Fertiliser firms to get special bank credit of Rs 5,500 cr

New Delhi: The Government has approved a Special Banking Arrangement (SBA) for fertiliser companies against the subsidy due for the current financial year.

“The arrangement will help fertiliser companies get Rs 5,500 crore from banks as loan. Interest will be charged at the rate of 10.5 per cent. The Government will bear 8 per cent interest, while remaining has to be paid by the company,” a senior Government official told Business Line. This kind of arrangement was also made last year when Rs 5,000 crore bank loans were availed.

Later in the evening, Government sources said that the State Bank of India was not ready to lend at 10.5 per cent. “Instead, it is asking for 10.85 per cent rate of interest,” a source said while added that there will be meeting with bankers on Thursday. This is 60-day credit in lieu of the subsidy due. While the industry estimates an additional subsidy of Rs 30,000 crore in the current fiscal, the Fertiliser Ministry in September had sought Rs 12,000 crore from the Finance Ministry under SBA to clear the subsidy arrears. Now, the final arrangement is even lower than that.

The industry feels that the present arrangement will partially ease the liquidity crisis. It will help in clearing subsidy arrears for domestically produced urea in June and July, sources said. All eyes are now on the second supplementary demand for grants during the winter session of Parliament.

For fiscal 2013-14, the Government had reduced fertiliser subsidy to Rs 65,971.50 crore from the revised estimate of Rs 65,974 crore in 2012-13. Of this, the Government is expected to provide Rs 15,544 crore as subsidy for imported urea, Rs 21,000 crore for domestically produced urea and Rs 29,426 crore for decontrolled fertilisers, including di-ammonium phosphate and muriate of potash and other complexes.

Meanwhile, a senior official said the Finance Ministry was unlikely to agree to significant additional money in the second supplementary demand for grants keeping the fiscal deficit target in mind. The Finance Minister, P. Chidambaram, has repeatedly said that every effort will be made to keep the fiscal deficit within the budgeted target. There is already additional allocation for the petroleum sector with more expected, while revenue collection is still below the target.

However, tracking the approval of banking arrangement, shares of fertiliser companies edged up to close higher on Wednesday. Shares of Chambal Fertiliser closed higher at Rs 38.85 gaining 2.78 per cent, while Coromandel International rose 0.67 per cent to end at Rs 219.45. Shares of National Fertiliser gained 0.62 per cent to close at Rs 24.30.