Fertiliser subsidies may get ~740 billion in FY19

The Union Budget, expected to be tabled in Parliament next week, can allocate around ~740 billion for fertiliser subsidies, and the amount is around 5.7 per cent more than the Budget Estimates (BE) of FY18 and 6.8 per cent higher than the Revised Estimates (RE) of FY18.

Sources said the higher allocation could be on account of an expected increase in natural gas prices because of a projected rise in petroleum rates from $55 a barrel in FY18 to an average of $65 a barrel in FY19. The MidTerm Expenditure Framework (MTEF), tabled in Parliament last year, had pegged the FY19 fertiliser subsidy at ~700 billion.

“The provisioning could be higher because of expected increase in gas price — a key input for companies. Gas prices have already gone up by 10 per cent in the second half of FY18 from $2.5 MMBtu to 2.8 MMBtu,” K Ravichandran, senior vice-president and group head, corporate ratings, Icra, told Business Standard.

For FY18, the Centre is expected to release around ~692.6 billion for fertiliser subsidies as against a budgetary provision of ~700 billion. However, despite an expected allocation higher by around ~40 billion in the FY19 Union Budget, industry sources said it would not be good enough to wipe out the dues.

At the end of FY18, the estimates show around ~280 billion could be unpaid dues, which would be slightly lower than the ~300 billion in the previous year.

The drop in unpaid subsidies could be due to the government clearing bills quicker and some relief from gas prices in the first half of FY18. “This won’t last long,” a senior industry official said.

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