Budget 2019: ICRA hopes rationalisation of subsidy under NBS scheme

ICRA expects rationalisation of the subsidy under the Nutrient-based Subsidy (NBS) scheme for NPK fertilisers in the upcoming Union budget as international prices of fertilisers have moderated along with raw material prices. ICRA also expects a reduction of the import duty on LNG to nil from 2.5% currently, resulting in lowering of the cost of production and the subsidy outgo for the GoI, as the reliance on imported LNG has been rising in a scenario of stagnant domestic gas production.

K. Ravichandran, senior vice president & group head-corporate ratings, ICRA said "The fertiliser industry continues to reel under liquidity stress, driven by the delay in the subsidy receipts from the government and the large subsidy backlog, which ICRA estimates to be around Rs. 32,000-35,000 crore at the end of FY2018-19. Consequently, the working capital borrowings and interest costs remain elevated for the industry, resulting in weak cash generation and subdued credit metrics."

He also added "The industry also awaits the pay-out of revised fixed costs under the modified NPS-III, which was notified in April 2014 but is yet to be paid out. The budget is expected to focus on enhancing farm incomes as has been the focus in the last couple of years. ICRA also expects the budget to focus on certain short-term measures to alleviate the significant agri-distress in some of the key agrarian regions of the country."