Fertilizer subsidy bill set to hit record ₹1.65 trillion in FY23: report

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New Delhi: Central government spending on fertilizer subsidies could reach a record high of 1.65 trillion in FY23, compared to budget 1.05 trillion, due to an unprecedented rise in the cost of raw materials and fertilizer prices around the world, the rating agency Crisil announced on Thursday.

A review of nutrient-based subsidy rates is crucial to maintaining fertilizer makers’ credit profiles, the agency said in an analysis.

Certainly the government has been proactive in resolving the situation, Crisil said. In FY22, the government initially allocated 79,530 crore as fertilizer subsidy but eventually increased it to 1.4 trillion, budget documents showed.

Crisil said another intervention may be required during this exercise. Failure to do so would push grant arrears to a record high of more than 75,000 crore by the end of this financial year, he said.

Mint reported on Tuesday that the central government is set to increase the fertilizer subsidy for the kharif cropping season to cool prices for farmers.

The Fertilizer Department said in a presentation on Tuesday that international fertilizer and commodity prices have been steadily rising since January 2021. An interdepartmental committee has recommended revising nutrient-based subsidy rates for nitrogen nutrients. , phosphorus, potassium and sulfur for the 2022 kharif. on average international fertilizer prices in March 2022 as a special case this year, Mint reported.

“More than 85% of subsidy arrears could be due to urea. Indeed, prices for pooled gas ― a mix of domestic gas and imported LNG considered for billing to fertilizer plants ― have soared more than 75% in the past fiscal year and are expected to remain high. for most of this fiscal year due to the Russian-Ukrainian deal. conflict. At the same time, retail urea prices remained unchanged, increasing the burden of government subsidies. This would be despite some respite likely due to the commissioning of new domestic capacity which could potentially halve India’s dependence on urea imports by almost 28% in FY 2021,” said the rating agency quoting its director Nitesh Jain.

Although manufacturers of non-urea products have increased their prices, this may not be enough to cover the escalating costs. For manufacturers of non-urea fertilizers, the government pays subsidy according to nutrient-based (NBS) subsidy rates, which have yet to be announced for this fiscal year, Crisil said.

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