Fertilizer Subsidy Current Affairs

CCEA approves continuation of Urea Subsidy Scheme

The Cabinet Committee on Economic Affairs (CCEA) has approved continuation of Urea Subsidy Scheme from 2017 upto 2020 and implementation of Direct Benefit Transfer (DBT) for disbursement of fertilizer subsidy. The proposal in these regards was forwarded by Department of Fertilizers, Ministry of Chemicals and Fertilizers.

Key Facts

The continuation of the urea subsidy scheme will ensure timely payment of subsidy to urea manufacturers resulting in timely availability of urea to farmers at statutory controlled price. Implementation of DBT in Fertilizer Sector will reduce diversion of fertilizers to non-agricultural use and plug leakages.

DBT in Fertilizer Sector

Department of Fertilizers is in process to roll out DBT in fertilizer sector nationwide. DBT will entail 100% payment to fertilizer companies on sale of fertilizers to farmers at subsidized rates. The DBT in fertilizer sector being implemented is slightly different from normal DBT implemented for other schemes. Under it, the subsidy will be released to the fertilizer companies instead of the beneficiaries, after the sale is made by the retailers to the beneficiaries. The subsidy will be released on submission of claims generated in the web-based online Integrated Fertilizer Monitoring System (iFMS) by fertilizer companies.

Urea Subsidy Scheme

Urea Subsidy is part of Central Sector Scheme (CSS) of Department and is wholly financed by Central Government of India through budgetary support. It also includes Imported Urea subsidy which is directed towards import to bridge gap between assessed demand and indigenous production of urea in the country. It also includes freight subsidy for movement of urea across the country.

Background

The use of chemical fertilizers have played pivotal role in making India self-reliant in food grain production and provide very vital input for growth of Indian agriculture. For sustained agricultural growth and to promote balanced nutrient application, urea is made available to farmers at statutorily controlled price.

The fertilizer subsidy mainly is difference between delivered cost of fertilizers at farm gate and MRP payable by farmer. It is given to fertilizer manufacturer/importer by Central Government. At present, there are 31 urea manufacturing units, out of which 28 urea units use Natural Gas as feedstock/fuel and remaining 3 urea units use Naphtha as feedstock.

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CCEA approves Special Banking Arrangement for payment of outstanding subsidy to fertilizer

The Cabinet Committee on Economic Affairs (CCEA) approved implementation of Special Banking Arrangement (SBA) for Rs. 10,000 crore for payment of outstanding claims on account of fertilizer subsidy in year 2016-17. CCEA chaired by Prime Minster Narendra Modi also approved that in future, Department of Fertilizers will avail SBA with concurrence of Department of Expenditure, Ministry of Finance.

Key Facts

Government is making available fertilizers, namely 21 grades of P&K fertilizers and Urea to farmers at subsidized prices through fertilizer manufacturers and importers. For making funds available to fertilizer companies against their subsidy claims, Union Ministry of Finance had approved SBA for amount of Rs. 10,000 crore with Government interest liability limited to G-Sec rate.

Accordingly, SBA was worked out with State Bank of India (SBI) for an amount of Rs. 10,000 crore to meet outstanding subsidy claims of fertilizer companies. The loan together with Government interest thereon has been repaid from BE 2017-18 within the sanctioned budget.

Background

Under the SBA, total loan of Rs. 9,969 crore was raised by Government for settlement of outstanding subsidy bills with SBI. The loan amount along with interest liability on part of Government amounting to Rs. 80.90 crore were paid to SBI. SBA for amount of Rs. 10,000 crore for year 2016-17 already has been implemented and operationalised to overcome liquidity problems of fertilizer companies.

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