View: Strong agri focus expected in Budget

The budgetary allocation towards the fertiliser subsidy for the upcoming year remains a key monitorable for the fertiliser industry.

ECONOMIC SURVEY: Apr-Dec fertiliser subsidy hits Rs 85,300 crore

According to ICRA’s estimates, the subsidy requirement for the sector will be around Rs 1.3-1.4 lakh crore for FY23 given the elevated commodity prices and the outlook expected to remain firm. It expects the budgetary allocation for the fertiliser subsidy to be in line with its estimate. It remains a possibility that the government may not allocate the full amount of the expected subsidy at the outset in the Budget for FY23. It may calibrate the subsidy budget during the course of the year, as in FY2022, depending on the evolving subsidy requirement during the year.

However, the outright allocation in the Budget will be a comforting factor for the industry. For FY22, the subsidy allocation of around Rs 1.41 lakh crore is expected to remain adequate for the sector.

During FY22, the fertiliser availability, particularly for phosphatic fertilisers, witnessed significant headwinds due to unavailability and elevated prices in the international markets. The government has been deliberating on steps to improve the domestic production of phosphatic fertilisers. ICRA expects it to outline steps to increase domestic production through incremental investments.

Some of the steps that the GoI can take include rationalisation of import duty on phosphoric acid, ammonia and imported natural gas, to improve the competitiveness of the domestic fertiliser players. It may be expected to develop a roadmap to increase balanced use of fertilisers in the country and reduce dependence on particular fertilisers. The implementation of the true form of Direct Benefit transfer (DBT) for the fertiliser sector has been an ambitious project for the government. However, given operational challenges in implementing, ICRA does not expect it to materialise in the near to medium term.