India’s farm output, hit by drought last year, could face a fertiliser shortage when summer sowing begins in April, cash-strapped manufacturers have warned.
Piling subsidies and payments by the government in bonds, rather than in cash, have sparked a liquidity problem, the industry has said in appeals to several ministries.
Agriculture minister Sharad Pawar alerted the Prime Minister’s Office on December 23 of a potential fertiliser shortage.
Government policy limits retail prices of fertilisers with subsidies to protect farmers. Producers sell at below-market prices and cover the cost from the government. The annual subsidy is Rs 49,980.25 crore.
“Blockage of industry’s funds of this order seriously affects its ability to continue production and supply of fertilisers,” the Fertiliser Association of India has said in a pre-budget memorandum to the ministries.
Fertiliser factories are also facing uncertainty in the supply of gas, their main fuel.
Fertiliser bonds carry 6 per cent interest rate, which the industry argues has become “untradable”. “Companies are forced to sell these bonds at a discount of up to 15 per cent because of few takers, incurring heavy losses,” Satish Chander, the director-general of the fertiliser association, told HT.
The industry has not been able to encash bonds worth Rs 16,500 crore and sought an all-cash payment provision in the 2010-11 budget. “Comfortable availability of fertilisers will not be possible under current conditions,” Chander said.