Good news for fertilizer companies as now fertilizer subsidies would be paid in cash. On the other hand, it may have adverse affect on fiscal.

According to Ram Vilas Paswan, Minister of Chemicals & Fertilizers and Steel, “Fertilizer subsidies will now be paid upfront in cash.”  He further added that Ministry of finance has cleared Rs 22,000 crore in cash as subsidy for fertilizer companies.

“The second tranche of Rs 32,000 crore subsidies would also be paid in cash. The government will pay the first two tranches of fertiliser subsidy within three months and first two tranches of fertilizer subsidy would amount to Rs 54,000 crore,” reported Paswan.

A meeting to review the iron ore prices has been called upon by Paswan. The fertilizer companies had been long demanding to clear the subsidy burden of Rs 1,19,000 crore due to which they had to face a severe cash crunch.

Paswan also reported, “Saying companies are faced with rising fertilizer demands and also with a severe liquidity crunch, it is right that subsidies be paid out in cash.”

By getting the PMO on its side, the Fertilizer Ministry has been successful in winning the round against the Finance Ministry, which had been strongly opposing the cash payout of subsidies due to fiscal concerns.

The Fertilizer Secretary, Atul Chaturvedi informed that initially FM has been opposed to it but now the opposition has been removed by the PM.

However, an adverse affect is most likely to be seen in the fiscal, which is already unstable. A complete cash payout may even worsen the condition for the fertilizer subsidy already is being estimated to be around 1 lakh crore.