Fertiliser sales volume to spurt 10% to record 68 million tonne in FY21

Mumbai: Domestic fertiliser sales is likely to surge to 10 per cent to a record 68 million tonne in 2020-21 following a good monsoon, which is well above the 3 per cent annual growth rate that was witnessed since the last five years, according to a report.

Crisil Ratings in a report stated that fertiliser sales in the country is set to surge 10 per cent to a record 68 million tonne this fiscal following a good monsoon.

Also, the timely disbursement of the Rs 65,000 crore additional subsidy announced by the government under the Atmanirbhar Bharat Package 3.0 last November can support the credit profiles of fertiliser manufacturers, it added.

For the government, the upcoming budget for fiscal 2022 is an opportunity to address the issue of subsidy arrears in two ways, one is providing the entire additional subsidy for this fiscal and the other is budgeting for adequate subsidy next fiscal, it said.

“Rising subsidy arrears and, as a result, piling up of debt have been a structural issue for the fertiliser industry since long. The additional subsidy, assuming there is no further build-up of arrears going forward, can spawn a structural improvement in the credit profiles of fertiliser companies.” “Disbursement of additional subsidy can reduce the industry’s debt by a significant three-fourth, and debtor days to below 50 days from 200 days by the end of this fiscal,” Crisil Ratings Senior Director Manish Gupta said.

The report further noted that to incentivise farmers to use fertilisers for better crop yield, the government keeps the retail selling price of fertilisers significantly lower than the actual cost, and reimburses the deficit to fertiliser manufacturers through subsidy payments.

The fertiliser industry’s subsidy arrears are estimated to have ballooned to Rs 50,000 crore by the end of the last fiscal because of rising sales and continuous under-budgeting over the years, it stated.