgeted at almost same level for FY14
as per Revised Estimates for FY13. Usually we could never establish link
between budgeted amount and actual requirement. This is typically under
budgeted every year keeping in mind targets for fiscal deficit number at the
time of presenting budget. This year Government has not paid industry its dues
from June’12 on imported P&K fertilisers, July’12 on domestically produced
P&K fertilisers and August’12 for domestically produced Urea. There was huge
carryover of FY12 which was paid at the beginning of FY13, which resulted in
budget getting exhausted in first 3-4 months itself during FY13.
FY14 may be marginally better with carryover of over Rs 25,000
crore from FY13 which will leave almost 40,000 crore for subsidy payments
during FY14. It should also be seen in light of proposed per tonne subsidy
reduction in P&K fertilisers by at least 20% - 25% under NBS for FY14.
Subsidy on domestic Urea remains a worry as proposed allocation will fall short
after settling bills from Sep’12 – Mar’13 during FY14. Gas price hike proposed
by Rangrajan committee which proposes to almost double gas prices will have
huge burden on production cost of Urea. Urea subsidy requirement may go up by
over 10,000 crore if gas price is hiked by $4/mmbtu. Clearly FM has not
provided for possible hike in subsidy needs after gas price increases, which
leaves us with option of looking at price hike to pass on impact of gas price hike
to farmers. 10% price hike in Urea can save Rs 1600 crore. Thus to mitigate
full impact of over 10,000 crore on account of higher gas prices, Urea prices
hike of over 60% will be required. We don’t foresee this to happen in a
election year as government has faced protest even for 10% price hike from its
own ministers being a politically sensitive issue which goes against the
interest of large number of farmers.
SUBSIDY ON FERTILISERS
(Rs crore)
|
Actual
|
Budget
|
Budget
(RE)
|
Budget
|
2011-12
|
2012-13
|
2012-13
|
2013-14
|
|
1. Indigenous(Urea) Fertiliser
|
20208
|
19000
|
20000
|
21000
|
2. Imported (Urea) Fertiliser
|
13716
|
13398
|
15398
|
15545
|
3. Sale of decontrolled Fertiliser
|
36790
|
28576
|
30576
|
29427
|
Total
|
70714
|
60974
|
65974
|
65972
|
