According to a CRISIL Ratings report, the government fertilizer subsidy bill is set to hit a record high of Rs 1.65 lakh crore this fiscal year against Rs 1.05 lakh crore budgeted, due to an unprecedented rise in raw material costs and fertilizer prices worldwide , according to a report by CRISIL Ratings. †
The report noted that the government has been proactive in addressing the situation.
In the past two budgets, the government has paid an additional Rs 1.2 lakh crore and increased the budgeted subsidy. However, the sharp rise in commodity prices has offset this, and another intervention may be needed in this budget. If you fail to do so, the subsidy backlog would rise to a record high of over Rs 75,000 crore by the end of this fiscal period, it said.
More than 85 percent of the overdue subsidy could be contributed by urea. This is because pooled gas prices — a mixture of domestic gas and imported LNG that qualifies for fertilizer plant billing — were up more than 75 percent in the past fiscal year and are expected to remain high for most of this fiscal year due to the Conflict between Russia and Ukraine, says Nitesh Jain, director of CRISIL Ratings.
“At the same time, urea retail prices have held steady, increasing the government subsidy burden, despite some interruption in the deployment of new domestic capacities that could halve India’s import dependency on urea from nearly 28 percent by fiscal 2021,” said Jain.