Outstanding subsidy bills for the fertiliser sector will exceed ₹40,000 crore by March, according to the Fertiliser Association of India (FAI). Domestic urea manufacturers are the hardest hit with dues amounting to ₹30,000 crore.

The industry also sent an ‘SOS’ to the Finance Minister appealing to intervene and institute a Special Banking Arrangement to help tide of the liquidity crisis facing fertiliser manufacturers.

“While the domestic urea industry is gasping for breath, payments for imported urea are made upfront. This flies in the face of agenda of Make in India,” the statement said.

It said that the situation has arisen mainly due to subsidies reaching 75 per cent of the cost of production and under provision of urea subsidy in the 2014-15 Budget which was ₹36,000 crore against required estimates of ₹58,000 crore.

“Out of the total budget allocation of ₹36,000 crore, ₹18,000 crore was used for clearing the backlog of 2013-14. The balance amount available for 2014-15 was only ₹18,000 crore. No additional fund was allocated in the winter session of Parliament. The requirement has now increased by more than ₹1,500 crore due to increase in price of domestic gas effective October 1, 2014,” the statement said.

Payment of ‘on account’ monthly subsidy bills were held up after making part payment last August and amount to ₹23,000 crore at this stage. In addition, there are unpaid dues since November 2012 which are estimated at ₹3,500 crore for urea along with arrears on freight bills payments dating back to 2008.

P&K segment

The situation is not different for P&K fertilisers, the statement said, with on account monthly payments, comprising 90 per cent of subsidy dues, only having been made till last November. Payments for the period between December and March will amount to nearly ₹6,000 crore while the pending 10 per cent subsidy is pegged at ₹6,700 crore.

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