BUDGET EXPECTATIONS: FERTILISER

16 Jan 2023 , 08:26 PM

The FY2024 Budget is expected to have a continued focus on the farm sector, including focus on initiatives to improve crop realizations and non-farm income. With agriculture remaining the focus, the agri-input sector i.e. agrochemicals, fertilisers etc. are expected to benefit.

The subsidy requirements witnessed a sharp increase in FY2023, driven by elevated prices of international raw materials and finished fertilisers amid high gas prices. ICRA expects the fertiliser subsidy allocation for FY2024 to remain elevated – upwards of Rs. 2.0 trillion – assuming some moderation in feedstock prices and savings through procurement of a part of the gas from the domestic spot market.

The GoI may not allocate the full amount of the expected subsidy at the outset in the Budget for FY2024 and may calibrate the allocation during the course of the year, as in the past, depending on the evolving subsidy requirements.

This current fiscal witnessed a lot of turbulence in terms of geo-political issues, gas availability and erratic flow of subsidy. Lowering the import duties on raw materials like phosphoric acid and ammonia to improve the competitiveness of domestic phosphatic fertilizer manufacturers has been a long-pending industry demand along with the reduction of import duty on LNG for the urea industry, as the consumption of the latter is on a steady rise. ICRA also expects the GoI to develop a roadmap to increase the balanced use of fertilisers in the country and reduce dependence on particular fertilisers. The Budget is also expected to focus on the increased use of the more environmental-friendly nano ferilisers, which will help in savings in the subsidy budget.