Date: February 14, 2009
Ref. No. MPML/PMS/214/2009
Fertiliser sop bill: Rs102k cr
THE NATION'S actual fertilizer subsidy bill for 2008-09 is now pegged at about Rs.1,14,000 cr, thanks mainly to the high price of crude oil for the better part of 2008. Of this, the department of finance (DoF) has already spent Rs.1,02,000 crore by January end. An additional Rs 12,000 cr spend is estimated. This is despite the steep drop in the global prices of fertilizer inputs and raw materials between October 2008 and early 2009.
"It is estimated that an additional Rs.12,000 cr subsidy spend will be incurred over and above what is already spent," even as global prices refused to come down to the pre-peak 2007 levels. Ironically, those persistently high prices may themselves be dictated by India, among the biggest fertilizer shoppers in the global market. The level of global prices in fact drove domestic fertilizer production into the negative for the first nine months of the year, affecting availability and necessitating increasing imports and creating an upward pressure on international prices of fert commodities. According to the DoF, compared to about 4.7 mt of urea imported in '07-08, imports are already to the tune of 5.7 mt in '08-09. More imports are expected before March, bringing up the level of imports to around 6-6.5 mt of urea, 6 mt of diammonium phosphate (DAP) and 5 mt of muriate of potash (MoP).
Ironically, in last December, the government had estimated a subsidy bill of slightly lower than Rs.1,10,000 cr over an earlier projected amount of Rs.1,20,000 cr. Based on January 2008 prices, in fact, the DoF had estimated even earlier that the subsidy bill would mount to a massive Rs.65,000 cr for this fiscal. Despite that, budgetary provisions for the year, were only a paltry Rs.31,000 cr, just Rs.486 cr more than the revised allocation for 2007-08. That allocated amount, in fact, was enough to ensure supplies only up to June 2008.
However, while the drop of around Rs.10,000 crore in subsidy estimates (down from a higher Rs.1,20,000 cr odd) was primarily on account of lower global prices for inputs and raw materials in the last few weeks, DoF officials maintained that a fast-depreciating rupee against the dollar blocked any further cut in the subsidy bill.
There is still a big plus side to the massive subsidy bill, however. The falling price of crude oil. And this hit multi year lows today at only $ 35-odd per barrel. "The upside on the projected saving on the subsidy bill is that if crude oil prices had continued rising through August, September and October, this fiscal's subsidy spend could have been much higher, at Rs.1,50,000 cr."
Level of global prices drove domestic fertiliser output into negative for first nine months. Fertiliser subsidy bill for 08-09 now pegged at Rs 1,14,000 cr Compared to 4.7 mt of urea imported in 2007-08, imports are already at 5.7 mt in 2008-09.
(Source: ET)