Additional Rs 65,000 cr fertiliser subsidy to help in adequate supply of crop nutrients: Gowda

Chemicals and Fertilisers Minister D V Sadananda Gowda on Thursday said the government's decision to provide an additional Rs 65,000 crore subsidy for fertilisers will help in ensuring adequate availability of crop nutrients to farmers.

Chemicals and Fertilisers Minister D V Sadananda Gowda on Thursday said the government's decision to provide an additional Rs 65,000 crore subsidy for fertilisers will help in ensuring adequate availability of crop nutrients to farmers. "I thank Hon'ble PM @narendramodi ji & FM @nsitharaman ji for providing additional fertilizer subsidy of ₹ 65,000 cr under #AtmaNirbharBharat package 3.0 to ensure adequate availability of fertilisers to farmers. This will help our farmer brothers to fulfil their aspiration," Gowda tweeted.

In the Budget, the government had allocated Rs 71,309 crore for 2020-21 fiscal. Finance Minister Nirmala Sitharaman on Thursday said the government will provide Rs 65,000 crore of additional subsidy for fertilisers to ensure its availability to farmers during the current season.

The consumption of fertilisers is expected to increase to 673 lakh tonnes in 2020-21 from 499 lakh tonnes in 2016-17. The Centre sells urea at fixed MRP (maximum retail price), and the difference between production cost and selling price is reimbursed to manufacturers as subsidy. It also provides subsidy on other fertilisers.

Commenting on the decision, rating agency ICRA said the additional allocation of Rs 65,000 crore for fertiliser subsidy is a big positive for the fertiliser industry. "It will be a landmark decision for the industry as it will resolve the issue of subsidy delays being faced by the industry over the last several years. The subsidy backlog had resulted in elevated working capital borrowings and significant interest outgo for the industry weakening the credit profile and profitability of the industry," it said.

With this additional allocation over the budgeted subsidy of Rs 70,000 crore, ICRA said the fertiliser industry will witness improvement in its profitability. "As per ICRA estimates, the subsidy backlog would have reached around Rs 57,000 crore to Rs 60,000 crore by the end of FY2021, given the strong volume growth being witnessed in fertiliser sales in the current fiscal. Such large backlog would have significantly weakened the liquidity position of the industry," the rating agency said in a statement.

The current additional allocation indicates a change in the stance by the government towards the fertiliser sector, it said..