Delhi to fork out Rs 13k cr for fertiliser industry dues

NEW DELHI: The government is set to fork out about Rs 13,000 crore to the fertiliser industry to cover huge pending subsidy/concession dues in the supplementary budget during the ongoing monsoon session of parliament.

Significantly, it is also set to issue fertiliser bonds worth Rs 6,000 crore to the industry to cover the subsidy payment dues. The government’s fertiliser subsidy bill is set to double and cross Rs 50,000 crore up to March 2008, according to an estimate of the Department of Fertilisers. A substantial part of this is pending carry overs of unpaid subsidy/concessions.

Sources said the bonds would be on the lines of oil bonds — cost neutral, and attract a secured interest rate of 9.5-10%. They will be tradable in the secondary market, with coupon rate and tenure decided by the government. So, fertiliser companies can trade the bonds to cover their capital liquidity crunch and buy raw materials and inputs for the production of fertilser to ensure that there is no supply constraint in key season.

Fertiliser bonds seem the only option for the government to clear pending dues in a deferred manner. This means the government does not have to immediately show the payout on its books but only when they mature.

Fertiliser companies had to borrow additional funds of around Rs 153 crore last year at a high interest rate to get over their liquidity crunch, thanks to the long time that the government took to clear the dues in subsidy to them. The coming supplementary budget allocations are, though, expected to clear both pending backlog as well as bills for the current year.