Govt. seeks ways to lessen fertiliser subsidy burden

The Treasury is looking at alternate ways to reduce its financial burden vis-à-vis the fertiliser subsidy in which some Rs.50 to 60 billion is paid annually to fertilizer importing companies, Finance Ministry sources said.

Due to a financial crisis, subsidy payments have got delayed and led to these companies facing severe cash-flow and liquidity problems.

The Ministry’s attention is now focused on arranging low interest loans with a government guarantee from state banks for these companies, a senior Ministry official revealed.

National Fertiliser Secretariat (NFS) Director R. Dharmawardena told the Business Times that the Treasury made a subsidy payment of Rs. 37 billion in June 2012 to fertilizer companies in payments owed for 2010 /2011.

The government has settled last year’s arrears but has to pay, at least, another Rs. 16 billion to AgStar Fertilizers Ltd, A Baur & Co, CIC Agri Businesses and Hayleys Agro Fertilizers for fertiliser dis- tributed to farmers, a spokesman for the local fertiliser importers said. He noted that the companies find it difficult to survive as the industry is faced with a lack of liquidity due to the delayed subsidy settlement in excess of the agreed payment period of six months. Importers have been further affected by a weak rupee and rising inter- est rates which have risen to more than 16 per cent from 10-12 per cent.

The Finance Ministry is planning to issue a directive to all relevant institutions to manage the fertilizer subsidy more effectively and efficiently, targeting only the farmers, who are in need of the subsidy,

The Ministry is of the view that through improved targeting of subsidies such as the fertilizer subsidy, it will be possible to reduce government expenditure on recurrent items. If targeting can save even one third of the fertilizer subsidy, this would reduce government expenditure by 1%, the Finance Ministry official said.