Fertiliser Subsidy Likely To Touch Rs 1.65 Lakh Crore In Current Fiscal: CRISIL

Government's fertiliser subsidy bill is set to touch an all-time high of Rs 1.65 lakh crore this fiscal against Rs 1.05 lakh crore budgeted, due to an unprecedented rise in the cost of raw materials and prices of fertilisers globally, according to a CRISIL Ratings report.

The report noted that the government has been proactive in addressing the situation.

In the past two fiscals, the government has paid an additional Rs 1.2 lakh crore and increased the budgeted subsidy. However, the steep rise in raw material prices has been negating this, and another intervention may be needed in this fiscal. Not doing so would take the subsidy arrears to an all-time high of over Rs 75,000 crore by end of this fiscal, it said.

Over 85 per cent of the subsidy arrears could be contributed by urea. This is because pooled gas prices -- a blend of domestic gas and imported LNG considered for billing to fertilisers plants - had shot up more than 75 per cent last fiscal, and is expected to remain elevated for the most part of this fiscal because of the Russia-Ukraine conflict, said Nitesh Jain, Director, CRISIL Ratings.

"At the same time, retail prices of urea have stayed put, increasing the government's subsidy burden. This would be despite some respite likely from the commissioning of new domestic capacities that could potentially halve India's import dependence for urea from nearly 28 per cent in fiscal 2021," Mr Jain said.