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India set to surpass fertiliser bill budget by 300 lakh crore, to tap banks

PW Bureau

While Rs 700.8 lakh crore was budgeted for fertiliser subsidies for the 2018-19 year ending March, sources said that close to half of the amount was used to pay back previous year’s dues

New Delhi/Mumbai: India is set to surpass its budget for the fertiliser subsidy bill for the financial year by Rs 300 lakh crore, sources told Reuters, adding that the government is likely to tap state-run banks to account for the extra expense. While Rs 700.8 lakh crore was budgeted for fertiliser subsidies for the 2018-19 year ending March 31, sources added that close to half of the amount was used to pay back the previous year’s dues.

Sources said that an increase in overseas fertiliser prices and a fall in the rupee currency resulted in the higher cost of imported fertilisers, which led to the requirement of a total subsidy of Rs 1 trillion for the year. A "special banking arrangement" might also be set up for local fertiliser companies, the source said.

"Considering the poor tax collections, we don't think the government would pay the entire subsidy this year," an official working with a co-operative fertiliser company said on the condition of anonymity.

"Like last year, it will be rolled over to the next year."

Earlier this month, a Comptroller and Auditor General of India (CAG) – which has the authority to review state and national budgets – report stated that the government should frame a policy on off-budget financing.

"Such off-budget financial arrangement, defers committed liability (subsidy arrears/bills) or create future liability and increases cost of subsidy due to interest payment," the report tabled in Parliament earlier this month said.

The government compensates state and private fertiliser companies such as Coromandel International Ltd, Chambal Fertilisers and Chemicals Ltd, Gujarat Narmada Valley Fertilizers and Chemicals Ltd and Rashtriya Chemicals and Fertilizers Ltd for selling crop nutrients to the country's millions of farmers at discounted rates.