India allocates extra $8.71 billion in fertilizer subsidy

ICRA

12/11/2020 12:43

By Mayank Bhardwaj
    NEW DELHI, Nov 12 (Reuters) - India has earmarked an extra
650 billion rupees ($8.71 billion) in fertilizer subsidies for
the current fiscal year, begun in April, Finance Minister
Nirmala Sitharaman said on Thursday.
    The government has decided to allocate the extra subsidy to
ensure that there is adequate availability of fertilizer to
farmers, Sitharaman said while announcing a third round of
fiscal stimulus to help stressed sectors battling the COVID-19
pandemic.
    Fertilizer demand starts picking up in October and November,
when farmers plant their winter crops such as wheat and
rapeseed.
    Fertilizer consumption was reasonably high in the summer
season as favourable monsoon rains encouraged millions of
farmers to plant more area with crops such as rice, corn,
cotton, soybeans and sugarcane.
    As farmers are likely to expand areas planted with
winter-sown crops due to the ample soil moisture, fertilizer
demand is expected to go up again in the winter season.
    "It was the best announcement we could have hoped for," said
Satish Chander, director general of the Fertiliser Association
of India, an industry group.
    In the budget for the current 2020-21 fiscal year, unveiled
in February, the government cut its allocation for fertilizer
subsidy by 11% to 713.09 billion rupees.
    Due to lower allocations in the budget, India often
overshoots its fertilizer subsidy bill, which gets rolled over
to next year, with the government often asking banks to fund
subsidy gaps.
    This invariably delays subsidy payments to fertilizer
companies.
    The extra allocation would resolve the issue of subsidy
delays being faced by the fertilizer industry over the last
several years, said K Ravichandran, senior vice president of
ICRA, the Indian arm of global ratings company Moody's Investors
Service.
    The government compensates state and private fertilizer
firms such as Coromandel International Ltd  CORF.NS,  Chambal
Fertilisers and Chemicals Ltd  CHMB.NS , Gujarat Narmada Valley
Fertilizers & Chemicals Ltd  GNFC.NS  and Rashtriya Chemicals
and Fertilizers Ltd  RSTC.NS  for selling crop nutrients to the
country's millions of farmers at discounted rates.
($1 = 74.57 rupees)

 (Reporting by Mayank Bhardwaj; Editing by Steve Orlofsky)
 ((mayank.bhardwaj@thomsonreuters.com; +91-11-4954 8030;
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